Materion Corporation Q1 2023 Earnings Call
Greetings welcome to the material first quarter 2000 twenty-three earnings conference call.
At this time all participants are in a lifting only mode.
If anyone should require operator assistance during the conference. Please press stars zero on your telephone keypad.
Please note this conference is being recorded.
I will now turn the conference over to your host John ceramic Chief Accounting Officer.
You may begin.
Good morning, and thank you for joining us on our first quarter 2000 twenty-three earnings conference call.
This is John <unk>, Chief Accounting Officer.
Can also access to materials through the download feature on the earnings call webcast link.
With me today is jugal, Vijay <unk>, President and Chief Executive Officer, and Shelley Chatterer, Vice President and Chief Financial Officer.
Format for today's conference call is as follows.
<unk> will provide opening comments on the quarter as well as an update on key strategic initiatives.
Following jugal Shelley will review the detailed financial results for the quarter.
In addition to discussing our expectations for the remainder of 2023.
We will then open up the call for questions.
Let me remind investors that any forward looking statements made him 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, an amortization net income and earnings per share reflect the adjusted gap numbers shy and attachments four through seven in this morning's press release.
Yeah judgments are made in the prior year period for comparative purposes, and remove special items non-cash charges and certain discrete income tax adjustments.
Now I will turn it over the call to jugal for his couch.
It's going to be with you today to share details on a strong first quarter performance.
Coming off an outstanding 2022.
With that momentum Indonesia.
The living and record the first quarter of value added sales EBITDA M E. P. S.
We continue to see the power about transformation into a global leader.
High performance advanced material as strong execution on our strategic initiatives is enabling us to consistently outgrow and markets.
We continue to build out our healthy pipeline of both projects at our customers partner with us to develop next generation solutions are lined with global Mega traps.
The strategic partnerships container to position us for future growth and enable us to deliver today, even in the face of softness.
Oh, a combination of strong volume.
Operational execution and diligent cost control, we achieved value at our sales growth of 15%.
EBITDA girl 20 per cent.
E P S growth.
These results reflect the striped corner of Europe , and your improvement across all three matrix more than doubling our quarterly sales EBITDA Meps over that time period.
Led by our new precision parchment project are many outgrowth initiatives contributed to a record of performance.
We also consider the benefits from a diversified market strategy was strong.
And market demand across aerospace automotive and energy.
Or advanced capabilities have enabled us to increase our content across multiple applications in these markets.
And a more than 70 per cent.
Greece for auto.
More than 25 per cent aerospace and more than 20 per cent for oil and gas since 2019.
These advances helped us deliver continued organic growth that outpaced the expected swelling of semiconductor.
In total are all.
Bold initiative stove top and bottom line.
<unk> margin expansion.
Tracking wild towards our midterm target of 20 per cent.
Our new precision Kladstrup facility is contributing meaningful.
The construction of our expansion of its facilities compressing plan and we are on track to begin production late next year.
The build out of our new facility in Milwaukee is also on track and production capabilities are scheduled to come 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 battery electric vehicles.
On our last call. We noted that we had been awarded a 10 million dollar order of just apply critical materials for space propulsion systems.
I'm pleased to report that the customer has awarded US a second order was $12 million alright total of $22 million today.
We recently began shipping products and expect to fulfill the first order of this year.
Our products, which are designed to withstand the arse and demanding conditions of space travel.
Preparing out critical missions.
We continue to work closely without increasing portfolio of space.
Our products.
All the requirements of the industry, each day and well into the future.
Clean energy Mega trend continues to create opportunities for us as well as the properties of many of our products are ideal for meeting at solutions.
To that end, we choose a major milestone in our partnership with Paris last month as we completed the first delivery of life.
Why is it reliable safe and cost effective.
Used a nuclear energy production.
Customer funded opens salt purification plant is off to a fantastic start.
Our customer funded bold initiatives and winning opportunities with new and existing customers are perhaps the most compelling examples.
Building customer confidence to our deep expertise to help them continuously enable what's next.
With the success and progress on our outgrowth initiatives, we remain confident that we're on pace to deliver a 2023, even if the environment goes more challenging, particularly in the semiconductor and consumer electronics markets.
With that in mind, a global team remains later.
Driving operational excellence and targeting cost management actions to ensure we continue to deliver.
Instant results.
Uneven environment.
At the same time will continue to advance and invest in our uncle initiatives positioning turning on longterm growth and success.
I'm very proud of our team's performance remain on track to deliver a record results on both of <unk>.
Top and bottom.
The third consecutive year.
Despite increasing headwinds in certain areas with the strength of our portfolio and diversified and market exposure, coupled with our target and operational iphones initiatives I'm pleased to share the we're raising our full your guidance for 2023.
Now, let me turn the call over to Shelly cover more details on the financials.
It's two will outline in his opening remarks, we delivered a records first orders for value added sales adjusted EBITDA EBITDA margin and earnings per share.
Now you added sales, which excludes the impact of pass through precious metal cost for 298.6 million for the flare up 15% from the prior year.
This increase was driven mainly by strong demand across the aerospace automotive and energy in markets, where we saw significant market grass as well as meaningful contribution from precision cloud strife.
We delivered adjusted earnings of $1.34 per share in the first quarter of 12% as compared to the prior year. Despite roughly 15 cents a interest expense.
Moving to fly 10, adjusted EBITDA in the quarter was 53.4 million or 17.9% a value added sales up 20% from the prior year with margin expansion of 70 basis points.
This increase was driven by higher volume and strong operational performance.
Materials.
Unfavorable mix some cost inefficiencies within electronic materials due to the declining semiconductor demand.
Moving to fly to London, Let me review first quarter performance by business segment.
Starting with our performance materials business value added sales for a first quarter record of 168 million.
30 per cent compared to the prior year.
Aerospace automotive and energy demand drowsy increase as well as higher precision Kladstrup volume.
EBITDA, excluding special items for the first quarter record at 42.8 million with an all time high EBITDA margin of 25.5% I'm 56 per cent compared to 27.5 million in the first quarter of 2022, delivering 420 basis points in March.
An extension.
The breakfast, primarily due to increased volume from our outgrowth initiatives and strong operational performance.
The first quarter also included an estimated benefit I mean inflation reduction acts advanced manufacturing production credit.
Studied the potential impact of this credit during the first quarter and determine the benefits should be larger than we anticipated coming into the air.
Moving to the outlook, we expect another year of the outbreak led by aerospace energy and automotive as well as corrupt and precision Plaid stripes.
Next trying to electronic materials on slide 12.
Value added sales were a first quarter record of 103.9 million up two per cent compared to the prior dear mainly due to higher shipments of canceling based products.
EBITDA, excluding special items, with 14.4 million or 13.9% of the value added to cancel the order a decrease of 24 per cent from the prior year.
The decrease was driven by a few items, including the expected tantalum cost headwinds and unfavorable mixed impact from stopping precious metals, yes.
<unk> celebrated through the corridor, resulting in some manufacturing cost and efficiency, which are currently being addressed through targeted cost reduction activities.
As we look forward to the remainder of the year, we expect a stronger secondhand with semiconductor orders increasing in the third and fourth border.
Finally, turning to the precision optics segment on slide 13.
Sales were $26.7 million down seven per cent compared to the prior year.
This decrease was driven mainly by the discontinued consumer electronics application and general market shopping.
Even excluding special items with $2.9 million or 10.8% a value added sales of 240 basis points from the prior year.
This is largely attributed to cost reduction actions extend control while the top line is being rebuilt.
Looking out towards the next few quarters, we expect sequential improvement to the top and bottom line supported by improved order rates and defense and state coupled with the continuation of targeted cost reduction activities.
Moving out of cash and liquidity on July 14th we ended the order with a <unk> physician of approximately $418 million and 187 million of available capacity on the company's existing credit facility.
Our leverage it two times, it's slightly below the midpoint of our target range and down from your end with free cash flow improving by 40 million compared to the first quarter of 22, despite higher Capex spent.
Lastly, let me transition to slide 15 to address our full year outlook.
First quarter was a great start to the year.
Let's see some pockets of them, Arkansas, that's going forward, we also see areas of healthy growth and meaningful opportunity from our outgrowth initiatives.
With this we are raising our full year adjusted E T S to $5.60 to $6 per share representing a 10% increase from 2022 with an appointment.
Are modeling assumptions have been noted and you'll see that we continue to expect roughly $95 million in capital expenditures and twenty-three to find exciting breath opportunities throughout our company.
In closing 20 twenty-three is shaping up to be another year of meaningful address is John execution from material, leading to continued record results and long term sustainable value creation for all of our stakeholders.
This concludes our prepared remarks, we will now open the line for questions.
At this time, we will be conducting a question and answer session.
You would like to ask a question. Please press star one on your telephone keypad. The confirmation tone will indicate your line is in Q as in question Q You May Press Star two if you would like to remove your question from Q.
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And the first question. This morning is coming from Phil Gibbs from Keybanc capital markets.
Phil Please go ahead.
Okay. Thanks, good morning.
<unk>.
You mentioned you had some benefits from the inflation reduction act and performance materials and sounds like some of that was baked into your prior guidance given.
Giving you said benefits were larger than you anticipated any color.
What the the credit may have been in the quarter and how long.
<unk> those those credits persist.
Yeah sure. So you know, we're certainly pleased with the settlement of the inflation reduction Act and you know coming into the year, we were still studying it and didn't really fully appreciate what the benefit would be for material, but we did know.
It would be a positive so we kind of built that into our thinking on performance materials margin expansion now that we've had more time to look at it we're looking at roughly an 8 million dollar benefit for the here. So that's recorded with production. So you can assume that somewhat radical as you go through the here and yeah. So we <unk>.
Back to get that yeah pretty even through the year. When you asked about when it goes away the way it's written as it does not phase out for critical materials and at least for our high purity beryllium that would be at a critical material and so we don't expect to phase out there yeah.
So I'll just add to that is Shirley mentioned it is with a critical materials and that are deemed by the U S. Government beryllium is definitely on that list. So we participate in this there may be some other materials she'll be considered a study it and and see if there's other.
Thanks to look at that but that's what we're looking at right now is a brilliant that's what chili's shall be filtered.
So mechanically how how does that how does that work you're producing.
Some material and above a certain threshold you get you get a credit or.
It's based on revenue how does yeah.
How does it come about.
Yeah. So you know, it's it's really to encourage production of these critical minerals in the U S and to sell them by U S. Taxpayers. So you know certainly that benefits us the way we understand it it only applies to our high charity beryllium, so 99% and above and the credit is based on a per cent production cost so rough.
10% of our cost to produce that material would come to us as a credit.
Okay.
Uhm electronic materials you're on your.
Operating margins were down about 370 basis points.
Any any color in terms of slicing it up between the.
Channel, a misalignment mix and and and some of the weaker absorption you talked about.
Bleeding into this here, we also had the mix with lower precious metal target sales and then we do have some constant efficiencies as volumes are stepping down we saw pretty meaningful step down in March so really with the accelerating through the border I would say those items are kind of a third a third a third they're they're really equally impactful the way we look at it.
Yeah.
Again, just add to that a little bit fill you know when you look at our precious metal targets. Those are used quite a bit on consumer electronics devices, they're used in a bit of a memory devices as well both of those in the semiconductor space of have been impacted and as a result.
Our precious metal target sales, which are favorable from a mixer standpoint. So we expect this deceleration that Shelley mentioned that happened in March you know, we expect that to continue here in two to.
And the recovery that has been noted by all the chip manufacturers into three and two four we would expect to participate in that recovery, but I think you know one of the things that we've we've got is very diversified company. When it comes to the market. So we play in and so we have other markets that are very favorable.
To be able to help us move forward and <unk> and then you know for the rest of the year.
Thank you.
Thank you. Thank you.
The next question. This morning, it was coming from Daniel more from C. J S Securities.
Thank you good morning Jugal Shelley.
Particularly around the content grows from the drivers of share gains.
It does sound like maybe perhaps incrementally more cautious as you just mentioned jugal around semi and consumer electronics is that the right take away or just sort of you know pointing out the ongoing choppiness and those and markets. That's wanting to just talk about your visibility to the continuing to outpace that market growth.
And H two it into physical 24.
Yeah.
Yeah, I would say I think there is a little bit of more consciousness in that market then perhaps what we had a few months back we've been continuing to monitor what's going on in the chip industry I'm sure you've been listening to the various calls and and reports from those from those companies you know they all tend to indicate that to to perhaps there'll be a low point with a recovery.
Two three Q for maybe a little bit to the right shifting to the right a bit and and so you know we we certainly have a bit of a cautious take on that compared to other shut up you know a couple of months back.
Content.
Will stress, though you know we participate in a very diversified part of the whole semiconductor Chang and so you know our content has not dropped anywhere near the level that some of the chip manufacturers have talked about in fact, if anything is <unk> to one you know our our business was actually plot to a little bit Hot we would expect of course a.
Softer two two and that space, but then the recovery in Q3, two four and would continue to expect.
Perform the overall semiconductor market it would be I think with the diversified portfolio that we have within semi and then as I indicated I I think the diversified portfolio that we have with the entire company aerospace the oil and gas auto telecom many parts of the industrial you know.
Very very strong markets for us in the content increase that we've had in each of those markets. You know if you just look at the last two three years I think positions as well to continue to be able to deliberate and frankly, that's exactly the some of the drivers you know for being able to raise our guide.
Very helpful. Maybe shifting quickly to the precision optics. It gets a little less attention I think you mentioned sequential quarterly improvement, we give them some of the new business wins do you expect to return to growth and H, two or by physical 24, and just talk.
The sort of maybe trajectory towards getting back to a more normalised low to mid teens margins in that business.
Right well you saw margin expansion right I've done on this business here in two one with some of the targeted actions that we have taken and I would expect that will continue to build on that as we move forward the rest of the year.
The top line, we are having good success, particularly to the defense in space and some of the auto areas for that business.
And so you know maybe a bit of it in the second half of this year, but really 24 would be would be I think of a better said for good top line growth turn around but I would start to see maybe in the in the second half of this year, but the bottom line side I take our actions are are taking place taken hold but as.
By the Q1 improvement and I would expect to see improve my 12 year.
Got it I'll jump back we're gonna follow ups. Thank you.
Thanks.
Thank you. Your next question is coming from David Silver from C. L. King.
Proceed with your question.
Yeah, Hi, good morning, Thank you David.
Good morning.
First question is gonna be a clarification, one and I apologize for it's naive found sounding name.
Nature of it.
But you know you did it's about the organic growth you did talk about double digit organic growth when I looked through the press release, when I'm looking through the slide deck.
Don't really see any like detail on them like what what the what.
What the absolute number is or how it breaks down by segment that my am I missing something or.
Just not not you know not being presented.
So let me take that long I think I think you'll see in our materials posted on the website that we do list or performance by and market, which I think is an indicator, but also important to remember that you know all of our acquisitions of Anniversaried. So right now everything is is organic growth.
Okay very good alright.
I had a question I'm following up on your comments in your prepared remarks about [noise].
The timeline for let's say your or discretionary capex projects in Massachusetts and in Milwaukee.
<unk> or first day of 2020 force startup.
Couple of questions do you have similar timelines for some of the performance materials.
Customer focus project's you know I do recall second half of last year, there was a noticeable.
Yep up when you know with a certain phase of the quiet strip project was completed and then turned on.
So do you do you have any kind of.
Timelines or or targets that we can focus on for you know the space propulsion and and any remaining you know key contracts that are under development <unk>, Yeah, I found it or whatever I'll, let you take it away. Thank you yeah no that that's a great question you know I can talk about two three.
He projects and then certainly we can do any other discussions you'd like him as a follow up as well when.
When you look at for example, the space propulsion, we announced a contract phase one of the contract we announced in the last earnings call, which was worth $10 million. We now have announced a second phase which is $12 million.
Our expectation is that the phase one will be able to complete this year. You know earlier, we had thought that maybe it would be maybe it would be somewhat this year and then and then the remaining next year, but our teams have continue to make great progress on that and we think we'll be able to finish phase one of it this year than face too would expect into next year.
We also announced to clean energy project and our last call and we indicated that that clean energy project would start to ship out perhaps a little bit at the end of this year and then finish out at the at the but by the end of next year. This was the one you may recall, where the customers funding 100 per cent of the investment approximately 15 million.
Of of <unk>.
<unk> that that their funding we're in the process of putting that that capacity in place in a couple of our facilities and we'll get that done of course of the other one that we have talked about for the last couple of years as the the precision cloud strip, but that one we had going from our legacy facility. We now have our new facility up and running.
Producing from both facilities and and you know is there and and at some point.
Will decide with our customer on how that production needs to continue but we're continuing that we do have a phase two implementation of that and the phase two implementation is in process. We expect that to start production towards the end of next year, and then really I would look for sales then and the 25 timeframe.
Meaningful sales and the 25 a timeframe. So hopefully that helps with I think some of the key projects that we've talked about on the on the PM side of the of the business and maybe just to take the capital side of that you know you're likely noted that our capital spending in Q1 was strong, especially for our first order you know we had a lot of.
Coming out of the year last year on several of these projects. So you know a lot of that came into <unk> and made our first quarter a bit higher withheld our guide for Capex at that sort of 95 million dollar range. So you know you can take 30 off that and expect it should be roughly equivalent and it's really hard to peg because the timing and how those.
How'd that work gets down on the invoices come in but you know you know what we have rest of the year.
[laughter] that's great color. Thank you on that.
Maybe I'll just stick with shallow you on this one but you know I was looking at your <unk>.
Cash flow statement and I did notice that even though.
Capex was up as you pointed out you know free cash flow was meaningfully better and.
You know the difference or the big part of the differences working capital you know the last few you Coupla years have been you know years were working capital was kind of use consistently.
And you know I I'm I I do expect it to reverse or diminish somewhat this year, but what what what kind of releases of working capital that's been built up.
Maybe over the past couple of years do you think is as likely as 2000 twenty-three progress is or is it is it just too contingent on <unk>.
Various <unk>.
Developments.
Great. Great question, you know as you can imagine the last couple of years, where we have been in in high growth mode. There's been pretty significant working capital added some of that for new projects, where you've got to fill the pipeline in a precision.
Strep would be a great example of that where you go from kind of no inventory to needing to fill the pipeline for raw materials, and then hold a certain amount of finished goods you know that's pretty structural for us going forward, but when we think about you know getting into a more steady state situation with semiconductor you know, we do expect working capital to be.
More manageable. This year you know we have several initiatives going on to kind of focus on making sure. We've got the right inventory the right working capital and that we're improving that where we can to increase cash flow. So you know I do expect that we're going to see a positive out of working capital. This year. You know, we haven't really put a number on that but it's it's definitely going to be.
You know not the burn it's been Alaska.
Okay. Thank you I have one more and then I'll get back in queue.
But.
Has to do with the I just wanted to clarify on the <unk>.
[noise] tronic materials expansions in Milwaukee and at the HCS unit.
Can you just remind me, but I'm assuming that those units there sorry, those expansions in both locations are essentially like base loaded I'm already in other words once they are.
Complete completed and commission you know there there are orders in hand.
To you know take up a fair amount of the new capacity added.
Is that the case or would you say, it's built in anticipation of orders, but no real firm orders in hand at this point.
Yeah. So let me start with our HCS as you indicated which is R. Newton facility, we're making investments in that facility because we're confident that the the tantalum content will continue to increase on the semiconductor site, we see that happening and all the designs that are taking place the.
You know the the smaller and smaller node chips that are being introduced we also see good growth on our aerospace and defense side of that business the industrial side of that business and so you know I I.
David we are confident that that the that the capacity.
We're gonna put in place is gonna have good meaningful demand a part of that is based on discussions in order. So that we have with customers and part of that is just continue development of new initiatives and new projects that were in Boston. So we're we're feeling good about the capacity to we're putting in place and what I think what we think it can do for US in 24 25 26.
Timeframe when it comes to the Milwaukee facility as we indicated I think when when when we first announced it we've got a we've got a a building that gives us the opportunity to expand but what we're doing in terms of putting the capacity and so we're putting very targeted capacity that is based on our customers.
Discussions customer contracts, you know the new business new business opportunity. So we're really making sure that we're or doing investments on a very targeted basis based on growth in the semiconductor space again on smaller node L. D type of of of programs as well.
But you know we announced that we are working on next generation battery materials with a number of different customers in one of the customer is actually made an investment with us and so that investment you know, we're doing a joint activity with them and and so that you know that.
I think is is one that we're feeling very good about that as well and so in general I would say, we're very excited about the capacity, we're putting in place in both locations and we expect those to have good meaningful impact you know over the next three to five years.
[laughter], that's great I am gonna get back in queue, but thank you very much for all the details much appreciated. Thank you.
Thank you. Your next question is coming from Dave storms from Stonegate capital markets. Please proceed with your question.
Thank you and good morning.
One a day.
Good morning, just hoping you could start by speaking a little bit about the targeted cost reduction actions. So you've mentioned you know just trying to get through some of the short term soft Mister C. N N a couple of markets.
Yeah good.
Good good question as you know.
We have had a very good track record of operational excellence I think you know within our company, we've driven that over the last several years and and that's just something that we do as a normal part of our our business whenever we feel that there's.
Needed actions, we look at them, we did that during the pandemic time is it was needed and and we've looked at that you know over the last several years. So as we see some softening in some of the areas that we make sure that you know we'd take appropriate action I think one of the things that were very focused on and have been very focused on is making sure that we don't take action, where we lose.
Capacity, we want to make sure that we can support our customers in a meaningful way and so there's a lot of discussion about the ramp up so that'll happen in the second half for the semiconductor side and we want to make sure we're well positioned to capitalize on those Ah ramp up. So you know any type of reductions that we do you know put in place, we're making sure that they're very well thought out a thought out.
And don't impact our capacity and don't impact our ramp up that may be required at some point. So it's just a I would say a normal course of action.
Based on market conditions, and it's something that will just continue to look at as we move forward.
That's a great color. Thank you <unk> one more for me you mentioned that all your acquisitions. Our anniversary. We're just wondering if you could shed a little light on what you're seeing.
Market, you know the potential for rate hikes and pause.
Cause in the second half of the year is given the market's a little more certainty and clarity or if multiples are still free elevated just anything you could give us there.
Yeah, I think the M&A side, you know what I would say that the expectations I think are still there from the seller side to be able to get a get a good price for the the the the properties. They have and so we just have to be very diligent in our in our evaluations. We can turn to look at M&A uhm.
We just have to be very diligent in understanding what the offering is and does it make sense for us to fill a certain portfolio gap for us does it give us some adjacency like we've done over the last couple of acquisitions and if it's the right type of thing for US then we'll evaluated based on based on the returns, but in general I would say that.
And a pricing side is probably still a bit elevated.
Elevated.
And probably has not seen the drop that maybe some of the other areas obscene.
That's very helpful. Thank you.
Thank you.
We have a follow up question from Phil Gibbs of Keybanc capital markets.
[noise]. Your line is lives. Please go ahead.
Hey, thanks very much.
Cause this year, the 11 million <unk> and then secondarily.
<unk>.
Similar line question with the the customer Prefunded.
Credits that you'd expect for clubs as to what's the Sars twenty-three and have those those been realized.
Yeah. So I'm the the main development Society, and we talked about another opening without an $11 million roughly spend it is here and as you know we put that on the balance sheet and amortize that really over production Ah to capture that is kind of cost of goods not a lot of that has been spent yet. So you know you would see.
That really still most of it will come in the next few quarters in terms of the prepayments. We received some of that last year, and we expect a little bit more to come this year, but but we did receive a good portion of that in in 22.
So how much is left on that Shirley.
Yeah, you know directly.
Four 5 million.
Thank you.
Hmm.
Thank you and we have a follow up coming from David Silver from C. L. King.
David Your line is life. Please go ahead.
[noise] Okay. Thank you. So jugal I guess this is kind of a big Big picture question, but.
You know you you've talked or surely talked earlier made some comments about the inflation reduction act in their benefits to you and.
You've talked about a number of <unk> customer focused project. So I'm, just gonna try and you know maybe integrate them but.
One reason I think you know your prospects might be bright longer term not the only reason, but I do think you know the restrictions on technology trade with China and some other issues in Asia you know.
<unk> spring from incremental I guess onshoring or Reshoring opportunities you know on top of the ones that you developed outside of that.
But I'm wondering you know when you look at the environment for.
You know aligning yourself with new customers or getting involved in newer projects as time goes on.
In part you know due to a shift from Asia.
To to the U S or North America.
For various technology products.
Mmm is there any.
Impediment in other words is the fact that the United States doesn't have quite the same ecosystem you know supplies may be skilled labor.
Research capabilities is.
Does any of that factor in that that maybe you know.
You, you're not gonna be able to avail yourself of as much of the opportunity as.
As possible or you know maybe you could just comment on how you think maybe the trade restrictions that were issues lately. This year, the I R a and other things.
Feed into let's say your three to five year outlook and you know is there enough of an ecosystem or is there any <unk>.
Bottlenecks.
Currently in the U S that might you know get in the way of you hitting your your long term growth objectives yeah.
Well a couple of things one I wanted to continue to stress that we have been focused on making sure that we grow our business globally. So certainly be the activity that's been going on in the U S is a factor in I'll talk about that but you know just to give you a data point, we had approximately I'm gonna say 46.
<unk>, but in order to 46% of our sales are in the U S. And then that's been coming down on actually an hour around a 43%. So we've we've actually increased or outside of the U S share by three points just on a year over year basis, and so that I think speaks to break with our teams are doing to make sure that we're capturing.
Sure.
<unk> in Europe , and and we're going to continue to work on that we're going to continue to make sure. The were absolutely focused on growing our business globally.
Globally now with regard to your question I think on the on the U S side, one of the things that I really am pleased with is that we have for this area as we have great R&D capability and manufacturing capability you know in the U S.
A lot of our R&D centers and really a main rd centers for electronic materials for performance materials for precision optics are located here in the U S are manufacturing them in our legacy manufacturing with all of our performance materials is located here in the U S. As you know David when we acquired the.
HCS a business the Newton facility. That's that's in the U S. And then the investment that we just talked about in Milwaukee, you know that we're putting in place that's in the U S. So I think between the R&D side in the manufacturing side and then our sales support in our other back office support I believe we're really well position and we have what is necessary to be able to.
To capture.
The work that's going on on the West front and at the same time, you know, we're making the necessary investments outside the U S. So that we can continue to grow our business in Asia and in Europe . So.
Over the next three to five years I expect us to be able to do both I expect us to be able to take advantage of the initiatives that the U S. Government is working on her just they'd be onshoring activity. That's involved here in the U S. But I also expect us to be able to grow our business in Asia, and Europe and continue to be a good global well diversified company.
Very complete very thorough answer I appreciate it thanks very much.
Thank you.
We have reached the end of the question and answer session and I will now turn the call over to John Gerontic for closing remarks.
Thank you. This concludes our first quarter of 2023 earnings call recorded playback of this call will be available on the company's website <unk> dot com.
I'd like to thank you for participating on the call. This morning, and your interest in Missouri, I won't be available for any follow up questions. My number is 2163834010. Thanks again.
This concludes today's conference and you may disconnect. Your lines at this time. Thank you for your participation.