Q4 2023 Materion Corp Earnings Call

Greetings welcome to materials fourth quarter and full year 2023 earnings conference call. At this time all participants are in a listen only mode. A question and answer session will follow the formal presentation.

Operator: Greetings. Welcome to Materion's fourth quarter and full year earnings. Next time, all participants are in a lesson. A question-and-answer session will follow before If anyone should require an operator, and friends, star zero. I will now turn the conference over to your host, Kyle Kallaher.

If anyone should require operator assistance during the conference. Please press star zero on your telephone keypad. Please.

Please note this conference is being recorded.

I will now turn the conference over to your host calling out her manager of Investor Relations you may begin.

Good morning, and thank you for joining us on our fourth quarter 2023 earnings Conference call. This is Pat Kelleher manager Investor Relations.

Kyle Kelleher: Good morning, and thank you for joining us on our fourth quarter 2023 earnings conference call. This is Kyle Kelleher, Manager, Investor Relations. 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 materials through the download feature on the Earnings Call webcast.

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>.

Kyle Kelleher: 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 and full year, as well as an update on key strategic initiatives. Following Jugal, Shelly will review the detailed financial results for the quarter and full year in addition to discussing our expectations for 2024. 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.

President and Chief Executive Officer, and Shelly, Chadwick, Vice President and Chief Financial Officer.

Our format for todays conference call is as follows jugal will provide opening comments on the quarter and full year as well as an update on key strategic initiatives.

Following jugal, Joe will review the detailed financial results for the quarter and full year. In addition to discussing our expectations for 2024.

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 Companys actual performance may materially differ from that contemplated by the forward looking statements as a result of a variety of factors. Those factors are lifting in the earnings press release, we issued this morning.

Kyle Kelleher: 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 gap numbers shown in attachments 4 through 8 in this morning's press release. The adjustments 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'll turn over the call to Jugal for his comment.

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 four through eight 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 over the call to jugal for his comments.

Jugal K. Vijayvargiya: Thanks, Kyle, and welcome, everyone. It's great to be with you today to talk about our fourth quarter performance and our record results for full year 2020. I'm proud of our team's focus and resilience, leading our company to another year of record sales and earnings. We overcame significant headwinds in some of our largest markets and can deliver strong results, demonstrating the power of our balanced portfolio and the extraordinary potential of our unique customer portfolio. Our sharp focus on operational excellence led to continued meaningful margin expansion, structurally improving our profitability and preparing us to maximize performance as markets recover. And while we managed our costs closely, adjusting to uncertain economic conditions.

Thanks, Kyle and welcome everyone.

It's great to be with you today to talk about our fourth quarter performance and our record results for full year 2023.

I'm proud of our team's focus and resilience, leaving our company to another year of record sales and earnings.

We overcame significant headwinds and some of our largest markets to deliver strong results.

Demonstrating the power of our balanced portfolio and the extraordinary potential of our unique customer partnerships.

Our sharp focus on operational excellence led to continued meaningful margin expansion.

Structurally improving our profitability and preparing us to maximize performance as markets recover.

And while we managed our costs closely adjusting to uncertain economic conditions, we continue to invest for the future seeding a pipeline for long term organic outgrowth.

Jugal K. Vijayvargiya: We continue to invest for the future, seeding a pipeline for long-term organic growth. In the fourth quarter, the diversity of our portfolio continued to be a highlight, while several of our markets remained challenged, when excluding semiconductor, our largest market, which is experiencing significant market weakness. Our sales were up slightly. Our aerospace and defense sales grew nearly 70% year-over-year, representing the 11th consecutive quarter of growth for this market, in addition to the benefits from significant organic wins in space and defense. We also saw the impact of a continued increase in our content for playing. On the other hand, our semiconductor and industrial end markets continue to show significant weakness in 2.4. In SEMI, we saw our third consecutive quarter of meaningful year-on-year decline.

In the fourth quarter, the diversity of our portfolio continue to be a highlight while several of our markets remain challenged.

When excluding semiconductor our largest market, which is experiencing significant market weakness our sales were up slightly.

Our aerospace and defense sales grew nearly 70% year over year.

Representing the 11th consecutive quarter of growth for this market.

In addition to the benefits from significant organic wins in space and defense.

We also saw the impact of continued increase in our content per plane.

On the other hand, our semiconductor and industrial end markets continued to show significant weakness in Q4.

In semi we saw our third consecutive quarter of meaningful year on year declines, but the order patterns are starting to show signs of stabilization.

Jugal K. Vijayvargiya: But the order patterns are starting to show signs of stabilization. We are also seeing some positive indicators in the broader market and expect that the related increase in demand will positively impact us, starting in the second half. Our performance in the industrial space is impacted by its largest application related to non-residential and warehouse construction.

We are also seeing some positive indicators in the broader market and expect that the related increase in demand will positively impact us starting in the second half.

Our performance in the industrial space is impacted by its largest application later in the nonresidential and warehouse construction builds.

Well the impact of Covid on office space utilization combined with higher interest rates and demand for our beryllium nickel sprinkle material is seeing a significant inventory correction that will carry through the year.

Jugal K. Vijayvargiya: With the impacts of COVID on office space utilization, combined with higher interest rates, the demand for our beryllium nickel sprinkler material is seeing a significant inventory correction that will carry through the year. While our end market outlook remains mixed, we continue to make significant advancements on strategic initiatives that position us for long-term growth. Our organic growth projects, aligned with compelling global megatrends, have allowed us to win exciting new business and ensure that we continue our strong track record of outgrowing our underlying end market. The emerging space market continues to be a source of new opportunities, as illustrated by a recent fourth order to supply critical materials for space propulsion. These four important orders, along with several other organic wins in this market, contributed approximately $90 million in new business orders during the year.

While our end market outlook remains mixed we continue to make significant advancements on strategic initiatives to position us for long term growth.

Our organic growth projects aligned with compelling global Mega trends have allowed us to win exciting new business and ensure that we continue our strong track record of outgrowing our underlying end markets.

The emerging space market continues to be a source of new opportunities for us.

As illustrated by our recent fourth quarter to supply critical materials for space propulsion systems.

These four important orders along with several other organic wins in this market contributed approximately $90 million in new business orders during the year.

We have positioned our company as a trusted partner supplying critical materials into this exciting high growth market.

Jugal K. Vijayvargiya: We have positioned our company as a trusted partner supplying critical materials into this exciting, high-growth market. Our technical expertise continues to lead to new R&D partnerships that will drive innovation and new opportunities in several of our key end markets. In November last year, we announced that we were awarded a $5 million contract with the United States Air Force for a project to develop additive manufacturing capabilities for beryllium material.

Our technical expertise continues to lead to new R&D partnerships that will drive innovation and new opportunities in several of our key end markets.

In November last year, we announced that we were awarded a $5 million contract with the United States Air Force for a project to develop additive manufacturing capabilities for early materials.

Jugal K. Vijayvargiya: Today, we are pleased to announce a new $4 million award from another government agency to fund additive manufacturing for other advanced materials across the aerospace, defense, and energy markets. These projects will enable us to better serve both new and existing customers, who will require more complex components for next-generation applications. We are preparing for the recovery in the semi-market by expanding our capability. The Proliferation of Artificial Intelligence or AI Applications Specifically, generative AI tools will result in increased demand for hardware-to-power. That will mean a greater worldwide need for chips, which we directly support with our highly engineered semiconductor material. Chips used to drive built-in AI capabilities in devices such as smartphones, tablets, and PCs will be in highest demand. By providing materials for both physical vapor deposition and atomic layer deposition, two important methods for the manufacture of these high-power semiconductors.

Today, we are pleased to announce a new $4 million award from another government agency to fund additive manufacturing for other advanced materials across the aerospace defense and energy markets.

These projects will enable us to better serve both new and existing customers will require more complex components for next generation applications.

We are preparing for the recovery in the semi market by expanding our capabilities.

Proliferation of artificial intelligence or AI applications, specifically generative AI tools will result in increased demand for hardware to power it.

That will mean greater worldwide need for chips, which will directly support with our highly engineered semiconductor materials.

Chips used to drive built in AI capability and devices, such as smartphones tablets and Pcs will be in highest demand.

By providing materials for both physical vapor deposition and atomic layer deposition tool important methods for the manufacturer of these high power semiconductor chips material is a vital part of the supply chain, enabling on device AI functionality.

Jugal K. Vijayvargiya: Materion is a vital part of the supply chain, enabling on-device AI functionality. We are pleased to announce that we've recently launched two new atomic layer deposition materials for advanced memory, meeting the needs of our customers, who are rapidly innovating to power these future applications. In addition, our tantalum materials are used to fabricate logic chips that power AI, as well as high-bandwidth memory chips employed in AI processes.

We are pleased to announce we recently launched two new atomic layer deposition materials for advanced memory meeting the needs of our customers who are rapidly innovating to power these future applications.

In addition, our tantalum materials are used to fabricate logic chips to power AI as well as high bandwidth memory chips employed in AI processing centers.

Jugal K. Vijayvargiya: We expect the market for those chips to significantly grow over the next five years and are making investments to ensure we are ready to support that. Our semiconductor capabilities will also be critical to the continued evolution of the automotive industry as the shift toward electric and autonomous vehicles continues to advance. As a reminder, these vehicles require 2 to 10 times more chips per vehicle.

We expect the market for those kits to significantly grow over the next five years and are making investments to ensure we are ready to support that demand.

Our semiconductor capabilities will also be critical to the continued evolution of the automotive industry as the shift toward electric and autonomous vehicles continues to advance.

As a reminder, these vehicles acquired two to 10 times more chips per vehicle.

Jugal K. Vijayvargiya: Transition and Advanced Mobility is supporting growth for our precision optics business, which is seeing an increase in demand for optical components. We are pleased to share that we've secured another customer contract to supply optical components for LiDAR technologies for autonomous vehicles. Our materials are in LiDAR modules at six vehicle OEMs currently, and we are actively providing prototypes to expand further.

The transition in advanced mobility supporting growth for our precision optics business, which is seeing an increase in demand for optical components.

We are pleased to share that we have secured another customer contract to supply optical components or lidar technologies for autonomous vehicles.

Our materials are in Lidar module at six vehicle Oems currently and we are actively providing prototypes to expand further.

Jugal K. Vijayvargiya: We have positioned ourselves as a critical technical partner in these exciting next-generation products and are looking forward to additional opportunities to serve this emerging market. We're building a strong pipeline of opportunities to support the clean energy transition with the successful development of two clean energy opportunities last year. We have also continued our work with Kairos Power and will be supplying additional material in support of their Molten Salt Nuclear Reactor Program.

We have positioned ourselves as a critical technical partner in these exciting next generation products and are looking forward to additional opportunities to serve this emerging market.

We're building a strong pipeline of opportunities to support the clean energy transition with the successful development of two clean energy opportunities last year.

We have also continued our work with <unk> power and we will be supplying additional material in support of their molten salt nuclear reactor stroke.

In addition, we successfully completed the facility upgrades required to support a customer funded $15 million investment will provide critical materials for power generation.

Jugal K. Vijayvargiya: In addition, we successfully completed the facility upgrades required to support a customer-funded $15 million investment to provide critical materials for power generation. Our shipments to the customer remain ahead of schedule. Our Precision Cladstrip Facility is now fully ramped and contributing meaningfully to our performance.

Our shipments to the customer remained ahead of schedule.

Our precision parts per facility is now fully ramped and contributing meaningfully to our performance.

We remain on track with our capacity expansion, which we expect to start production at the end of this year.

Jugal K. Vijayvargiya: We remain on track with our capacity expansion, which we expect to start production at the end of this year. We have also secured a record $60 million in new defense orders for 2023 as we continue to strengthen relationships with our key partners. Our materials are critical to the performance of leading-edge defense applications.

We have also secured a record $60 million and new defense orders in 'twenty three as we continued to strengthen relationships with our key partners.

Our materials are critical to the performance of leading edge defense applications.

The advancements of outline underscore the significance of our outgrowth initiatives continue to create momentum and gives us confidence as we move forward.

Jugal K. Vijayvargiya: The advancements I've outlined underscore the significance of our art growth initiatives that continue to create momentum and give us confidence as we move forward. As we shared during the year, we have been focused on making targeted adjustments to improve our costs in order to improve the efficiency and performance of our business. This approach has been a key enabler as we expanded margins by 170 basis points last year, reaching 19.3% of sales, nearing our midterm target of 20%. We will continue to focus on operational excellence as we head into 2024 to manage through market softness and maximize our performance as markets gradually recover in the second half of the year. Our performance in 23 strengthened the confidence we have in our strategy as we delivered another record year despite volatile market conditions. I'm very proud of our team's hard work and relentless focus on delivering results and creating value for all of our stakeholders. The advances we made in 23 are paving the way for another year of record results this year. Now, let me turn the call over to Shelly to cover more details on the connection. Thanks, Jugal, and good morning, everyone.

As we shared during the year, we have been focused on making targeted adjustments to improve our cost structure in order to improve the efficiency and performance of our business.

This approach has been a key enabler as we expanded margins by 170 basis points last year, reaching 19, 3% of sales nearing our midterm target of 20%.

We will continue to focus on operational excellence as we head into 2024 and manage through market softness and maximize our performance as markets gradually recover in the second half of the year.

Our performance in 'twenty three strengthen the confidence we have in our strategy as we delivered another record year. Despite volatile market conditions I'm very proud of our team's hard work and relentless focus on delivering results and creating value for all of our stakeholders.

The advances we made in 'twenty three are paving the way for another year of record results. This year.

Now, let me turn the call over to Shelly to cover more details on the financials.

Thank you Bill and good morning, everyone. During my comments I will reference the slides posted on our website. This morning, starting on slide 13.

Shelly Chadwick: During my comments, I will reference the slides posted on our website this morning, starting on slide 13. In the fourth quarter, value-added sales, which exclude the impact of pass-through precious metal costs, were $289.7 million, down slightly from the prior year, but up 7% sequentially. Despite strength in aerospace and defense, semiconductor and industrial remain challenged, as Jugal outlined. When looking at earnings per share, we delivered adjusted earnings of $1.41 in the fourth quarter, down slightly from the prior year.

In the fourth quarter value added sales, which exclude the impact of pass through precious metal costs were $289 7 million down slightly from prior year, but up 7% sequentially. Despite.

Despite strength in aerospace and defense semiconductor and industrial remained challenged as jugal outlined.

When looking at the earnings per share we delivered adjusted earnings of $1 41 in the fourth quarter down slightly from prior year.

Moving to slide 14, adjusted EBITDA in the quarter was $53 3 million or 18, 4% of value added sales down 4% from the prior year with margin expansion of 10 basis points.

Shelly Chadwick: Moving to slide 14, Adjusted EBITDA in the quarter was $53.3 million, or 18.4% of value-added sales, down 4% from the prior year, with a margin expansion of 10 basis points. This year-over-year decrease is mainly due to the volume decline, but strong price mix and operational performance, including the targeted cost improvement initiatives, are contributing to the increase in margins. These results also include the year-to-date adjustment to the expected manufacturer's production credit benefit, as we announced earlier this year. Moving to slide 15, let me now review fourth quarter performance by business segment. Starting with performance materials, value-added sales were $186 million, up 5% compared to the prior year and up 10% sequentially. This record quarter and year-over-year increase was driven by strength across the aerospace and defense end markets, including meaningful contributions from space applications. EBITDA excluding special items was $46 million, or 24.7% of value-added sales, up 4% compared to $44.3 million in the fourth quarter of 2022.

This year over year decrease is mainly due to the volume decline as strong price mix and operational performance, including the targeted cost improvement initiatives are contributing to the increase in margins.

These results also include the year to date adjustment to the expected manufacturer's production credit benefit as we announced earlier this year.

Moving to Slide 15, let me now review fourth quarter performance by business segment.

Starting with performance materials value added sales were $186 million up 5% compared to prior year and up 10% sequentially.

This record quarter and year over year increase was driven by strength across the aerospace and defense end markets, including meaningful contributions from space applications.

EBITDA, excluding special items was $46 million or 24, 7% of value added sales up 4% compared to $44 3 million in the fourth quarter of 2002.

This growth was primarily due to higher volume favorable price mix and strong operational performance. Despite the unfavorable year to date adjustment to the manufacturers production credit.

Shelly Chadwick: This growth was primarily due to higher volume, a favorable price mix, and strong operational performance despite the unfavorable year-to-date adjustment to the manufacturer's production credit. Moving to the Outlook, we expect Aerospace and Defense to remain strong in 2024, and we remain on track with the expansion of our Precision-Clad Strip Facility, which is expected to ramp up in the latter part of 2024. Despite these growth drivers, we expect the industrial and automotive end markets to remain challenged while they face continued inventory corrections. Next, we turn to electronic materials on slide 16. Value added sales were $77.7 million, down 21% compared to the prior year as a result of the significant weakness in the semiconductor market. EBITDA excluding special items was $11 million, or 14.2% of value-added sales in the quarter.

Moving to the outlook, we expect aerospace and defense to remain strong in 2024, and we remain on track with the expansion of our precision clad strict facility, which is expected to ramp in the latter part of 2024.

Despite these growth drivers, we expect the industrial and automotive end markets to remain challenged while they say it continued inventory corrections.

Next turning to electronic materials on slide 16.

That you added sales were $77 7 million down 21% compared to the prior year as a result of the significant weakness in the semiconductor market.

EBITDA, excluding special items was $11 million.

14, 2% of value added sales in the quarter.

Shelly Chadwick: Despite the sizable volume decline, targeted cost improvement initiatives helped to mitigate the semiconductor market shock. As we look forward to 2024, we expect semiconductors to remain challenged through the first half of the year, with a gradual recovery starting in the second half. As we saw a delay in the market downturn's impact on Materion, we will experience a similar delay with the overall market upturn based on our position in the inventory chain. The first quarter of 2023 was among the strongest in the company's history for SEMI, with the decline beginning in Q2. And while we manage through the end of the downturn, we expect to see continued benefit from our Operational Excellence Initiative. Finally, turning to the precision optics segment on slide 17. Value-added sales were $26 million, down 6% compared to the prior year.

Despite the sizable volume decline targeted cost improvement initiatives helped to mitigate the semiconductor markets.

As we look forward to 2024, we expect semiconductor to remain challenged through the first half of the year with a gradual recovery starting in the second half.

As we saw a delay in the market downturn impact on material and we will experience a similar delay with the overall market upturn based on our position in the inventory chain.

The first quarter of 2023 was among the strongest in the Companys history for semi with the decline beginning in Q2.

And while we manage through the end of the downturn, we expect to see continued benefit from our operational excellence initiatives.

Finally, turning to precision optics segment on slide 17.

You added sales were $26 million down 6% compared to the prior year. This decrease was mainly driven by reduced PCR filter demand in general softening in the consumer electronics market, partially offset by strength in defense.

Shelly Chadwick: This decrease was mainly driven by reduced PCR filter demand and general softening in the consumer electronics market, partially offset by strength in defense. EBITDA excluding special items was $3.8 million, or 14.7% of value added sales. The decrease in volume was a meaningful driver of this year-over-year decline, offset by positive price mix and the benefit of targeted cost improvement initiatives. From a sequential standpoint, we saw another quarter of EBITDA growth, along with 170 basis points of margin expansion. Looking out to 2024, we expect defense, space, and automotive to drive top-line growth. I will comment on the full year on slide 18. We delivered our third consecutive year of record value-added sales, adjusted EBITDA, and adjusted earnings per share. Value-added sales reached an all-time high of $1.1 billion, up about 1% from the prior year.

EBITDA, excluding special items was $3 8 million or 14, 7% of value added sales.

The decrease in volume was a meaningful driver of this year over year decline offset by positive price mix and the benefit of targeted cost improvement initiatives.

From a sequential standpoint, you saw another quarter of EBITDA growth, along with 170 basis points of margin expansion.

Looking out to 2024, we expect defense space and automotive to drive topline growth and expect a continued benefit from the cost improvement initiatives implemented.

Moving to slide 18, let me comment on the full year.

We delivered our third consecutive year of record value added sales adjusted EBITDA and adjusted earnings per share.

You added sales reached an all time high of $1 1 billion up about 1% from the prior year.

Shelly Chadwick: This year-over-year increase was mainly attributed to strength in aerospace and defense and precision clad strips, offset by significant semiconductor market weakness. Adjusted EBITDA for the year was $217.7 million, or 19.3% of value-added sales, up 11% from the prior year, with a margin expansion of 170 basis points. The significant margin performance was largely driven by favorable price mix, strong operational performance, including the targeted cost improvement initiative and the benefit from the manufacturer's production credit. We delivered $5.64 in adjusted earnings per share for the year, up 7% as compared to the prior year, despite a $0.40 interest expense headwind. 2023 did provide a favorable tax rate of 13.3% from the impact of the non-taxable production credit and an outsized benefit from foreign earnings.

This year over year increase was mainly attributed to strength in aerospace and defense and precision class strength offset by the significant semiconductor market weakness.

Adjusted EBITDA for the year was $217 7 million or 19, 3% of value added sales up 11% from the prior year with margin expansion of 170 basis points.

The significant margin performance was largely driven by favorable price mix strong operational performance, including the targeted cost improvement initiatives and the benefit from the manufacturers production pad.

We delivered $5.64 in adjusted earnings per share for the year up 7% as compared to the prior year, Despite a 40% interest expense headwind.

2023 did provide a favorable tax rate at 13, 3% from the impact of the non taxable production credit and an outsized benefit from foreign earnings.

Shelly Chadwick: Moving now to cash, debt, and liquidity, on slide 19, we ended the quarter with a net debt position of approximately $413 million and approximately $180 million of available capacity on the company's existing credit facility. Our leverage, at 1.9 times, remains slightly below the midpoint of our target range. Lastly, let me transition to slide 20 and address the full year outlook. While we expect some of our key end markets to remain challenged in the near term due to macroeconomic conditions, we expect another year of record results driven by our organic pipeline and close customer partnership. These growth drivers, along with continued operational excellence and the impact of our targeted cost initiatives, will help drive earnings growth in 2024. With this, we are guiding to the range of $6.10 to $6.50 adjusted earnings per share, a 12% increase from the midpoint versus the prior year.

Moving now to cash debt and liquidity on slide 19, we ended the quarter with a net debt position of approximately $413 million and approximately $180 million of available capacity on the company's existing credit facility.

Our leverage at one nine times remaining slightly below the midpoint of our target range.

Lastly, let me transition to slide 20, and address the full year outlook.

While we expect some of our key end markets to remain challenged in the near term due to macroeconomic conditions. We expect another year of record results driven by our organic pipeline and close customer partnerships. These.

These growth drivers along with continued operational excellence and the impact of our targeted cost initiatives will help drive earnings growth in 2024.

With this we are guiding to the range of $6 10 to $6 50 adjusted earnings per share a 12% increase from the midpoint versus the prior year.

Operator: We expect Q1 to be comparable to last year, but we'll see sequential improvement each quarter thereafter. In closing, despite some market headwinds, 2024 is shaping up to be another exciting year of market outgrowth and strong execution from Materion, leading to yet another year of record results. This concludes our prepared remarks. We will now open the line for questions and others. Thank you. At this time, we'll be conducting a question. I would like to ask... Press star 1 on your telephone. The Information Tone will indicate your line of question; press star 2 if you would like to remove your question.

We expect Q1 to be comparable to last year, but we will see sequential improvement each quarter thereafter.

In closing despite some market headwinds 2024 is shaping up to be another exciting year of market outgrowth and strong execution from materials.

Turning to yet another year of record results.

This concludes our prepared remarks, we will now open the lines for questions.

Thank you at this time, we'll be conducting a question and answer session.

If you would like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue. You May Press Star two if you would like to remove your question from the queue.

Operator: Participants using speaker equipment, it may be necessary, and that's star number one. Daniel. Thank you. Good morning, Jugal.

For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys once again Thats star one if you wish to ask your question.

Please hold while we poll for questions.

Okay.

And the first question today is coming from Daniel Moore from CJS Securities.

Daniel Your line is live.

Thank you good morning, Duke Morton Shelly, Thanks for taking the questions.

Daniel: Good morning, Shelley. Thanks for taking the questions. Good morning. Good morning, Dan.

Good morning, Dan.

Good morning, maybe start with your outlook and I appreciate all the color.

Jugal K. Vijayvargiya: Maybe start with the outlook and appreciate all the color. Just give us a sense of what level of value-added sales growth is associated with your guide for 24. And, you know, maybe just talk about the cadence a little bit given a much tougher comp in Q1, as you described embedded. Yeah, Dan, as you look at our deck that we provided, you know, we did share some of the end market growth outlooks between the various markets that we serve. You know, we see a couple of markets on the positive favorable side; I'd say more than a 3% type of growth, particularly aerospace, defense, and then more of the space segment of aerospace with the new business winds that we've had. I would say low single digits on several of our markets and a couple of markets that we frankly see, you know, contracting. So when we look at our overall growth for year over year, I would say mid single digits. It's probably reasonable for the full year. However, I would see that skewed to the back half of the year.

Just give us a sense for what level of.

Value added sales growth is associated with your guide for 'twenty four.

Maybe just talk to the cadence a little bit given.

A much tougher comp in Q1 as you described embedded within those assumptions.

Yes, Dan.

As you look at our deck that we provided we did share some of the end market growth outlooks between the various markets that we serve we see a couple of markets.

On the positive favorable side.

I'd say more than a 3% type of a growth, particularly aerospace.

Aerospace.

And then more of the space segment of aerospace with the new business wins that we've had.

I would say low single digits on several of our markets and a couple of markets that we frankly see.

Contracting so when we look at our overall Roe.

For year over year, I would say mid single digits, it's probably reasonable for the full year. However, I would see that skewed to the back half of the year I think the first half of the year, especially with our Q1 comps semi.

Jugal K. Vijayvargiya: I think the first half of the year, especially with our Q1 comps, you know, semi, as Shelley noted, was a very, very strong quarter for us last year in Q1, one of the strongest, I think, in the company's history, as the semi slowdown had not caught up to us. Whereas now, of course, we're in the full semi-slowdown mode, and it'll start to show signs of recovery here in the second half of the year. So I would expect, you know, just slight growth in the first half of the year but much more robust growth in the second half of the year, led by semi, but then also other markets as well, as well as new business activities. And so I could see a, you know, roughly mid single digit increase overall for the year.

Semi.

<unk> noted was a very very strong quarter for us last year in Q1, one of the strongest I think in the Companys history.

As the semi slowdown has not caught up to us.

Whereas now of course, we are in the pool semi slowdown mode and it'll it'll start to show signs of recovery here.

Second half of the year, so I would expect.

Just slight growth in the first half of the year, but.

Much more robust growth in the back half of the year led by Xiaomi, but then also other.

Markets as well as well as new business activities, and so I could see a roughly a mid single digit overall for.

For the year.

Jugal K. Vijayvargiya: Yeah, and as you heard in my comments, you know, first quarter is going to look a lot like first quarter last year. So when I think about the year from an earnings perspective, I'm expecting, you know, maybe a 45-55 percent weighting from a percent weighting first half to second half. Very helpful, and then shifting gears a little bit longer. I appreciate all the commentary. On the semi-side, beyond market growth, how should we think about the opportunity for content gains driven by higher-powered logic chips?

Yes.

You heard in my comments first quarter is going to look a lot like fourth quarter last year. So when I think about the year from an earnings perspective, I'm expecting maybe a $45 55 from a percent weighting first half to second half.

Yes.

Very helpful.

Perfect sense.

And then shifting gears a little bit longer term.

All the commentary on the semi side beyond the market growth how should we think about the opportunity for for content gains driven by higher powered logic chips. Some of it some of those which you described jugal in your prepared remarks, you know looking out over the next three to five years and that's out has that outlook changed at all.

Jugal K. Vijayvargiya: Thank you. Thanks for watching. Please like, comment, and subscribe. And if you have any questions, feel free to reach out to me. I'm at the email address in the description.

Jugal K. Vijayvargiya: And if you have any questions, please let me know. And I'll see you in the next video, prepared. Thank you, looking out over the next three to five years as that outlook, Right? Frankly, the outlook has not changed at all for us over the longer term. You know, SEMI is our largest market. It's one that we're very, very excited about. And we continue to be very excited about where things are headed in the next three to five years. We are continuing to invest in the SEMI space. For example, you know, we just mentioned that today we're launching two new ALD materials. These are atomic layer deposition materials that are going to be used for advanced memory and AI applications.

Right.

Frankly, the outlook has not changed at all for us for a longer term semi is our largest market is one that we're very very excited about and we continue to be very excited.

About where things are headed in the next three to five years, we are continuing to invest in the semi space.

For example, we just mentioned it today that we are.

Launched two new ALG materials. These are atomic layer deposition materials that are going to be used for advanced memory and AI applications. We all are hearing what's going on on the AI front and I think we're really really well prepared.

Jugal K. Vijayvargiya: We're all hearing what's going on on the AI front, and I think we're really, really well prepared for both advanced memory as well as advanced logic with our tantalum portfolio, as well as the number of other materials that we have. And in addition to that, I think when you look at overall SEMI investments on the capacity side, we're putting the right investments in on the capacity side, so, you know, for the short term uptake, but also able to capture the long term, you know, long term growth.

For both advanced memory as well as advanced logic.

With our tantalum portfolio as well as the number of other raw materials that we have.

In addition to that I think I think when you look at the overall semi.

Semi investments on the capacity side, we're putting the right investments in the capacity side. So for the short term uptick, but also be able to capture the.

The long term.

Long term growth. So I think I think on the on the semi side we remain.

Jugal K. Vijayvargiya: So I think I think on the SEMI side, we remain excited. I would say probably even more so than we were earlier because of the uptake that's going to happen here in the near term, but then continued growth in the three to five years.

Excited I would say probably even more so than we were earlier because of the uptick that's going to happen here in the near term, but then continued growth in the three to five years. Our portfolio is really well positioned last comment I think on the power side as you know power.

Jugal K. Vijayvargiya: Our portfolio is really well positioned. Last comment, I think, you know, on the power side, as you know, power semiconductor is an important part of our portfolio. We see the applications for power semiconductors continue to increase, whether it's consumer electronics or other industrial applications.

I mean conductor is an important part of our portfolio, we see the applications for power semiconductor continuing to increase whether it's EV applications or other industrial applications and our.

Jugal K. Vijayvargiya: And, you know, our positioning with the portfolio, the product portfolio that we have, but also, I would say just equally as important, the customer portfolio that we have on the power SEMI is extremely, extremely strong. So we are we are very, we're feeling very confident, I think, in our ability to grow both short term and long term for the SEMI market. Perfect last one I'll jump out is the guide implies you know we're closing in on that 20% EBITDA more goal. Just wondering, you know, maybe not necessarily providing an updated goal today, but talking about the operating leverage ability of the business beyond, you know, what you've already generated over the last few years. Thanks. Yeah, so let me just comment a little bit, you know, first of all, on 23 right, two of the two of the four quarters, we delivered 20% margins. And I've said this a number of times that we'd like to be able to see that on a more consistent basis.

Our positioning with the portfolio of the product portfolio that we have but also I would say just equally as important the customer portfolio that we have on the power semi is extremely extremely strong. So we are.

We are very.

We're feeling very.

Confident I think in our and our ability to grow.

Both short term and long term for the semi market.

Perfect last one and I'll jump out.

The guide implies you know closing in on that 20% EBITDA.

Margin goal, just wondering maybe if not not necessarily providing an updated goal today, but talk about the operating leverage ability of the business beyond.

You know the what you've already generated over the last two to three years. Thanks again.

Yeah. So let me just comment a little bit first of all on <unk>.

23, right two of the two of the four quarters, we delivered.

20% margins and I've said this a number of times that we'd like to be able to see that on a more consistent basis.

Jugal K. Vijayvargiya: I feel that we're positioning ourselves more and more to be able to deliver that on a consistent basis. And, you know, I would not be surprised if 24 represents a much more consistent basis for that 20% margin delivery. And then, clearly, you know, that that's not the end for us.

I feel that we're positioning ourselves more and more to be able to deliver that on a consistent basis and would not be not be surprised of 24 represents a much.

More consistent basis for that 20% margin.

<unk>.

And then clearly that's not the end for US as you know, we continue to challenge ourselves more and more in.

Jugal K. Vijayvargiya: As, you know, we continue to challenge ourselves more and more, and we will be setting up an objective that I'm sure we'll be talking to you about at some point that defines what we think we can be in three to five years from now. And and, you know, that's something we're looking forward to, and perhaps having that discussion, you know, during the next twenty years. Looking forward to it. Dan, questions. Hi, good morning.

We will be.

Setting.

And objective that I'm sure, we'll be talking to you at some point that defines what we think we can be in three to five years from now and that's something.

Something we're looking forward to and perhaps are having that discussion during during 'twenty four.

Look forward to it thank you again.

Thanks, Dan.

Thank you.

The next question is coming from Mike Harrison from Seaport Research Partners, Mike Your line is live.

Hi, good morning.

Good morning, Good morning, Mike.

Jugal K. Vijayvargiya: Morning. Good morning, Mike. Jugal, I was wondering if you could, maybe, I'm looking at slide 7 here that shows your end market performance. Uh, and it's kind of striking that of your, uh.., you know, seven TN markets that you call out, five of them are showing dramatic declines, right? You know, double-digit declines. Is this an indication of what's going on in the underlying market? Or is there some destocking going on or timing issues? Maybe just give us a little bit more color.

Jugal I was wondering if you could.

Maybe I'm just looking at slide seven here that shows your end market performance.

And it's kind of striking that of your.

Seven.

The end markets that you called out.

Five of them are showing.

Dramatic declines right.

Double digit declines.

Is this an indication of what's going on in the underlying market for is there some destocking going on or timing issues, maybe just give us a little bit more color.

Jugal K. Vijayvargiya: I think we understand what's going on in semiconductors. But if you could talk in a little more detail about industrial energy, automotive, I guess, those three, and what's driving those big declines in the fourth quarter. Yeah, I think Mike, it's important to note, and you highlighted the keyword, I think, here, which is the fourth quarter. If you look at the course of the full year, the numbers are much less, right, declines on a full year basis but much higher declines in the fourth quarter.

Think we understand what's going on in semiconductor, but if you could talk a little more detail about industrial energy automotive bye guys.

Those three and what's driving those big the acquired through the fourth quarter, yes.

Yes.

I think Mike it's important to note and you highlighted the keyboard I think here, which is the fourth quarter. If you look at of course of the full year.

The numbers are the numbers are much less rate declines on a full year basis, but much higher declines in the fourth quarter and I can tell you that it is the underlying market slash destocking.

Jugal K. Vijayvargiya: And I can tell you that it is the underlying market slash and destocking going on in these markets. You know, we've done extensive reviews with our teams on where we are in terms of share, share growth, and new business wins. And we know that we have good growth and good business wins to have confidence that, as the markets turn around, we will have the right growth in 24 and into 25. So this is clearly, this is really clearly a market slash, you know, destocking, and I can kind of walk through each market, of course, be able to help understand that and help talk through that. You know, as we look at, as we look at 24, you know, I would see the industrial market. I think, you know, we do have one sort of special thing going on in the industrial market. And that's related to our beryllium nickel sprinkler systems or the springs that we provide for those.

Going on in these in these markets. We've done extensive reviews with our teams on where are we in terms of share share growth new business wins and.

We know that we have a good growth and good business wins it to be but have confidence that 'twenty four as the markets turnaround we will have the right growth in 'twenty four and into 2005 so.

This is clearly this is really.

Clearly.

Our market slash.

Destocking and I can kind of walk through each market.

Of course, we're able to help.

Understand that and helped us through that.

As we look at as we look at 'twenty four.

I would see the industrial market I think we do have one sort of special thing going on in the industrial market and that is related to our beryllium Nicola sprinkler.

The systems are the springs that we provided for those.

Jugal K. Vijayvargiya: In there, I see that as more of a one-time correction; I think that's going to happen probably, you know, during the 24 timeframe. But other than that, I really do see this as a market situation and just destocking and would expect that during 24, these markets are turning around for us. The one thing that I'll note is, you know, despite these reductions in Q4, you see our performance, the team has done a fantastic job of driving performance across the company, whether it's price, whether it's mixed related improvements, operational performance in the plants, you know, our SG&A, cost control, targeted cost actions, all those things that we should be doing. The team has done a really fantastic job of driving those.

In there I see that as more of a onetime correction I think thats going to happen probably during the 24 timeframe.

But other than that I really do see this as a market situation and just destocking and we would expect that during 2000 and for these markets are turning around for us.

One thing that I'll note is despite.

These reductions in Q4, I mean, you see our performance that the team has done a fantastic job of driving performance across the company, whether it's price whether it's.

Mixed related improvements.

Operational performance in our plants our SG&A.

Cost control targeted cost actions all of those things that.

And that we should be doing the team has done a really a fantastic job of.

Driving those so.

Jugal K. Vijayvargiya: So to me, this is a temporary situation that, you know, we would see turning around, as we indicated earlier that, you know, we expect about a mid, mid single-digit growth, really heavily weighted towards the back half. All right, thanks for that. And maybe on a brighter note, the aerospace and defense market has been extremely strong here. You noted the $60 million in additional orders that you've secured. I know that the defense market in particular can have some lumpiness to it. So I'm just curious, is some of the strength that you're seeing just timing-related?

To me this is a I.

This is a temporary situation that we would see turning around as we indicated earlier that we expect about a mid single digit growth really.

Heavily weighted towards the back half of the year.

Alright, thanks for that and maybe.

A brighter note the aerospace and defense market has been extremely strong here you would note.

Ed.

With $60 million.

Additional orders that you secured I noticed that the defense market in particular can have some lumpiness to it. So I'm just curious if some of the strength that youre seeing is timing related or are you optimistic.

Jugal K. Vijayvargiya: Or are you optimistic that you're seeing a sustained pickup in opportunities and applications within that market? Yeah. Well, first of all, let's take that market and appeal to it a little bit, right? And then there are three major components, I would say, that we should talk about. One is the commercial aerospace market.

Optimistic that youre seeing a sustained pickup in opportunities and applications within that market.

Yes.

First of all lets take that market and just.

Peel it a little bit right and then there are three major components I would say that.

But we should talk about one is the commercial aerospace market. The other one is the defense market and then the third is the emerging space market.

Jugal K. Vijayvargiya: The other one is the defense market. And then, you know, the third is the very emerging space market. Let me start with that. That's been a fantastic market for us. You know, we indicated about $90 million in new business orders. Today, we announced this fourth order of $36 million for supplying space proposal systems. This is the fourth such order.

Let me start with that emerging space market, that's been a fantastic market for us.

We indicated about $90 million of new business orders.

Today, we announced this fourth order of $36 million upper supplying for space portfolio systems. This is the fourth order. If you kind of look at what's happened over the last year or so and look at the first three orders add that up that's roughly about $70 million of orders just in the in the space market.

Jugal K. Vijayvargiya: If you kind of look at what's happened over the last year or so and look at the first three orders, add that up, that's roughly about $70 million in orders just in the space market. Combine that with our ToughMet business in the space market, and our optical assistance business in the space market, and we're looking at, you know, roughly about $90 million. So, very good, strong market for us in 23. Growing, accelerating market for us in 24. And we would hope that that can continue, you know, beyond that.

Combine that with our <unk> business in the space market, our optical systems business in the space market and we're looking at roughly about $90 million. So very good strong market for us in 'twenty three growing accelerating market for us in 'twenty four and we would we would hope.

I hope that that can continue beyond that.

Jugal K. Vijayvargiya: For the aerospace market, the commercial space market, we've gained content, 25% more content on average on planes now versus pre-pandemic just in the last few years, both on the Boeing side as well as on the Airbus side. You know, so good content growth, as well as, as you know, the build rate continues to increase. Temporary situation on the Boeing side, as we all are aware of, but in general, the build rates continue to increase for airplanes. So we would expect our material content to continue to increase. And on the defense side, you know, the team's done a fantastic job of getting our materials more and more ingrained into the defense applications.

The aerospace market the commercial aerospace market, we have gained content, 25% more content on an average on planes now versus pre pandemic just in the last few years both at at.

At the Boeing side as well as the Airbus side.

So it's a good content growth as well as as you know the build rates continue to increase temporary situation on the mining side as we all are aware up but but in general the bill rates continue to increase with airplanes. So we would expect our material.

Content to continue.

To increase and on the defense side. The team has done a fantastic job of getting our materials more and more ingrained into the defense applications and I would expect that even though there is lumpiness and I agree with you completely that theres lumpiness on the defense orders, we would expect a good market and good growth for defense overall for the year. So I think all three components of the aerospace and defense.

Jugal K. Vijayvargiya: And I would expect that even though there's lumpiness, and I agree with you completely that there's lumpiness on the defense orders, we would expect, you know, a good market and good growth for defense overall for the year. So I think all three components of the aerospace and defense market we feel really good about for 24 and are positioning, you know, well for 25 and beyond. All right, very helpful. And then just a couple of quick ones.

Market, we feel really good about 424 are in positioning well for 25 and beyond.

Alright very helpful.

Just a couple of quick ones.

The electronic materials business, and the margin or EBITDA commentary you've mentioned.

Shelly Chadwick: The electronic materials business, in the margin or EBITDA commentary, you mentioned some one-time unfavorable items hitting that business. Can you give a little more color on what those items were and maybe how we should think about the EBITDA margin progression in 2024 for that EM business? Yeah, thanks for that question.

Some one time unfavorable items hit.

Hitting that business can you give a little more color on what those items were.

And maybe how we should think about the EBITDA margin progression in 2024 in that.

Business.

Yes. Thanks for that question. They did see some items, but there were one time items. There was nothing that was really big that stood out a couple of accrual adjustments a couple of expenses that just came in at the end of the year and we do expect that from a quarter on quarter, we will see a positive.

Jugal K. Vijayvargiya: You know, they did see some items, but they weren't one-time items; there was nothing that was really big that stood out; a couple of accrual adjustments, a couple of expenses that just came in at the end of the year. We do expect that, quarter on quarter, we will see a positive, positive move in the margins as we enter into 24. So we think, you know, Q4 was a bit impacted just by those one-time Q1 items, and we'll see things kind of pick up in 24. Yeah, and Mike, to add to that, if you look at our Q2 and Q3 results, you know, we were on 17-18% EBITDA margins in the Q2-Q3 timeframe. Certainly, in Q4, we had the impact of the one-time items that Shelly mentioned, but there was also a significant impact based on the mix for memory devices. And you know what's happened to the memory side, particularly in the last year.

Positive move in the margins as we enter into 24. So we think Q4 was at the impacted just by the Q1.

One time items, then and we'll see things kind of pick up in 'twenty four.

And Mike I'd add to that if you look at our Q2 and Q3 results. We were at 17, 18% EBITDA margins in the Q2 Q3 timeframe certainly Q4, we had the impact of the onetime items that Charlie mentioned, but also there was a significant impact.

Just on the mix.

For memory devices.

You know what's happened to the memory side, there, particularly in the last year and so that was a that was a mixed hit for us, but we would expect and we see this I think happening during the year as Shari indicated that those one time items are behind us and we would expect continued progression back towards the Q2.

Shelly Chadwick: And so, you know, that was a mixed hit for us, but we would expect, and we see this, I think, happening during the year, as Shelly indicated, that those one-time items are behind us. And we would expect continued progression back towards the Q2-Q3 type margins and then pushing those forward, you know, after that. All right.

Q3 type margins and then and then pushing those.

Forward after that.

Alright, and then last one for me is you called out $5 $6 billion worth of startup cost scrap costs for the second phase of this precision cloud strip project.

Shelly Chadwick: And then last one for me is you called out $5.6 million worth of startup costs and scrap costs for the second phase of the Precision Clad Strip Project. Is that all the startup costs, or is that just a portion that you guys considered unusual? I guess I'm just looking for a little more clarity on how we should be modeling those startup costs through late 2024. If you could provide some more detail there, yeah, sure. Thanks for that. As you probably know, when we were working through the initial phases of the ramp up of the clad strip facility, we did not special out any of those ramp costs.

Or is that all the startup costs or is that just the portion that you guys considered unusual.

I guess I'm, just looking for a little more clarity on how we should be modeling those startup costs.

Through late 2024, if you could provide some more detail there.

Yes sure. Thanks, Thanks for that.

As you probably know as we know when we were working through the initial phases of the ramp of the Kladstrup facility. We did not special out any of those ramp costs, we took them to the P&L and we discussed and disclosed what they were once we were at kind of full run rate in that facility and we had some.

Shelly Chadwick: We took them to the P&L, and we discussed and disclosed what they were. Once we were at kind of full run rate in that facility, and we had some process tweaks and some formulation tweaks that we were working on with the customer, we did incur some additional charges that we would assume or we would call unusual, and we didn't want that to mask the performance of the business. So we called them out, and we special negotiated those charges in 22.

Process tweaks.

Formulation tweaks that we were working on with the customer we did.

Her some additional charges that we would assume are lower we would call unusual and we didn't want that to mask. The performance of the business that we called them out and with special dose charges in 'twenty. Two similarly, we're doing a little of that again and we did that in Q4, where we had some process runs and things that were for qualification.

Shelly Chadwick: Similarly, we're doing a little of that again, and we did that in Q4, where we had some process runs and things that were for qualifications that needed to be scrapped. And so a lot of it is there, in addition to some resources that we brought in, just to make sure the ramp goes well. So now that we're really, you know, fully running, we don't want the business results skewed by ups and down on those startup costs. So if we have unusual costs, we will continue to hide them so that you don't have to worry about, hey, is that margin going to come down or come up, you know, during the year. So I guess as we're thinking about the performance materials business, on an adjusted basis going forward, we should assume that there's not startup costs in there, that those are gonna be specialized out, or are there still gonna be some headwinds, I guess, as that's ramping up? on an adjusted basis. Yes, on an adjusted basis, you should assume that those will be specialed out.

<unk> that needed to be scrapped and so a lot of it is there.

In addition to some resources that we brought in just to make sure. The ramp goes well. So now that we're really fully running we don't want to have.

The business results skewed by up and down on those startup costs. So if we have unusual costs. We will continue to special items. So that you don't have to worry about here is that margin has come down come up during the year.

So I guess as we're thinking about the performance materials business.

On an adjusted basis going forward, we shouldnt assume that theres not startup costs in there that those are going to be special about or are there still going to be some headwinds I guess that's.

Thats ramping.

Year to date adjusted basis on an adjusted basis, you should assume that those will be special out and as we've talked about the ramp of that will start late in 'twenty four.

Shelly Chadwick: And, you know, as we've talked about, the ramp for that will start late in 24. Right, right, understood. Okay, thank you very much for all that.

And the sales related to that.

Right right understood. Okay. Thank you very much for all the help sure. Thanks, Mike.

Shelly Chadwick: Sure. Thanks, Mike. David Silver from, Okay, thank you. Good morning. Good morning, everybody.

Thank you. The next question is coming from David Silver from CL King.

David Your line is live.

Yes.

Okay. Thank you good morning, Hey, good morning, guys.

Yeah.

David Silver: I apologize if I'm going to make you repeat yourself, but I wanted to maybe just talk about the softness on the electronic materials side initially. So, Correct me if I'm wrong, but I think maybe last quarter or so, Jugal, I think your commentary was the fourth quarter we would see an inflection point or reach an inflection point at some point in the fourth quarter on the electronic materials side, and I think the tone of it, and I guess the stabilization that you had been maybe indicating got pushed out to the right a little bit. You know, I know there's a But was there something in particular that maybe you know has led you to delay maybe the upturn your expectations of an upturn in that group maybe by two or three quarters?

I apologize if I'm going to make you repeat yourself, but I wanted to maybe just.

Talk about the softness on the electronic materials side initially.

So.

Correct me, if I'm wrong, but I think maybe last quarter or so.

I think your commentary was the fourth quarter, we would see.

An inflection point or reach an inflection point at some point in the fourth quarter on.

The electronic materials side.

Think the tone of it and I guess the.

Stabilization that you had been.

May be indicating that got pushed out to the right a little bit.

Yes.

I know, there's a number of issues that have been.

Pressuring that group for many quarters, but was there something in particular.

Maybe.

He has led you to.

Delay may be the the upturn.

Your your expectations of an upturn in that group, maybe by two to three quarters.

David Silver: Yeah, if we actually go back, you know, a couple of quarters, I think the world was thinking, and we were thinking that, you know, this market, the semiconductor market, was going to bottom out in Q2 and start to see, you know, an uptick in Q3. And then, as we noticed from all the major companies, the recovery got a bit delayed, but delayed, but delayed. And, you know, now the most recent information is that, you know, Q1 is expected to be the low point, and then a slight recovery in Q2, but then really, you know, more of the recovery happening in the second half of this year. So, and that's just a combination of usage around the world as well as the inventory destocking that was happening at all of the semi companies. So, I think that clearly impacts us as we are a key supplier into that value chain. The recovery for us will be slightly later than what the semi-conductor companies will recover just based on the cycle and kind of where we fit in the value chain, but we'll follow that. We'll follow that recovery, you know, as it happens.

Yes, David.

Actually go back a couple of quarters I know you highlighted fourth quarter I think the world was thinking than we were thinking that this market cereal market was going to bottom out in Q2 and start to see an uptick in Q3, and then as we noticed from all the major semi.

Semi companies.

<unk> got a bit delayed were delayed but delayed and now the most recent information is that Q1 is expected to be the low point.

And then slight recovery in Q2, but then really.

More of the recovery happening in the back half of this year, so and that's just a combination of.

So you saved around the world as well as the inventory Destocking that was happening at all of the semi company. So I think that clearly impacts us as we are a key supplier into that value chain.

That recovery for us will be slightly later than what.

The semi companies will recover just based on the cycle and kind of where we fit in the value chain, but we will follow that will follow that recovery as it happens. So I think really it's ed so very much David associated with sort of the market dynamics and what we've been what we were hearing from the.

Jugal K. Vijayvargiya: So, I think really it's very much David associated with sort of the market dynamics and what we've been hearing from the various various semi producers. The one item that was more specific, I think, to us, which again, you know, is a market-dependent item, is the memory mix issue that I mentioned, where we did have some specific product portfolios that we count on every quarter, and we had a significant drop just based on inventory correction that our customers are going through. And as a result, you know, that created a negative, a heavy negative mix for us for the quarter, but we would expect that to start to recover in Q1 and into Q2 and so on. So, I think we're lined up extremely well to be able to hit the ground running, you know, as the semi-producers start to produce more and get the recovery going. Okay, very good. I'm going to ask you to paraphrase one comment you made in your opening remarks.

The various <unk>.

So semi producers.

One item that was more specific I think to us, which again is a is a market dependent item is the.

As the memory mix issue that I.

That I mentioned, where we did have some specific product portfolio, which we count on every quarter and we had a significant.

Drop, but just based on inventory correction that our customers are going through and as a result.

That created a negative a heavy negative mix for us for the quarter.

But we would expect that to start to recover in Q1 and into Q2 and so on so I think we're I think we're lined up extremely well.

To be able to hit the ground running as the as the semi producers.

To start to produce more in and get the get the recovery going.

Okay very good.

I'm going to ask you to parse one comment you made in your opening remarks, but.

Again on electronic materials I believe you indicated that the order book that you are seeing.

Jugal K. Vijayvargiya: Again, on electronic materials, I believe you indicated that the order book that you're seeing is kind of indicating maybe early signs of stabilization. I think that was your wording. And, you know, when I think about an order book in your electronic materials business, I kind of think, well, Are the orders that you're seeing reflective of maybe legacy products, in which case, you know, maybe it's indicating the customer inventory liquidation is nearing an end? Or alternatively, is it, you know, for more leading-edge or newer applications, which kind of points to, you know, the rollout of the ramp-up of new customer facilities. Is there some way you could maybe parse, you know, the, the, the order book that you're seeing and maybe, you know, read the tea leaves there a little bit? Yeah, I think it's a combination of what you just indicated.

It is kind of indicating maybe early signs of stabilization I think was your wording.

And when I think about an order book and electronic but your electronic materials business I kind of think well.

Are the orders that you're seeing or are they reflective of maybe legacy products in which case, maybe it's indicating the customer inventory liquidation is nearing an end or alternatively is it.

Or more leading edge or newer applications, which kind of points to.

The rollout of the ramp up of new customer facilities is there some way you could maybe parse.

The.

The order book that you are seeing and maybe read the tea leaves there a little bit.

Yes, I think it's a combination from what you just indicated so for example, when you talk about the leading edge. We indicated that we launched two new OLED materials for these advanced memory applications in AI applications, we're starting to as we're having discussions with our customers we're starting to feel.

Jugal K. Vijayvargiya: You know, so for example, when you talk about the leading edge, you know, we indicated that we launched two new ALD materials for these advanced memory applications and AI applications. We're starting to feel, as we're having discussions with our customers, that they are going to start to put orders in that then will translate into sales in the Q2, Q3 timeframe. So I think that's an example of where there are newer products that we believe are going to contribute to a sales uptake. And at the same time, I think on the legacy products, you know, as you know, we have a lot of precious metals business and non-precious metals business.

They are going to start to put orders in that then will translate into sales.

In the Q2 Q3 timeframe, so I think that's.

That's an example of where there is newer products that we believe we are going to contribute to our sales uptick and at the same time I think on the legacy products. As you know we have a lot of precious metals business non precious metal business, we're watching the inventory levels very closely with our customers and and then for what we can see the.

Jugal K. Vijayvargiya: We're watching the inventory levels very closely with our customers. And from what we can see, you know, the last few weeks, I mean, the orders haven't there's not been a decline. Let's put it that way.

Last few weeks I mean, the orders of.

There has not been a decline let's put it that way and also so we feel good about I think the fact that okay. Maybe we're we're bottoming out and and we would we would expect to see over the next few weeks slight.

Jugal K. Vijayvargiya: You know, so we feel good about, I think, the fact that, OK, maybe we're bottoming out, and we would expect to see over the next few weeks a slight uptick in the order rate, you know, for those legacy products. So that's kind of really where our commentary is coming from. And that's where we feel that there will be a slight uptick in Q2, but really, you know, a bigger uptick in Q3, Q4. And I think we're hearing that right also from the various other earnings calls or other announcements that the FEMI producers are making as well. Okay, and then, you know, you mentioned the two new ALD materials, and please don't tell me anything, you know, you shouldn't tell me, but should I assume that the new materials are tantalum-related, the new ALD materials, or is this kind of new-new material something, something, you know, beyond the kind of use, you know, the tantalum-based activity, products, and activities, development activities that you' You know, it is not something that we created as part of the acquisition that we made from H.E. Stark.

Slight uptick in the order rate for those legacy.

Products. So that's kind of really where our commentary is coming from and that's where we feel that there will be there'll be a slight uptick in Q2, but really a bigger uptick in Q3 Q4, and I think we're hearing that right also from the various other earnings calls or other announcements that the that the semi producers are making as well.

Okay, and then you did mention the two new <unk> materials and please don't tell me anything you.

You Shouldnt tell me, but should I assume that the new materials are.

Cancel them.

Related.

The new E. L D materials or is this kind of new new material something.

Some thing.

Beyond kind of use the tantalum, but yes.

That activity.

Products and activities development activities.

Here you have ongoing yes, so our <unk> portfolio that we have is not a tantalum based LD portfolio. It is not something that we created as part of the acquisition that we made from <unk> something that we've been working on for a number of years. It's a organic activity that we started to invest in when we started to see that.

Jugal K. Vijayvargiya: ALD is something that we've been working on for a number of years. It's an organic activity that we started to invest in when we started to see that, you know, this was an emerging area. And so over the last, you know, four or five years, we've been developing, and we're now up to a total of five materials. And so really advanced chemicals is the category that we put them in internally to the company. So they're not tantalum related. They're really much more advanced materials that, as I said, end up in the next generation memory applications, which then, you know, will end up in the various AI applications that we would find very interesting. So it sounds like Milwaukee, not Newton.

This was a emerging area and so over the last four or five years, we've been developing and we're now up to a total of five materials and so really advanced chemicals.

What the category is that we put it in an internal to the company.

But they're so they're not canceled unrelated theyre really theyre really.

Much more advanced materials that as I said end up in the next generation memory applications, which then.

We will end up in the in the in the various AI applications that we would we would see.

Very interesting so it sounds like Milwaukee.

Not not Newton so thank you for that.

Jugal K. Vijayvargiya: Thank you for that. Okay. I just wanted to switch over, maybe.

Okay.

I just wanted to.

Switchover, maybe we don't really talk too much about your optical segment.

Jugal K. Vijayvargiya: We don't really talk too much about, you know, your optical segment. But, you know, you've done a lot of restructuring work there. You know, I'm just wondering if you maybe have an outlook for 2024 for that segment. I mean, is this, you know, the time when that group finally presumes organic growth? And if so, what would you say would be kind of the one or two leading brands?

But you've done a lot of restructuring work there.

And.

I'm just wondering if you maybe have an outlook for 2024 for that segment I mean is this.

The time when that that group finally presumes organic growth.

If so what would you say would be kind of the one or two.

Jugal K. Vijayvargiya: Sources of that turnaround. Yeah. Well, I think, first of all, that business, you know, despite the sales drop that happened, has done a really nice job of managing the performance and the cost management of that business, various cost control activities that we put in. We've now had three consecutive quarters of, three quarters, I should say, Q2, Q3, you know, Q4, where we've had EBITDA improvement. It's our expectation that we'll continue to drive improvement in that business on the bottom line throughout 24. And then on the top line, if you look at the last time that we did an earnings call, which was the Q3 earnings call, we talked about space and defense related orders in the optics space. Today, we're talking about contracts and the LIDAR technology for autonomous vehicles.

<unk>.

Sources of the turnaround.

Well I think first of all that business. Despite the sales drop that happened has done a really nice job of managing the performance and the cost cost management of that business various cost control activities that we put in we've now had.

Three consecutive quarters of three quarters I would just say Q2, Q3, Q4, where we've had EBITDA improvement.

Our expectation that we'll continue to drive improvement in that business on the bottomline throughout 'twenty four.

And then on the top line if you look at the last time that.

And then we did an earnings call, which was the Q3 earnings call we talked about.

Space and defense related orders in the optics space today, we're talking about a contract in the Lidar technology.

Technology for autonomous vehicles, and so I think those are the type of areas that are going to contribute so automotive is going to be is going to be a contributor in this thing defense.

Jugal K. Vijayvargiya: And so I think those are the type of areas that are going to contribute, you know, so the automotive industry is going to be a contributor to this thing. Defense, the space market, is going to be a contributor, I think, to the growth here in 24. And then, of course, longer term as well in 25 and 26. So, you know, our expectation is that this business is going to be a top line contributor in 24, as well as a continued bottom line contributor as it has done over the last couple of quarters. Okay, and then just last one for me.

Space the space market is going to be a contributor I think to the growth here in 'twenty four and then of course longer term as well in 2020 six so our expectation is that this business is going to be a top line contributor.

In 2000, and or as well as continued bottom line contributor.

As it has done over the last couple of quarters.

Okay, and then just last one for me.

Shelly Chadwick: You know, not the biggest issue, but there was a commentary, a comment or two regarding shares, your share repurchase authorization, and whatnot. And, you know, this is just my opinion, but, you know, I don't necessarily think your typical investor is demanding that kind of activity on your part. But just remind me, I mean, is your authorization there to offset dilution? Is it for handling?

Not the biggest issue, but there was a commentary a comment or two regarding share your share repurchase authorization and whatnot.

And this is just my opinion, but.

I don't necessarily think Youre typical investor is demanding.

That kind of activity on your part, but just remind me I mean is your authorization there to offset dilution as for handling.

Shelly Chadwick: You know, options-related issuance. I mean, how do you anticipate your share repurchase activity fitting into your overall capital structure and cash deployment strategy? Yeah, I'll take that one.

Options related issuance.

How do you anticipate.

Your share repurchase activity fitting into your overall <unk>.

Capital structure and cash deployment strategy.

Yeah, I'll take that one thanks.

Shelly Chadwick: Thanks. You know, we think a lot about capital allocation and where we want to invest our money. We do have the 8 million available for the share repurchase program that was last authorized, but we haven't had any activity on that in a couple of years.

Thank a lot about capital allocation and where we want to invest our money. We do have the $8 million available on the share repurchase program that was last authorized but we haven't had any activity on that in a couple of years and really the reason is because we're more focused on that organic growth for deploying our capital into our organic growth is more important to us right.

Shelly Chadwick: And really, the reason is that we're more focused on that organic growth. So, deploying our capital to our organic growth is more important to us right now than kind of offsetting dilution or bringing that share count down. And we think, you know, we're delivering really well, the returns are very good. So we've got that lever there. Should we choose to use it?

Now then kind of offsetting dilution or bringing that share count down and we think we're delivering really well that returns are very good. So we've got that lever there should we choose to use it but right now it's something we're not very active.

Shelly Chadwick: But right now, it's something we're not very active in, and it makes perfect sense. Okay, thank you very much. I'll get back in queue.

Makes perfect sense, Okay. Thank you very much I'll get back in queue.

Okay. Thanks, Dave.

David Silver: Okay, David. Thank you. The next question is coming from Samuel McKinney from KeyBank Capital. Samuel Ulianov, Hey, good morning. It's Phil Gibbs.

Thank you. The next question is coming from Samuel Mckinney from Keybanc capital markets. Samuel Your line is live.

Hey, good morning, it's Phil Gibbs how are you.

Samuel Mckinney: How are you? Hi Phil. Thanks for talking about the aerospace and defense and space market and thinking about those buckets. It kind of leads me into the question that I had. How much is space?

Bill.

Okay.

Thanks for talking about the the aerospace and defense and space market in and thinking about those buckets kind of leads me into the question that I had how much of the space.

Jugal K. Vijayvargiya: Right now, as a percentage of that total bucket, and I would think that includes satellites in commercial space. Yeah, I well, it's becoming a much larger part, right? As you know, Phil, you've been following our company for quite a while, and space was a relatively small component of our business, more related to government-type activity or just large projects, such as James Webb or, you know, something like that.

Right now as a percentage of that of that total bucket I would think that includes satellites and commercial space.

Yes, well, it's becoming a much larger part right as you know <unk> been following our company for quite a while and space was relatively small component of our business, so more related or government type activity or just large.

Projects, such as the James Webb.

Something like that and now space has become a much larger part of our component.

Jugal K. Vijayvargiya: And now, you know, space has become a much larger part of our component. You know, defense is continuing to grow, and commercial aerospace is continuing to grow. But I would say, I would say it's probably, we're looking at maybe about a quarter to a little less than a third of the total is probably the space component, but I would expect to continue to see growth in that business. Thank you, and then... Well, a lot of questions on margins on electronic materials, but hoping to just simplify it a little bit. Obviously, the mix wasn't wasn't ideal in the quarter.

Defenses continue to grow the commercial aerospace is continue to grow but I would say I'd say, it's probably we're looking at maybe by a quarter or two to a.

A little less than third is probably the space component, but I would expect to continue to see growth in that.

In that business.

Thank you and then.

A lot of questions on margins on a lot of electronic materials, but hoping to just simplify it a little bit obviously the mix was it was an ideal in the quarter as it sounds like you are.

Jugal K. Vijayvargiya: And it sounds like you're, um.., shipping under your production rates, which impacts absorption greatly when you think about that type of business. If you were shipping in line with your production rates and if your mix was, let's just call it average for something, you know, more ideal, where would margins have been?

Shipping under your production rates, which impacts absorption greatly when you think about that that type of business. If you were shipping in line with your.

Production rates and if your mix was let's just call it.

Average four or something more ideal where where should margins have been.

Jugal K. Vijayvargiya: Well, look, I mean, we've said all along that we need this business to be contributing positively to our goal of 20% EBITDA margins for the company. So I expect this business to be able to deliver those types of margins. I mean, we saw what this business was able to do in Q2 and Q3 when it had a decent mix, even though we had a little bit of a sales challenge in Q2 and Q3. So I expect this business to be able to deliver favorably towards our 20% EBITDA target. And the last one for me on the H.C. Stark acquisition from late 21, there was a little sliver of that business that was non-tantalum based. I think some of that was going to be directed toward clean energy. Any thoughts or comments that you can make along those lines? Thanks so much. Yeah, you're absolutely right, and your memory is correct. I mean, we did it.

Well look I mean, we've said all along that that we need this business to be contributing positively to our goal of 20% EBITDA margins for the company.

So.

I expect this business to be able to deliver those types of margins.

We saw what this business was able to do in Q2 and Q3 when it when it had decent.

Decent mix, even though we had a little bit of a sales challenge in Q2 and Q3. So I expect this business to be able to deliver.

Favorably towards our 20% <unk>.

EBITDA EBITDA targets.

And the last one for me.

On the HC Stark acquisition from late 'twenty, one there was a little sliver in that business.

That was non tantalum based I think some of that was it was going to be directed towards clean energy.

Thoughts or comments that you can make along those lines. Thanks, so much.

Yes.

You're absolutely right in your memory is correct I mean, we did and I can tell you that that business.

Jugal K. Vijayvargiya: And I can tell you that that business is doing extremely well, both the tantalum side, by the way, of non-semi-application, I'll say, as well as the non-tantalum business, you know, where we have pursued other markets and have grown in other markets. So I can tell you that that business has done extremely well over the last year and a half or so with our team. And I expect continued growth in that business over the next few years. Thanks.

Is doing extremely well.

Both the tantalum side by the way of non semi application I'll say as well as non tantalum business.

Where we have pursued other markets and have grown in other markets. So I can tell you that that business has done extremely well over the last year and a half or so with our team and I expect continued growth in that business over the next over the next few years.

Thanks Russell.

Jugal K. Vijayvargiya: Best of luck. Thank you. The next question is coming from Dave Storms.

Thank you thanks Bill.

Thank you. The next question is coming from Dave storms from Stonegate, Dave Your line of life.

Dave Storms: Morning, Dave. Appreciate you taking the question. Just kind of wanted to start, you know, looking at the general market this year versus last year. Kind of what is the general customer acquisition and contracting environment?

Good morning.

Good morning, Dave.

I appreciate you taking the question just kind of wanted to start looking at the general market this year versus last year kind.

Kind of what is the general customer acquisition and contracting environment look like.

Jugal K. Vijayvargiya: Yeah, I think the acquisition and contracting environment has been good, even though the markets where the actual sales in 23 were challenged in some of the markets. As we've talked about, new business activity and new product development activity has continued to be strong. And, as a result, we're seeing some of those things already converting into new business wins, but we would expect more of that to happen during 24. So, I think what's been positive is that customers did not really slow down new development, new R&D activity, therefore, you know, working with us. And so we would look for those to materialize and contribute to our one to three year sales, great caller, and just you know kind of sticking with those business wins. Obviously, as we've discussed, you're very well aligned with some really cutting-edge technologies, you know the LIDAR, the AI, clean energy. Are there any of these technologies that you see as having particularly strong potential to take a leap and scale up over the next few years? 18 to 36 months.

Yes, I think the I think the acquisition and contracting environment has been good even though the markets. The actual sales in 'twenty three we're challenged in some of the markets as we've talked about new business activity and new product development activity has continued to be strong.

And as a result, we are seeing some of those things already convert into new business wins, but we would expect more of that to happen. During 24. So I think what's been positive is that customers did not really slow down.

New development.

New R&D activities, therefore, working with us and so we would look for those to.

To materialize and and contributed to our towards our one to three year sales window.

That's perfect great color and just kind of sticking with those business wins, obviously, you know as we've discussed we're very well aligned with some really cutting edge.

Technology as you know the Lidar lidar the AI clean energy.

Are there any of these technologies that you see as having like.

Particularly strong potential to take a leak and scale up over these next.

2018 to 36 months.

Jugal K. Vijayvargiya: Well, I mean, there's a number of things I would say that have contributed, and I expect them to continue. For example, the space activity that we have talked about, I just indicated to Phil that we used to be just a small player in the space market, mostly government, some of the larger projects, and here we are, you know, talking about $90 million of new business orders, for example, in space, in the 23 calendar year. That's an incredible level of growth that we've been able to achieve. Now, when you look at, for example, the semi-market, we have a number of things going on, ALB being one of them. So we do look for ALB as those materials are adopted more and more, as more and more advanced chips come out, and as more and more AI applications come out.

I mean, theres a number of things I would say that have contributed and I expect them to continue.

For example, the space activity that we have talked about I just indicated to fill that we used to be just a small player in this space.

Market.

Most of the government some of the larger projects and here, we are talking about a $90 million of new business orders for example in space.

In the 'twenty three calendar year, that's an incredible level of growth that we've been able to drive that when you look at for example, the semi market. We have a number of things going on <unk> being one of them. So we do look for <unk>.

Those materials are adopted more and more as more and more advanced chips come out as more and more AI applications happen, we would expect that to grow when I look at Lidar autonomous vehicles, there are different levels of autonomous vehicles, but as we see more and more autonomous vehicles come out that have lidar technology, we would expect that business to <unk>.

Jugal K. Vijayvargiya: We would expect that to grow. When I look at LIDAR, autonomous vehicles, you know, there are different levels of autonomous vehicles, but as we see more and more autonomous vehicles come out that have LIDAR technology, we would expect that business to continue to grow. So I think, you know, we are excited about the megatrends that are out there, and I think our alignment to those megatrends with our, you know, our portfolio. As you know, we love talking about that on these calls and other venues. That's perfect. Thank you. And then just one more for me, if I could.

Two to then grow so I think.

We are excited about the the the megatrends that are out there and I think our alignment of those mega trends with our with our portfolio and.

As you know, we love talking about that in these calls and other venues.

That's perfect. Thank you and then just one more from me if I could show.

Shelly Chadwick: Shelley, I know you just mentioned that you're very focused on organic growth. Just curious as to how you see this in relation to any M&A activity that you think about on your horizon. Yeah, sure.

Kelly I know you just mentioned that you are very focused on organic growth.

Curious as to how you.

See you guys in relation to any M&A activity that you see.

Shelly Chadwick: So, you know, Organic has been our focus, as you know, since we did our last acquisition at the end of 21, which Jugal just referred to on the main Tantalum business. You know, we are always open for business, if you will, looking at opportunities to expand our portfolio, and expand our geographic footprint. But the opportunities that we have that are more near term and certain have been coming up to be organic. So we love the returns on organic projects. We're continuing to focus there, but we're not closed off to the idea of M&A, should the right thing come along. Thank you both and congrats on the strong, Thank you.

Think about on your horizon.

Yeah sure. So organic has been our focus as you know since we did our last acquisition at the end of 'twenty, one, which jugal just referred to.

The main tantalum business.

We are always open for business, if you will looking at opportunities to expand our portfolio expand our geographic footprint, but the opportunities that we have that are more near term uncertainty has been coming up to be organic. So we love. The returns on organic projects were continuing to focus there, but we're not closed off to the idea of.

Of M&A should the right income alone.

That's very helpful. Thank you both and congrats on a strong 2023. Thank.

Cara Callagher: Thank you. The next question is a follow-up coming from David Silver from C.L. King.

Thank you.

Thank you.

Question is a follow up coming from David Silver from CL King David Your line is live.

Okay. Thank you for that one.

David Silver: Okay, thank you for that. Just one more question, and I'll stipulate this might be a little unfair, but I had a question, perhaps, about your view of the industrial economy. You know it is a meaningful end market, and other than electronics-related end markets, it was kind of the weakest in 2023. And then I'll just say, over the last 24 hours, I guess both Japan, which might be a proxy for Asia, Japan's economy contracted in the fourth quarter, and this morning the UK announced that its economy contracted in the fourth quarter as well, so maybe a sign of continued weakness in Europe.

One more question and I'll stipulate that might be a little unfair but.

I had a question maybe about your view of the industrial economy.

<unk>.

It is a meaningful end market and other than electronics related end markets. It was kind of the weakest in 2023, and then I'll just say like over the last 24 hours.

I guess, both Japan, which might be a proxy for Asia, Japan.

Their economy contracted in the fourth quarter in this morning.

The U K announced.

Their economy contracted in the fourth quarter as well so maybe assigned for.

Continued weakness in Europe, but.

Jugal K. Vijayvargiya: But from your perspective, I mean, what are you hearing from your industrial customers in terms of end market demand? And maybe, you know, are things still declining there, or are there some signs of stabilization? And then more to the point, you know, in your fiscal year 2024 full year guidance, you know. What kind of improvement or what kind of change in the industrial end markets you serve is kind of built? Yeah, David, a great, great question.

From your perspective, I mean, what are you hearing from your industrial customers in terms of end market demand in may.

Maybe where things still declining there or are there some signs of stabilization and then more to the point.

In your.

Fiscal year 2020 for full year guidance.

What kind of improvement or what kind of.

Change in the.

Industrial end markets you serve as kind of built in there. Thank you.

Jugal K. Vijayvargiya: Because, you know, that is a large market for us. And one that, as you can imagine, we're very focused on. If you look at just the general industrial market, and one metric we look at, for example, is PMI, the last time PMI was north of 50 was September 22, so a long time ago.

Yes, David Great Great question, because that is a.

Large market for us and one that.

As you can imagine we're very focused on.

If you look at just the general industrial.

Market and and one metric that we look at for example, as PMI. The last time PMI was north of 50 was September of 'twenty two.

So a long time ago.

Jugal K. Vijayvargiya: And since then, it's below, you know, it's below 50, which implies that, you know, there's contraction. When you look at our slide 10, and kind of what we have indicated for our industrial market, we believe the industrial market will continue to be a challenge market in the 24-month timeframe, and that's why we sort of indicate that it's, you know, less than zero percent. Now, in our case, as I indicated earlier, we have a specific product that is also impacted, and that's related to non-residential construction with our beryllium nickel product.

That.

And since then it's below it's below 50, which implies that.

There's contraction.

When you look at when you look at our slide 10, and kind of what we have indicated for our industrial market.

We believe the industrial market will continue to be a challenged market in the 2004 timeframe and that's why we sort of indicate that it's less than zero percent.

Now in our case as I indicated earlier, we have a specific product that also has impacted and that's related to nonresidential construction.

With our beryllium nickel a product, but setting that aside which is really a one time.

Jugal K. Vijayvargiya: But setting that aside, which is really a one-time, you know, a specific item, we expect the industrial market to continue to be challenged throughout 24. What's great about, I think, our company is that we're very well diversified. So, clearly industrial, we expect to be a challenge market, but we've got, if you look at that chart pan, we've got all of our markets showing positive, except automotive and industrial. So and that's why we're able to, I think, say that we would have, you know, about a mid single-digit year over year growth led by SEMI, led by aerospace, commercial space, defense, you know, and some of the other things that we have going on as well.

A specific item, we expect industrial market to continue to be challenged.

<unk> 24, what's great about I think our company is.

We're very well diversified so clearly industrial we expect to be a challenged market, but we've got if you look at that chart Pan we've got.

All of our markets showing.

Positive.

Automotive and industrial so and Thats why were able to I think say that we would have about a mid single digit.

Year over year growth led by semi led by aerospace commercial space.

<unk>.

And some of the other some of the other things that we have going on as well. So so I think so I think we're we're kind of excited about where we're headed despite the fact that we have these.

Jugal K. Vijayvargiya: So I think, you know, we're kind of excited about where we're headed, despite the fact that we have these, you know, headwinds for the industrial PMI index being below 50 for a long time and not sure when that's going to turn and kind of cross 50 again. The organic growth projects that we continue to drive, you know, we highlighted a number of them on slide 6. And, you know, we'll continue to we'll continue to make sure that we're staying above the market in all the areas that we're playing.

Headwinds for industrial the PMI index being being below 50 for a long time and not sure when thats going to turn and kind of cross 50 again.

The organic growth projects that we can turn to drive we highlighted a number of them on our slide six and.

We'll continue to we'll continue to make sure that we're staying above above market on all the areas that we're playing in.

Jugal K. Vijayvargiya: Okay, and I'm going to just finish with an observation. So this was a record year for your company. I want to say Kyle, I think, set a record this quarter with the most pages in the quarterly earnings slide deck. There's a lot to go through here. Maybe send it out a little earlier. My brain doesn't work that fast.

Okay, and I'm, just going to just finish with an observation. So this was a record year for your company.

I wanted to say Tayo I think set a record this quarter with.

The most pages in the quarterly earnings slide deck. So.

There's a lot to go through here, maybe send it out a little earlier my brain doesn't work that fast in the morning, but anyway.

David Silver: But anyway, a lot of good information here, but another record-setting element to the quarter. Thanks very much. I appreciate that. Well, I know that was a comment, but I'll just add to that that this is our third year in a row of record sales, record EBITDA, and record margin. And so at record EPS, 21, 22, and 23, our team has done a fantastic job of delivering both on the top line and the bottom line, even during challenging times, which we experienced in 23. And I think we're extremely well positioned to continue that into 24 and have 24 be another record year for us.

A lot of good information here, but another record another record set another record setting element to the quarter alright, thanks very much I appreciate it.

Well I know there was a comment but I'll just add to that that this is our third year in a row.

Our record sales record EBITDA.

Record margin, so and record EPS 'twenty, one 'twenty two 'twenty three our team has done just a fantastic job of delivering.

Both on the top line.

And the bottom line, even during challenging times, which we experienced in 'twenty three and I think we're extremely well positioned to continue that into 2004 and have 24 will be another record year for us.

Jugal K. Vijayvargiya: Very good. Thank you. Thanks, everyone.

Very good thank you.

Thanks, David.

Cara Callagher: Thank you, and this does conclude today's question and answer session. I would now like to hand the call over to Cara Callagher for closing remarks. Thank you. This concludes our fourth quarter 2023 earnings call. Recorded playback of this call will be available on the company's website, materion.com. I'd like to thank you for participating in this call and your interest in Materion. I'll be available for any follow-up questions. My number is 216-383-4931.

Thank you and this does conclude today's question and answer session.

I would now like to hand, the call over to <unk> for closing remarks.

Thank you. This concludes our fourth quarter 2023 earnings call recorded playback of this call will be available on the company's website materially on dot com.

Thank you for participating on this call and your interest in material that will be available for any follow up questions. My number is $2 six $3 three or 93, one thank you again.

Operator: Thank you again. Thank you. This does conclude today's conference. You may disconnect your lines at this time. Thank you for your participation.

Thank you. This does conclude today's conference you may disconnect. Your lines at this time. Thank you for your participation.