Q4 2023 Rogers Corp Earnings Call

Operator: and others. Thank you for watching. We'll see you next time. Good afternoon.

Good afternoon, My name is Kevin and I'll be your conference operator today at this time I'd like to welcome everyone to Rogers Corporation fourth quarter 2023 earnings Conference call I'll now turn the call over to your host Mr. Steve Haymore director of Investor Relations. Mr. Haymore, you may begin.

Operator: My name is Kevin, and I'll be your conference operator today. At this time, I'd like to welcome everyone to Rogers Corporation's fourth quarter 2023 earnings conference call. I'll now turn the call over to your host, Mr. Steve Haymore, Director of Investment Relations. Mr. Haymore, you may begin.

Steve Haymore: Good afternoon, everyone, and welcome to the Rogers Corporation fourth quarter 2023 earnings conference call. The slides for today's call can be found on the investor section of our website, along with the news release that was issued earlier today. Please turn to slide two. Before we begin, I would like to note that statements in this conference call that are not strictly historical are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and should be considered as subject to the many uncertainties that exist in Rogers' operations and environment. These uncertainties include economic conditions, market demands, and competitive factors. Such factors could cause actual results to differ materially from those in any forward-looking statement made today. Please turn to slide three.

Steve Haymore: Good afternoon, everyone and welcome to the Rogers Corporation fourth quarter 2023 earnings conference call. The slides for today's call can be found on the investors section of our website along with the news release that was issued earlier today.

Speaker Change: Please turn to slide two.

Steve Haymore: Before we begin I would like to note that statements in this conference call that are not strictly historical are forward looking statements within the meaning of the private Securities Litigation Reform Act of 1995 and should be considered as subject to the many uncertainties that exist in Rogers operations.

Steve Haymore: And environment.

Steve Haymore: These uncertainties include economic conditions market demands and competitive factors such factors could cause actual results to differ materially from those in any forward looking statements made today.

Steve Haymore: Please turn to slide three the discussions during this conference call will also reference certain financial measures that were not prepared in accordance with U S. Generally accepted accounting principles a.

Steve Haymore: The discussions during this conference call will also reference certain financial measures that were not prepared in accordance with U.S. generally accepted accounting principles. A reconciliation of those non-GAAP financial measures to the most directly comparable GAAP financial measures can be found in the slide deck for today's call. Turning to slide four, with me today is Colin Gavea, President and CEO, Ram Mayampurath, Senior Vice President and CFO, and Larry Schmid, Senior Vice President of Global Operations and Supply Chain. I will now turn the call over to Colin. Thanks, Steve. Good afternoon to everyone, and thank you for joining us today.

Steve Haymore: A reconciliation of those non-GAAP financial measures to the most directly comparable GAAP financial measures can be found in the slide deck for today's call.

Steve Haymore: Turning to slide four with me today is Colin <unk>, President and CEO, Rob <unk>, Senior Vice President and CFO and Larry Schmid Senior Vice President of global operations and supply chain I will now turn the call over to Colin.

Colin: Thanks, Steve Good afternoon to everyone and thank you for joining us today.

Colin Gavea: I'll begin with the headlines of our quarter and year on slide five. Overall, the macroeconomic headwinds we faced throughout the fiscal year persisted through the fourth quarter, prompting more pronounced destocking at our customers and contributing to broad market softness across our end markets. In particular, our sales in the general industrial and portable electronics segments significantly declined compared to the third quarter.

Colin: I'll begin with the headlines of our quarter year and outlook on slide five.

Colin: Overall, the macroeconomic headwinds we faced throughout the fiscal year persisted through the fourth quarter, prompting more pronounced destocking at our customers and contributing to broad market softness across our end markets.

Colin: In particular, our sales in the general industrial and portable electronics segments significantly declined compared to the third quarter.

Colin Gavea: Lower sales volumes more than offset the procurement cost savings we achieved in Q4, and as a result, gross margins and adjusted earnings fell below our expectations. The ongoing contraction in global manufacturing activity, which has persisted for more than a year in many countries, continues to have a meaningful impact on the general industrial market, which comprises much of our core business. We are not yet seeing sustainable signs of improvement in this market, but we believe we are near the bottom of this cycle and may begin to see some recovery mid-year. While we anticipate the macro environment will remain challenging, Rogers continues to focus on variables within our control to position us to respond once demand improves.

Colin: Lower sales volumes more than offset the procurement cost savings we achieved in Q4 and as a result gross margins and adjusted earnings fell below our expectations.

Colin: The ongoing contraction in global manufacturing activity, which has persisted for more than a year in many countries continues to have a meaningful impact on the general industrial market, which comprises much of our core business. We are not yet seeing sustainable signs of improvement in this market, but we believe we are near the bottom of this cycle and may begin to see some recovery.

Colin: Mid year.

Colin: While we anticipate the macro environment will remain challenging Rogers continues to focus on variables within our control to position us to respond once demand improves.

Colin Gavea: Our commitment to aggressively manage costs while simultaneously advancing our growth strategy is reflected in our full year 2023 results, which include gross margin improvement and solid free cash flow generation. We also secured significant design wins and brought on new team members. We will discuss our near-term priorities later in the call. We also announce today that due to persistent challenges in the global manufacturing economy and a lack of near-term buy visibility in the EV market, the timeline to reach our March 2023 Investor Day targets is being extended beyond 2025. We have not changed our view about what we can achieve, just the timing of when we achieve it. The longer time frame for recovery does not change our strategic objectives or confidence in the future. Rogers is grounded in leading industry positions and relationships with our customers.

Colin: Our commitment to aggressively manage costs, while simultaneously advancing our growth strategy is reflected in our full year 2023 results, which include gross margin improvement and solid free cash flow generation. We also secured significant design wins and brought our new team members.

Colin: Three accomplishments and near term priorities later in the call.

We also announced today that due to persistent challenges in the global manufacturing economy.

Colin: And a lack of near term visibility in the EV market the timeline to reach our March 2023, Investor day targets is being extended beyond 2025, we have not changed our view about what we can achieve just the timing of when we achieve at the.

Colin: The longer timeframe for recovery does not change our strategic objectives, our confidence in the future.

Colin: Rogers is grounded in leading industry positions and relationships with our customers as we manage this business for growth profitability and success over the long and short term. We continue to invest so we are positioned to capture opportunities when the market recovers. We believe the strength of our team significant opportunities in our end markets and our.

Colin Gavea: As we manage this business for growth, profitability, and success in the long and short terms, we continue to invest so we are positioned to capture opportunities when the market recovers. We believe the strength of our team, significant opportunities in our end markets, and our differentiated technology will position us to achieve our goals. Before providing more detail on our quarterly performance, I'd like to touch on some of our RESTORE accomplishments in 2023; please turn to slide 6. Our recent actions have helped fortify our business against the weaker macroeconomic environment while at the same time positioning us for long-term success. The first key objective we outlined was cost improvement. We took a series of actions in 2023 to adjust our cost structure to meet demand, strengthen our product portfolio, and optimize our capacity footprint. We also executed on operational excellence initiatives, which lowered costs and helped us better serve customers.

Colin: <unk> technology will position us to achieve our goals.

Before providing more detail on our quarterly performance I'd like to touch on some of our restore accomplishments in 2023. Please.

Colin: Please turn to slide six our recent actions have helped fortify our business against the weaker macroeconomic environment, while at the same time positioning us for long term success the.

Colin: The first key objective, we outlined was cost improvement.

Colin: We took a series of actions in 2023 to adjust our cost structure to meet demand strengthen our product portfolio and optimize our capacity footprint. We also executed on operational excellence initiatives, which lowered costs and helps us better serve customers.

Colin Gavea: Larry Smith, our SVP of Operations and Supply Chain, will speak more about our progress in these areas shortly. Executing on our cost improvement objectives and carefully managing adjusted operating expenses helped us make progress in our margin improvement journey in 2023. Our objective was to achieve 35% gross margins in the second half of 2023, which we hit in Q3, demonstrating what Rogers can achieve despite a tough environment. However, lower sales volumes did lead to a decline in our gross margin in Q4.

Larry Smith, our SVP of operations and supply chain will speak more about our progress in these areas shortly.

Larry Smith: Executing on our cost improvement objectives and carefully managing adjusted operating expenses helped us make progress in our margin improvement journey in 2023.

Larry Smith: Our objective is to achieve 35% gross margins in the second half of 2023, which we hit in Q3, demonstrating what Rogers and achieve despite a tough environment.

Larry Smith: Lower sales volumes did lead to a decline in our gross margin in Q4. However, we saw meaningful full year 2023 gross margin improvement.

Colin Gavea: However, we saw a meaningful full-year 2023 gross margin improvement. These actions to improve our cost structure are sustainable and will help drive an increase in gross margin as sales return to more normalized levels. Next, we bolstered the organization with new leadership in R&D, operations, supply chain, legal, human resources, and business development. We now have the right skill sets in place to execute on our short and long-term goals as we move forward. Lastly, we secured important design wins in our key end markets. We selectively invested in new capacity, and we paid down $185 million on our revolving debt facility. With an even stronger balance sheet entering 2024, we will be able to continue to fund both organic and inorganic growth. I'll now turn it over to Larry to discuss our progress on the operation. Thanks, Colin.

Larry Smith: These actions to improve our cost structure are sustainable and will help drive an increase in gross margin as sales return to more normalized levels.

Larry Smith: Next we bolstered the organization with new leadership, and R&D operations supply chain legal human resources and business development well.

Larry Smith: We now have the right skill sets in place to execute on our short and long term goals as we move forward.

Larry Smith: Lastly, we secured important design wins in our key end markets, we selectively invested in new capacity and we paid down $185 million on our revolving debt facility.

Larry Smith: With an even stronger balance sheet entering 2024, we will be able to continue to fund both organic and inorganic growth.

Larry Smith: I'll now turn it over to Larry to discuss our progress on operations.

Larry: Thanks, Collyn turning to slide seven I'll discuss how we delivered on the 2023 operations objectives that we outlined at last year's Investor Day, and more importantly, the many ongoing operational and supply chain excellence initiatives, but we continue to pursue all.

Larry Schmid: Turning to slide seven, I'll discuss how we delivered on the 2023 operations objectives that we outlined at last year's Investor Day and, more importantly, the many ongoing operational and supply chain excellence initiatives that we continue to pursue. I'll begin with our most important resource, our dedicated and talented employees. I'm very pleased with the great progress we made over the course of the year, bringing in highly experienced talent from top-tier multinational organizations. Through a targeted hiring process, we filled key global leadership positions in safety, procurement, supply chain, and technical operations. Simultaneously, we fortified our safety management processes and systems. The safety culture at Rogers has always been a strength, and we remain focused on driving our performance towards best in class.

Larry: Ill begin with our most important resource our dedicated and talented employees I am very pleased with the great progress we made over the course of the year, bringing on highly experienced talent from top tier multinational organizations through a targeted hiring process, we filled key global leadership positions in safety.

Larry: Procurement supply chain and technical operations side.

Larry: Simultaneously, we fortified our safety management processes and systems. The safety culture at Rogers has always been a strength and we remain focused on driving our performance towards best in class.

Larry Schmid: Second, as Colin touched on, we made substantial progress with our operational excellence initiatives in 2023. For example, we delivered significant manufacturing and procurement cost savings by implementing new sourcing strategies focused on optimizing both direct and indirect spending. Additionally, we continue to drive year-over-year manufacturing efficiencies and productivity improvements to lower structural costs. We also improved on-time delivery performance to customers and made improvements in our integrated business planning process. Looking ahead, we're still working aggressively to drive further supplier diversification and deliver additional savings in manufacturing spend. Likewise, we will continue to pursue improvements in yields, asset utilization, maintenance and reliability costs, and energy use. Lastly, the operations team achieved a nearly 10% capacity utilization improvement in our Keramic operation, our fastest growing business last year. With strong demand for our Keramic business, we also began deploying new capacity in China.

Larry: Second as Colin touched on we made substantial progress with our operational operational excellence initiatives in 2023.

Larry: For example, we delivered significant manufacturing and procurement cost savings by implementing new sourcing strategies focused on optimizing both direct and indirect spending. Additionally.

Larry: Additionally, we continued to drive year over year manufacturing efficiencies and productivity improvements to lower structural costs. We also improved on time delivery performance to customers and drove improvements in our integrated business planning process.

Larry: Looking ahead, we are still working aggressively to drive further supplier diversity diversification and deliver additional savings and manufacturing spend.

Larry: Likewise, we will continue to pursue improvements in yields asset utilization maintenance and reliability costs and energy usage.

Larry: Lastly, the operations team achieved a nearly 10% capacity utilization improvement in our <unk> operation our fastest growing business last year with strong demand in our <unk> business. We also began deploying new capacity in China. This work is continuing at full speed in 2024, and we look to <unk>.

Larry Schmid: This work is continuing at full speed in 2024, and we look to begin commissioning and internal qualification activities later this year, with mass production expected to begin no later than mid-2025, of course, subject to overall market conditions and customer approval. As always, we will also continue to implement other yield, capacity, and quality improvements this year to help support customers and the growth of our business. With that, I'll now pass it back to Colin.

Larry: <unk> commissioning and internal qualification activities later this year with mass production expected to begin no later than mid 2025 of course subject to overall market conditions and customer approvals as always we will also continue to implement other yield capacity and quality improvements this year.

Larry: To help support customers and the growth of our businesses and with that I'll now pass it back to Colin.

Colin Gavea: Thanks, Larry. Turning to slide 8, I'll next touch on our fourth quarter results. Sales of $205 million declined approximately 11% from the prior quarter and were below the low end of our guidance due to lower than anticipated industrial and portable electronic sales. In reviewing the end market sales results, I will start with the EV-ATV segment, our significant growth category. Q4 EV-ATV sales improved at a double-digit rate versus the prior quarter, led by our Power Substrate product. Demand for EMS EV HEV battery products also improved. For the full year, EV HEV sales declined by mid-single digits.

Colin: Thanks, Larry.

Colin: Turning to slide eight I'll next touch on our fourth quarter results sales of $205 million declined approximately 11% from the prior quarter and were below the low end of our guidance due to lower than anticipated industrial and portable electronics sales.

Colin: In reviewing the end market sales results I will start with the EV HEV segment, our significant growth category Q4, EV HEV sales improved at a double digit rate versus the prior quarter led by our power substrate products demand for EMS EV HEV battery products also improved for the full year EV HEV.

Colin: Sales declined mid single digits, we had very strong growth in our power substrate technology, where the growing demand.

Colin Gavea: We had very strong growth in our power substrate technology, where the growing demand for Silicon Carbide Power Modules and EVs and HEVs continues to drive demand for our product. However, this sales increase was more than offset by much lower power interconnect sales, which declined in 2023 as certain customers worked through higher inventory levels ordered in 2022. In our high growth markets, portable electronics sales declined meaningfully versus the prior quarter due to normal seasonality and weaker demand from certain key OEMs. At this end of the year, when the global smartphone market declined sharply, we anticipate some improvement in 2024, depending on consumer traction with new models that will be introduced later this year. Sales in the aerospace and defense market declined versus the prior quarter.

Colin: For Silicon carbide power modules in Evs and Atvs continues to drive demand for our products. This sales increase was more than offset by much lower power interconnect sales, which declined in 2023 as certain customers worked through higher inventory levels ordered in 2022.

Colin: In our high growth markets portable electronics sales declined meaningfully versus the prior quarter due to normal seasonality and weaker demand from certain key Oems. This ended the year, where the global smartphone market declined sharply we anticipate some improvement in 2024, depending on consumer traction with new models.

Colin: That will be introduced later this year.

Colin: Sales in the aerospace and defense market declined versus the prior quarter <unk>.

Colin Gavea: Commercial aerospace demand was lower following a very strong Q3, and defense demand declined, primarily related to program timing. Full year sales also declined, but we expect this will be a key growth market going forward. We saw good full-year growth in both the ADAS and renewable energy markets. The growth in renewable energy was led by demand for our advanced power substrate.

Colin: Commercial aerospace demand was lower following a very strong Q3 and defense demand declined primarily related to program timing full year sales also declined but we expect this will be a key growth market going forward we.

Colin: We saw good full year growth in both the asos and renewable energy markets, but growth in renewable energy was led by demand for our advanced power substrates.

Colin Gavea: In our core markets, we saw a sequential double-digit decline in industrial sales. Full-year industrial sales were also significantly lower versus 2022. As we've highlighted, the ongoing contraction in manufacturing activity in the U.S. and EU, combined with a weak post-COVID recovery in China, created a strong headwind in this market last year. Lastly, we secured sizable design wins in our AES and EMS business this past quarter. Our Keramic Advanced Substrate Technology was designed by a major power module supplier and will be utilized in this customer's high-performance 800-volt silicon carbide power module platform.

Colin: In our core markets, we saw a sequential double digit decline in industrial sales full year industrial sales were also significantly lower versus 2022.

Colin: As we've highlighted the ongoing contraction in manufacturing activity in the U S and EU combined with a weak post COVID-19 recovery in China created a strong headwind in this market last year.

Colin: Lastly, we secured sizable design wins, and our Aes and EMS business this past quarter.

Colin: Our <unk> advanced substrate technology was designed in by a major power module supplier and will be utilized in this customer's high performance 800 volt silicon carbide power module platform.

Colin Gavea: In Rolling, we secured a design win for our power interconnects in a major renewable energy project. We also secured an important design win in our EMS business with a leading medical device manufacturer. Rogers was selected based on the performance of our advanced materials and our highly customized solution design.

Colin: And Ah Rollings business, we secured a design win for our power Interconnects and a major renewable energy project. We also secured an important design win in our Ams business with a leading medical device manufacturer Rogers was selected based on the performance of our advanced materials and our highly customized solution design.

Ram Mayampurath: Now I'll turn it over to Ram to discuss our Q4 Financial Performance and Q1 Outlook. Thanks, Colin. I will begin on slide nine by reviewing our full-year results before discussing Q4 in more detail. As Colin and Larry highlighted, we made good progress in many areas in 2023, including improving our cost structure and driving free cash flow, even as macro conditions were challenging. Full-year sales were $908 million, a decrease of 6.5% from the prior year.

Colin: Now I'll turn it over to Rob to discuss our Q4 financial performance and Q1 outlook.

Rob: Thanks, Colin I will begin on slide nine by reviewing our full year results before discussing Q4 in more detail.

Rob: As Paul and Larry highlighted we have made good progress in many areas in 2023, including improving our cost structure and driving free cash flow, even as macro conditions were challenging full year sales were $908 million a decrease of six 5% from the prior year gross margins increase.

Ram Mayampurath: Gross margins increased by approximately 75 basis points to 33.8%. The improvement in gross margin on meaningfully lower sales volume highlights the structural cost reductions made last year. We also contained 2023 operating expenses and lowered our overall SG&A spend dollars versus 2022. With the improvement in gross margin and by flexing OPEX lower, we partially offset the impact of the drop in sales volume. Adjusted EBITDA margins were 16.3% in 2023, and roughly in line with the prior year. For the full year, adjusted EPS was $3.78 compared to $4.91 in 2022. On slide 10, I'll discuss our Q4 sales results in more detail. Net sales of $205 million declined 11% versus the prior quarter due to lower volume of approximately $23 million and unfavorable foreign currency fluctuations of close to $2 million. On a reportable segment basis, AES revenue decreased from the prior quarter by 7.2%, or $117 million.

Rob: By approximately 75 basis points to 33, 8% the improvement in gross margin on meaningfully lower sales volume highlights the structural cost reductions made last year.

Rob: We also contained 2020 at the operating expenses and lowered our overall SG&A spend dollars versus 2022.

Rob: The improvement in gross margin and by flexing Opex lower we partially offset the impact from drop in sales volumes. Adjusted EBITDA margin was 16, 3% in 2023 and roughly in line with the prior year.

Rob: For the full year adjusted EPS was $3 78.

Rob: <unk> to $4 91 in 2022.

Rob: On slide 10, I will discuss our Q4 sales results in more detail net sales of $205 million declined 11% versus the prior quarter due to lower volume of approximately $23 million.

Rob: Unfavorable foreign currency fluctuations of close to $2 million.

Rob: On a reportable segment basis EES revenue decreased from the priory prior quarter by seven 2% or $117 million.

Ram Mayampurath: Sales decreased in the aerospace and defense, industrial, and renewable energy markets, although this was partially offset by higher EV-HEV sales and a slight increase in ADAS. EMS revenue decreased by 14.9% to 83 million, resulting from lower portable electronics and general industrial sales.

Rob: Sales decreased in aerospace and defense industrial and renewable energy markets. This was partially offset by higher EV HEV sales.

Rob: And a slight increase in <unk>.

Rob: <unk> revenue decreased by 14, 9% to $83 million, resulting from lower portable electronics and general industrial sales.

Ram Mayampurath: These declines offset improvements in EV-HEV sales. Turning to slide 11, our gross margin for the fourth quarter was 67 million, or 32.9%, which declined from 35.1% in Q3. The decrease in gross margin was mainly a result of lower sales volumes and underabsorbed production costs.

Rob: New clients offset improvement in EV HEV sales.

Rob: Turning to slide 11, our gross margin for the fourth quarter was $67 million or 32, 9%, which declined from 35, 1% in Q3.

Rob: The decrease in gross margin was mainly a result of lower sales volumes and under absorbed production costs.

Ram Mayampurath: These demand-related headwinds reduced gross margin by approximately 350 basis points from the prior quarter. This reduction was partially offset by approximately 150 basis points of procurement savings and other manufacturing efficiencies in Q4. Although we are seeing some impact on gross margin from our current factory staffing levels, we intend to carry these costs through Q1 in anticipation of improved demand by mid-year. Q4 adjusted income decreased to $11 million versus $23 million in Q3.

Rob: These demand related headwinds reduced gross margin by approximately 350 basis points from the prior quarter.

Rob: This reduction was partially offset by approximately 150 basis points of procurement savings and other manufacturing efficiencies in Q4.

Rob: Although we are seeing some impact to gross margin from our current factory staffing levels. We intend to carry these costs through Q1 in anticipation of improved demand by mid year.

Rob: Q4, adjusted income decreased to $11 million versus $23 million in Q3 Q4 adjusted earnings per share was <unk> 60, compared to $1 24 per <unk> in the prior quarter.

Ram Mayampurath: Q4 adjusted earnings per share was $0.60 compared to $1.24 in the prior quarter. The sequential decrease in Q4 adjusted net income resulted mainly from lower gross margin and higher adjusted operating expenses, which was partially offset by lower tax expenses. Adjusted operating expenses were higher in the quarter, mainly due to an increase in R&D costs and DNA professional services to support key strategic initiatives. Adjusted operating income does not include an insurance recovery of approximately $24 million received in the fourth quarter in connection with the fire that occurred at our U.S. factory in 2021. This recovery is reflected in our GAAP net income of $23 million and GAAP EPS of $1.24. Continuing to slide 12, ending cash at December 31st was approximately $132 million, a decrease of $104 million from the end of 2022 and a $5 million increase from the end of Q3 2023. We generated strong operating cash flow of $72 million in Q4 and $131 million for the full year. This enabled us to invest in capital to support our organic growth initiative and make discretionary repayment of $185 million on our revolving credit facility. Capital expenditures were $23 million in the quarter and $57 million for the year.

Rob: The sequential decrease in Q4 adjusted net income resulted mainly from lower gross margin and higher adjusted operating expenses, which was partially offset by lower tax expenses.

Rob: Adjusted operating expenses were higher in the quarter, mainly due to increase in R&D costs and G&A professional services to support these strategic initiatives.

Rob: Adjusted operating income does not include an insurance recovery of approximately 24 million received in the fourth quarter in connection with the fire that occurred at our <unk> factory in 2021.

Rob: This recovery is reflected in our GAAP net income of <unk> 3 million and GAAP EPS of $1 24.

Rob: Continuing to slide 12, ending cash at December 31 was approximately $132 million a decrease of $104 million from the end of 2022, and a $5 million increase from the end of Q3 2023.

Rob: We generated strong operating cash flow of $72 million in Q4 and $131 million for the full year. This enabled us to invest.

Rob: In capital to support our organic growth initiatives and make discretionary repayment of $185 million on our revolving credit facility.

Rob: Capital expenditures were $23 million in the quarter and $57 million for the year.

Ram Mayampurath: We dedicated considerable effort in 2023 to improve gross margin and manage working capital, which further strengthened our balance. We are well-positioned to execute on our capital allocation priorities, primarily driving organic growth as well as managing debt, strategically investing in synergistic M&A, and returning capital to shareholders. Next, on slide 13, I will discuss our guidance for the first quarter of 2024. Net sales are expected to range between $205 and $215 million.

Rob: We dedicated considerable effort in 2023 to improve gross margin and manage working capital, which further strengthened our balance sheet, we are well.

Rob: Well positioned execute on our capital allocation priorities, primarily driving organic growth as well as managing that strategically investing and synergistic M&A and returning capital to shareholders.

Rob: Next on slide 13, I will discuss our guidance for the first quarter of 2024 net sales are expected to range between $205 and $215 million. The midpoint of this range is slightly higher than Q4 as RF solutions demand is forecasted to be stronger.

Ram Mayampurath: The midpoint of this range is slightly higher than Q4, as RF solutions demand is forecasted to be stronger in Q1. We are guiding gross margin to be in the range of 32% to 33% for Q1. The 32.5% midpoint of our guidance is lower than our Q4 results due primarily to changes in product mix. As mentioned, our guidance also reflects costs that we are carrying in anticipation of a top-line recovery. In addition to the capacity expansion investments, we will incur additional operating expenses this year to capitalize on our growth opportunities. Startup costs are projected to be between a million and two million in Q1 and will continue for the remainder of the year. Depending on how demand levels evolve, these startup costs may be adjusted. Earnings per share is expected to range from $0.30 to $0.50, and adjusted EPS from $0.45 to $0.65.

Rob: In Q1.

Rob: We are guiding gross margin to be in the range of 32% to 33% for Q1 to 32, 5% midpoint of our guidance is lower than our Q4 results due primarily to changes in product mix as mentioned our guidance also reflects costs that we're carrying in anticipation of the <unk>.

Rob: Top line recovery.

Rob: In addition to the capacity expansion investments, we will incur additional operating expenses this year to capitalize on our growth opportunities.

Rob: <unk> costs are projected to be between <unk>, Midland and $2 million in Q1 and will continue for the remainder of the year.

Rob: Depending on how demand levels evolve these startup costs may be adjusted.

Rob: Earnings per share is expected to range from 30 to 50.

Rob: And at <unk> EPS from 45 to 65.

Colin Gavea: We project our full-year tax rate to be around 25%. Finally, based on our current view, we anticipate Q1 guidance to be the low point of sales in 2024. We also anticipate that the second half of the year will be stronger than the first half. I will now pass the call back to Colin to discuss our multi-year financial targets. Thanks, Ram.

Rob: We project, our full year tax rate to be around 25% finally based on our current view, we anticipate Q1 guidance to be the low point of sales in 2024. We also anticipate that the second half of the year will be stronger than the first half.

Rob: I will now pass the call back to Colin to discuss our multiyear financial targets.

Colin: Thanks, Rob turning to slide 14, following some significant changes in the external environment. In 2023, we are extending the timeline to achieve our investor day financial targets to beyond 2025.

Colin Gavea: Turning to slide 14, following some significant changes in the external environment in 2023, we are extending the timeline to achieve our Investor Day financial targets beyond 2025. This decision is a result of several compounding factors across various markets that have affected our business over the last year. The first and most impactful factor is the slower-than-expected recovery in the global manufacturing industry. As reflected in our Q4-23 results and our Q1-24 outlook, the continuing contraction of the manufacturing economy meaningfully reduced sales in our general industrial and other core markets. These challenges have been broad-based, including in the U.S., Europe, and China.

Colin: This decision as a result of several compounding factors across various markets that have affected our business over the last year.

Colin: The first and most impactful factor as the slower than expected recovery in the global manufacturing industry.

Colin: As reflected in our Q4 'twenty results and our Q1 'twenty four outlook the continuing contraction of the manufacturing economy meaningfully reduced sales in our general industrial and other core markets. These challenges have been broad based including in the U S. Europe and China. We believe we may begin to see some recovery in industrial markets in.

Colin Gavea: We believe we may begin to see some recovery in industrial markets in the second half of 2024, but there is much uncertainty around the timing of a recovery. The next factor leading to this change is the lack of near-term visibility on electric vehicle growth. Since the middle of 2023, there have been a number of automakers that have announced changes to their EV production plans in response to the demand environment. Subsidies have also been reduced or removed for EVs, for example, in Germany.

Colin: The second half of 2024, but there is much uncertainty around the timing of a recovery.

Colin: The next factor leading to this change is the lack of near term visibility on electric vehicle growth.

Colin: The middle of 2023, there have been a number of automakers that have announced changes to their EV production plans in response to the demand environment.

Colin: Subsidies have also been reduced or removed for Evs for example in Germany.

Colin Gavea: As a result, there is increased variability in the timing of when certain design wins and projects in our opportunity funnel will happen. To be clear, these recent events do not change our view of the long-term growth potential in the EV market, but they do create a lack of visibility at the present time. Third, we are revising our growth rate in certain markets that are facing different challenges. For example, in the portable electronics market, we are projecting some recovery in 2024 following the significant market declines in 2023. However, the medium-term outlook remains muted as the premium segment of the market, where we primarily participate, is forecasted to grow at a lower rate as consumers keep existing phones longer. In the wireless infrastructure market, we expect sales to decline going forward, given the weaker-than-anticipated 5G base station rollout in many regions.

Colin: As a result, there is increased variability in the timing of when certain design wins and projects in our opportunity funnel will happen to be clear. These recent events do not change our view of the long term growth potential in the EV market, but it does create a lack of visibility at the present time third we're revising our growth rate in certain.

Colin: <unk> that are facing different challenges in the portable electronics market. We are projecting some recovery in 2024 following the significant market declines in 2023. However, the medium term outlook remains muted as the premium segment of the market, where we primarily participate is forecasted to grow.

Colin: At a lower rate as consumers keep existing phones longer in the wireless infrastructure market, we expect sales to decline going forward given the weaker than anticipated <unk> base station rollout in many regions.

Colin Gavea: Before moving on to more specifics regarding our growth targets, I'd like to reiterate that we will remain firmly committed to our strategy that will position Rogers for sustainable growth and long-term shareholder value. The EV-ATV opportunity remains a significant long-term growth driver for our business and the global automotive industry in general. As leading OEMs work through the near-term challenges associated with this transition, Rogers is a valued partner, providing mission-critical materials solutions for our customers.

Speaker Change: Before moving on to more specifics regarding our growth targets I'd like to reiterate that we will remain firmly committed to our strategy that will position Rogers for sustainable growth and long term shareholder value.

Speaker Change: The EV HEV opportunity remains a significant long term growth driver for our business and the global automotive industry in general as leading Oems work through the near term challenges associated with this transition Rogers is a valued partner providing mission critical materials solutions for our customers.

Colin Gavea: Overall, our technology and strong positions in our key markets remain differentiators for the company that will propel us forward, despite the present headwinds. On slide 15, we have provided the key assumptions and strategic initiatives that will help us reach our multi-year sales target of $1.2 to $1.3 billion. We are also providing growth rate expectations for our core, high, and significant markets, although these are directional in nature, given the current level of uncertainty. Starting with our significant growth markets, we continue to believe that our significant growth market comprised of EV HEV will be the strongest contributor to reaching our sales target. We project this market will increase at a CAGR of in the high teens or possibly stronger depending on EV demand levels.

Speaker Change: Overall, our technology and strong positions in our key markets remained differentiators for the company that will propel us forward. Despite the present headwinds.

Speaker Change: On slide 15, we have provided the key assumptions and strategic initiatives that will help us reach our multiyear sales target of one two to $1 3 billion. We are also providing growth rate expectations for our core high end significant markets. Although these are directional in nature, given the current level of uncertainty.

Speaker Change: Starting with our significant growth markets, we continue to believe.

Speaker Change: That our significant growth market comprised of EV HEV will be the strongest contributor to reaching our sales target. We project. This market will increase at a CAGR in the high teens or possibly stronger depending on EV demand levels.

Colin Gavea: This growth is expected to be led by our Keramic Power Substrate business, which grew rapidly in 2023 and where we have the greatest visibility into customer demand. The first phase of our new pyramid facility is anticipated to be a major contributor to this growth. We are planning for commercial production to begin in 2025, with a full production run rate in 2026. The growth outlook for silicon carbide in EVs and ATVs remains very strong, and our power substrate solutions are integral to enabling that growth.

Speaker Change: This growth is expected to be led by our <unk> power substrate business, which grew rapidly in 2023, and where we have the greatest visibility to customer demand. The first phase of our new <unk> facility is anticipated to be a major contributor to this growth.

We are planning for commercial production to begin in 2025 with a full production run rate in 2026.

Speaker Change: The growth outlook for Silicon carbide in Evs, and Atvs remains very strong and our power substrate solutions are integral to enabling that growth.

Colin Gavea: We also anticipate that some of our significant EMS-EV battery design wins will begin to ramp in the 2025 to 2026 timeframe, although the timing is later than expected at this time last year and has changed due to specific OEM manufacturing challenges and softer demand leading to production delays. We are on the print in these important programs, and we expect this will be a strong growth opportunity for us as production increases over the coming years. In our Rollings business, we are opening a new facility in Mexico that will manufacture our advanced busbar technology primarily for the EV, HEV, and renewable energy market.

Speaker Change: We also anticipate that some of our significant EMS EV battery design wins will begin to ramp in the 2025 to 2026 timeframe.

Speaker Change: The timing is later than expected at this time last year and has changed due to specific OEM manufacturing challenges and softer demand leading to production delays.

Speaker Change: We are on the Prince and these important programs and we expect this will be a strong growth opportunity for us as production increases over the coming years.

Speaker Change: And Ah Rollings business, we are opening a new facility in Mexico that will manufacture our advanced <unk> technology, primarily for the EV HEV and renewable energy markets. This targeted investment continues our regional footprint strategy and will enable us to better serve our customers in North America.

Colin Gavea: This targeted investment continues our regional footprint strategy and will enable us to better serve our customers in North America. Importantly, this projected growth in EV will not be linear given the timing of our new capacity additions and likely fluctuations in market demand. Turning to our high growth market We are planning for these markets to grow at a mid-single-digit range over the next few years. This is lower than our previous assumption due to the challenges discussed in the portable electronics markets, a more measured view of global economic growth in the coming years, and the likelihood that these markets will not grow as quickly. We expect aerospace and defense and renewable energy to provide the strongest growth. The outlook for A&E is based on both specific defense programs utilizing advanced radar technologies and the substantial backlogs in commercial aerospace production. The outlook for new solar and wind deployments remains strong, and we expect growth with both our power substrate and power interconnect solutions.

Speaker Change: Importantly, this projected growth in EV will not be linear given the timing of our new capacity additions and likely fluctuations in market demand.

Speaker Change: Turning to our high growth markets. We are planning for these markets to grow at a mid single digit range over the next few years. This is lower than our previous assumption due to the challenges discussed in the portable electronics markets a more measured view of global economic growth in the coming years and the likelihood that these markets will.

Speaker Change: Not grow as quickly.

Speaker Change: We expect aerospace and defense and renewable energy to provide the strongest growth.

Speaker Change: The outlook for A&D is based on both specific defense programs utilizing advanced radar technologies and the substantial backlogs in commercial aerospace production the outlook for new solar and wind deployments remain strong and we expect to growth with both our power substrate and power interconnect solutions.

Colin Gavea: And then for our core markets, we anticipate growth in the low single-digit range. This reflects both the weaker near-term demand in general industrial and consumer markets and our expectation for a gradual recovery. The outlook for decline in the wireless infrastructure market is also contributing to the lower growth rate.

Speaker Change: And then our core markets, we anticipate growth in the low single digit range. This reflects both the weaker near term demand in general industrial and consumer markets and our expectation for a gradual recovery the outlook for a decline in the wireless infrastructure market is also contributing to the lower growth rate.

Colin Gavea: Finally, while our targets are based on organic growth assumptions, synergistic M&A will remain a key part of our strategy. As always, it will be subject to timing as we follow our disciplined process to identify the right opportunities to be transacted within targeted financial parameters. In summary, we have a very clear strategy to achieve these financial targets.

Finally, while our targets are based on organic growth assumptions synergistic M&A will remain a key part of our strategy as always it will be subject to timing as we follow our disciplined process to identify the right opportunities to be transacted within targeted financial parameters and.

Speaker Change: In summary, we have a very clear strategy to achieve these financial targets based on the visibility of design win ramps and supporting capacity investments, we expect growth over the next few years. However, the current market uncertainty makes it challenging to predict timing and the exact rate of growth for this reason we are not currently able.

Colin Gavea: Based on the visibility of design wind ramps and supporting capacity investments, we expect growth over the next few years. However, the current market uncertainty makes it challenging to predict timing and the exact rate of growth. For this reason, we are not currently able to specify at what point in the next few years we are likely to reach these targets.

Speaker Change: To specify at one point in the next few years, we are likely to reach these targets.

Operator: As we wrap up our prepared remarks, let me reiterate today's key messages. First, we made great progress in 2023 making structural changes to our cost structure for improving cash flow and shoring up the organization. We are also making the necessary investments in capacity and organizational capabilities to grow as these significant market headwinds ease. We have great confidence in our technology, our innovation capabilities, and the talented employees at Rogers as we work to deliver on our financial targets. With that, I will now turn the call back over to the operator for questions. Thank you. We will now be conducting a question and answer session. If you would like to be placed in the question queue, please press star 1 on your telephone keypad. A confirmation tone will indicate that you are lining up in the question queue.

Speaker Change: As we wrap up our prepared remarks, let me reiterate today's key messages first we made great progress in 2023, making structural changes to our cost structure.

Speaker Change: Improving cash flow and shoring up the organization.

Speaker Change: We are also making the necessary investments in capacity and organizational capabilities to grow as these significant market headwinds ease we have great confidence in our technology, our innovation capabilities and the talented employees at Rogers as we work to deliver on our financial targets.

Speaker Change: With that I will now turn the call back over to the operator for questions.

Speaker Change: Thank you, we'll now be conducting a question and answer session if you'd like to be placed in the question queue. Please press star one on your telephone keypad.

Speaker Change: Information tone will indicate that Youre line is getting the question in Q1.

Operator: One moment, please, while we poll for questions. Our first question is coming from Craig Ellis from B. Riley Securities. Your line is now live.

Speaker Change: One moment, please while we poll for questions.

Speaker Change: Our first question is coming from Craig Ellis from B Riley Securities. Your line is now live.

Craig A. Ellis: Yeah, team, thanks for taking the questions and in a tough environment. Congratulations on the company's controllable progress. So I wanted to start with a comment that I think you made, Ram, when you were talking about the first quarter. I think you said you expected the first quarter to be the low point for the year. Can you identify some of the things that give you conviction that it would be a low point and touch on what from a demand standpoint leaves you with that confidence and how you are seeing and thinking about downstream inventories and their levels as you think about the ability to grow up Sure. Hi Craig.

Craig A. Ellis: That team thanks for taking the questions.

Craig A. Ellis: In a tough environment congratulations on the company control with our progress. So I wanted to start with a question around a comment that I think you made Brian when you were talking about the first quarter. I think you said you expect that.

Speaker Change: First quarter to beat the low point for the year can.

Speaker Change: Can you identify some of the things that give you conviction that it would be a low point 10 touch on.

Speaker Change: But from a demand standpoint leaves you with that confidence and how you are seeing and thinking about downstream inventories and their levels should think about the ability to grow off of <unk>.

Speaker Change: Sure Hi, Craig.

Ram Mayampurath: You know, talking about the cost improvements and the margin traction we have had in the first three quarters, those improvements are permanent, and the cost reductions we have made are here to stay. So, as we have said before, we focused a lot on correcting the cost structure of the company, both in COGS and in OPEC. And as we see the top line recover, we hope to see much more improvement in the bottom line. Now talking about the top line in particular, that's where, that drives most of our results, as you know, and I'll start, and I'll pass it on to Colin. If you look at our second half from what we are hearing from our customers, and specifically with regard to the burning of the inventories in the channel and the timing of when some of the new orders and recovery of the ordering patterns would start, that signals that the second half is likely to be better than the first half. In general, seasonality, as you know, picks up better in the second half of the year as we start seeing the pour on ramp up, and the PE activity group before the holiday bill.

Speaker Change: Talking about the cost improvements in the margin.

Speaker Change: The traction we have had in the first three quarters those improvements are.

Speaker Change: Permanent in this.

Speaker Change: Cost reductions we have made.

Speaker Change: We are here to stay.

Speaker Change: So as we have said before we are focused a lot on correcting the cost structure of the company both in Cogs and Opex.

And as we see the topline recover we hope to see much more improvement in the bottom line.

Speaker Change: Now talking about the top line in particular Thats fair.

Speaker Change: More of that drives most of our results as you know and I'll start and I'll pass it onto column.

Colin: If you look at our second half from what we're hearing from our customers.

Column: And specifically with regard to the burning of the inventories in the channel and timing of when some of the new orders and recovery of the ordering patterns would start that signals that the second half is likely to be better than the first half.

Column: In general seasonality as you know picks up better in the second half of the year as we start seeing the poor on ramp up.

Column: The p/e activity before the holiday build.

Ram Mayampurath: And then finally, the design in WINS converting to orders also signals that the second half will be better than our first half. Those are the three main indicators that signal that Q1 will be the low point. Q1 guidance will be the low point of the year, and we think the second half will be better than the first half. Colin?

Column: And then finally, the design wins converting to orders also signals that the second half will be better than our first half.

Column: Those are the three main indicators that signal of that.

Column: Q1 will be the low point Q1 guidance it will be the low point of the year and we think the second half will be better than the first half call. It yes.

Colin Gavea: Yeah, Craig, I'll add some more color to that, I think. I wanted to talk about the inventory piece first. We have been talking about that for quite a while, and I think the story really starts back in 2012.

Speaker Change: Yes, Craig I'll add some more color to that I think.

Speaker Change: I wanted to talk about the inventory piece first so we have been talking about that for quite a while and I think the story really starts back in 2021.

Colin Gavea: So back then, we were in the COVID snapback, and it was a real struggle for a lot of companies to get raw materials, and people could not produce what they wanted to produce or needed to produce for their customers. We certainly had a large backlog as the COVID snapback came in full force, and our backlog decreased a lot or increased a lot. As we got into 2022, our backlogs decreased, we were able to supply, and we saw companies really order a lot of inventory. They really mostly maxed and filled things out based on the fact that for the past two years, they hadn't been able to get inventory.

Speaker Change: No.

Speaker Change: Then we were in the Covid snapback and it was a real struggle for a lot of companies to get raw materials and people could not produce what they wanted to produce or needed to produce for their customers. So we certainly had a large backlog as the snapback came in in full force and.

Speaker Change: Our backlog decreased a lot our increased a lot.

Speaker Change: As we got into 2022, our backlog decreased we were able to supply and we saw companies really order a lot of inventory they really mostly maxed in fill things out based on the fact for the past two years that hadn't been able to get inventory.

Colin Gavea: And then as we have come into 2023, we found that there was a significant inventory hangover. We saw it at several different key customers where they ordered quite a lot of inventory in 22, anticipating to build a certain amount of vehicles in 22 and 23, and they built half the vehicles they thought, and their inventory lasted for 24 months or longer. And there was still some carryover into 2000 and 24.

Speaker Change: And then as we have come into 2023.

We found that there was a significant inventory hangover, we saw it in several different key customers, where they order quite a lot of inventory in 'twenty, two anticipating to build a certain amount of vehicles in 'twenty, two and 'twenty three and they build half the vehicles, they thought and their inventory lasted for 24 months or longer.

Speaker Change: And there are still some carryover into 2024, when we've hit this particular topic, particularly hard with our end customers and our customers' customers. The consensus. We are hearing is that these the inventory hangover from the Covid Snapback and then the actions taken when companies could supply again.

Colin Gavea: When we've hit this particular topic particularly hard with our end customers and their customers, the consensus we're hearing is that the inventory hangover from the COVID snapback and then the actions taken when companies can supply again will run out and come to normal levels around the middle of the year. There could be some put and takes in terms of what month it happens, but that has been a general consensus. So that just builds on a little bit on what Ram said. The other thing is China has not, okay, I can stop. Go ahead. No, go ahead and finish the point.

Speaker Change: We will run out and come to normal levels around the middle of the year there could be some puts and takes in terms of what month. It happens, but that hasnt been a general consensus so that just builds on a little bit with what Ron said. The other thing is China has not okay. I can stop go ahead.

Speaker Change: Go ahead and finish the point, yes, finally that the China, China issue, China really has not come back from when they changed their zero Covid policy and released everybody back into the workforce. There was an attempt at a bit of a stimulus in China.

Colin Gavea: Yeah, finally, the China issue. China really has not come back from when they changed their zero COVID policy and released everybody back into the workforce. There was an attempt at a bit of a stimulus in China in the second half of last year.

Speaker Change: The second half of last year and talking to folks in China, and having just traveled there they feel like it'll still be a few more months for that to hit and so we also see that as a factor to help improve things from an economic perspective in the second half of the year.

Colin Gavea: And talking to folks in China, and having just traveled there, they feel like it'll still be a few more months for that to hit. And so we also see that as a factor to help improve things from an economic perspective in the second half of the year. There's no doubt that China has been a downside surprise every single quarter over the last four, and materially so. I wanted to follow up on the inventory comment, Colin, and just stitch it together with a point that was made in the prepared remarks around some of the subsegment behavior.

Speaker Change: There is no doubt that China is spent on downside surprise every single quarter over the last four.

Speaker Change: Materially so.

Speaker Change: I wanted to follow up on the inventory comment Collyn just stitch it together with.

Speaker Change: Point that was made in the prepared remarks around some of the sub segment behavior. So we did see a rise in EV and each EV product sales in the fourth quarter. So are you sensing that inventory is much better positioned there than in some other areas may be more legacy ice.

Craig A. Ellis: We did see a rise in EV and HEV product sales in the fourth quarter. So are you sensing that inventory is much better positioned there than in some other areas, maybe more legacy ice-based automotive applications or general industrial? Help me understand the rise in sales there versus some of the things you're seeing with just broadly excessive inventory. I think we did, I mean EVHEV did have a good year in general.

Speaker Change: Spaced automotive applications or general industrial help me understand the ryzen sales there versus some of the things you're seeing but just broadly excess of inventory.

Speaker Change: I think we did on the EV HEV did have a good year in general I think they were up 31% year over year career amick.

Colin Gavea: I think they were up 31% year-over-year for Keramic and some other of our product lines. But, you know, that's the whole market. But, you know, what I would say is it's OEM-dependent.

Speaker Change: <unk> and some other of our product lines.

Speaker Change: But and that was the whole market as a matter of fact, but what I would say is it's OEM dependent.

Colin Gavea: So we have some programs with OEMs where we know their inventory is in good shape. We have others where things are still a bit backed up. And it'll be on a case-by-case basis.

Speaker Change: So we have some programs with Oems, where we know their inventory is in good shape, we have others, where things are still a bit backed up.

Speaker Change: And it'll be a case by case basis, and then I think the inventories also exist a bit in our general industrial space, where we had a lot of different end markets in that core business.

Colin Gavea: And then I think the inventories also exist a bit in our general industrial, where we had a lot of different end markets in that core business order more than they turned out to need in 2023. But it does feel like, with, as I mentioned, a lot of conversations and a lot of work in our IVP process that that inventory will be normalizing somewhat in the middle of. If I could, just one more, and since Larry's on the call, I'll direct it to him. So, Larry, nice to have you on board.

Speaker Change: <unk> more than they.

Speaker Change: It turned out to need in 2023, but it does feel like with as I mentioned, a lot of conversations and a lot of work and our IBP process that that inventory will be.

Normalizing somewhat in the middle of the year.

Speaker Change: Mhm.

Speaker Change: If I could just one more and.

Speaker Change: Larry on the call I'll direct it to him so Larry and nice to have you onboard.

Larry: You made a point about structural cost declines that were achieved last year and it certainly seemed like that was visible in and how gross margin played out.

Craig A. Ellis: You made a point about structural cost declines that were achieved last year, and it certainly seemed like that was visible in how gross margin played out through the year. The question is this, are you able to quantify how significant those were in 2023? And what should investors expect would be possible for all the initiatives that you have in place for 2024? Thank you. Yeah, thanks, Craig. Good to talk to you.

Larry: Through the year. The question is this are you able to quantify how significant those were in 2023.

Larry: And what should investors expect would be possible for all of the initiatives that you have in place for 2024. Thank you.

Speaker Change: Yeah. Thanks, Craig good to talk to you I think that when you think about the year over year productivity improvements.

Larry Schmid: I think that when you think about the year-over-year productivity improvements, you can look at 2024 being fairly similar to what we did in 2023. And just to drill a little bit more there, there's more work to do in the three major buckets. So in the procurement space for direct and indirect procurement, we've still got some more opportunities there that we continue to pursue. In the manufacturing space, there are about four or five different areas, not to get too lengthy into that, but we continue to also drive improvements. And then, of course, logistics will continue to play in that space as well. So similarly, the areas that we focused on in 23 are going to continue to focus on. We're getting a little bit further into the heavy lifting now, but we see similar opportunities for 23. And would they flow into the model gradually through the year, Larry?

Speaker Change: You can look at 2024 being fairly similar with what we did in 2023.

Speaker Change: And just to drill a little bit more there there's more work to do in the three major buckets.

Speaker Change: So in the procurement space for direct and indirect we've still got some more.

Speaker Change: Opportunities there that we continue to pursue.

Speaker Change: In the manufacturing space, there are about four or five different areas not to get too lengthy into that but we continue to also drive improvements and then of course logistics will continue to play in that space as well. So similarly, the areas that we focused on in 'twenty three we're going to continue to focus on we're getting a little bit further into the heavy lifting now.

Speaker Change: But we see similar opportunities for 'twenty four.

Speaker Change: And would they plug into the model gradually through the year, Larry or is there anything that would be more of a step function change in the three areas that youre really targeting and if so at what point in the year should we expect to see that.

Craig A. Ellis: Or is there anything that would be more of a step function change in the three areas that you're really targeting? And if so, at what point in the year should we expect to see the results? So, so I can take that, Craig. You know, if the three areas of focus continue to remain, the operational improvements, just productivity in the plants, footprint consolidation, just plant excellence, manufacturing excellence, procurement savings being number two, and improvements in design being number three. You've seen a lot of improvement from the first two activities so far. And at a four-year run rate, we saw close to 200 basis points of improvements in our margins, maybe in the turning to the second half, third quarter in particular.

Larry: So I can take that Greg.

Greg: The three areas of focus continue to remain.

Greg: The operational improvements to productivity in the plant footprint consolidation.

Greg: Plant excellent.

Greg: Manufacturing excellence procurement seeing savings being number two and improvements from design being number three you've seen a lot of improvement from the first two activities.

Greg: So far in a full year run rate, we saw close to 200 basis points of improvement in our margins maybe in the turning to second half third quarter input.

Greg: In particular, we expect some of that activity to Larry's point to continue in the future. So we will be making additional cost improvements.

Ram Mayampurath: We expect some of that activity, to Larry's point, to continue in the future, so we will be making additional cost improvements. But the big step change will come from the top line coming back. So, like we have said before, our path back to 38 to 40% remains, or that remains our target. 70% of that from where we finished in Q3, for example, which is what we expect would have been Q4, if we had a similar top line, will come from volume improvements and 30% from additional costs and productivity. I got it.

Greg: But the big step change will come from the top line coming back.

Greg: So like we've said before.

Greg: Back to a 38% to 40% remains our that remains our target.

Greg: 70% of that from where we finished in Q3 for example, which is what we expect would have been Q4, if we had similar top lines.

Greg: Will come from volume improvements and 30% from additional cost and productivity efficiencies.

Speaker Change: Got it thanks team.

Craig A. Ellis: Thanks, team. Thank you. The next question is coming from Will Gilea from CGS Security. Your line is now: Hi, this is Will Gildea from CGS Security on behalf of Dan Moore.

Speaker Change: Thank you. Our next question is coming from will <unk> from CJS Securities. Your line is now live.

Will: Hi, This is will go Dave for Dan Moore, Thanks for taking the questions today.

Will Gilea: Thanks for taking questions today. Industrial tends to get less attention, but it still represents 30% of your total revenue. Could you talk about the pipeline of opportunities for new products or new business wins in that segment, and what is your confidence that we will return to GDP plus type growth over the next 12 to 24 months?

Will: Industrial tends to get less attention, but still represents 30% of your total revenue could you talk about the pipeline of opportunities for new products.

Will: Or new business wins in that segment and what is your confidence that.

Will: We will return to GDP plus type growth over the next 12 months to 24 months.

Speaker Change: So I can take that so the general industrial segment does have many end market segments, where we've had good growth and we just highlighted a key program win.

Colin Gavea: So the general industrial segment does have many end market segments where we've had good growth, and we just highlighted a key program win in this past call that came out of this segment in the medical area. When you think about general industrial for our business, it's medical, it's oil and gas, semiconductor, HVAC, construction, food production, and we continually feel very good about several of the design wins we've had with our existing technology and even with our newly acquired technology from Silicone Engineering. But overall, some of these markets still remain sluggish, such as wireless communication, to keep that market from growing and having it maintain a flattish trajectory. In terms of the comeback, we look very closely at a certain index that, really, I think is a good proxy for this piece of our business. It's the Purchasing Manufacturers Index.

Speaker Change: In this past call that came out of this segment in the medical area. When you think about general industrial for our business.

Speaker Change: It's medical it's oil and gas semiconductor HVAC construction actually food production.

Speaker Change: And we continually feel very good about several of the design wins, we've had with our existing technology and even with our newly acquired technology from Silicon Engineering.

Speaker Change: But overall some of these markets still remained sluggish such as wireless communications to keep that market from growing and having it maintain a flattish trajectory in terms of the comeback.

Speaker Change: We look very closely at a certain index that really I think is a good proxy for this piece of our business. It's the purchasing manager purchasing manufacturers index in the U S.

Colin Gavea: In the U.S., it spent 15 months below 50, which indicates a contracting economy. The Eurozone is 19 months below 50, again, indicating a contracting economy. We know that Germany is, in fact, in a recession. It's the largest customer, excuse me, largest country for us in terms of sales. And typically, what happens in Germany drives Europe.

Speaker Change: <unk> 15 months below 50, which indicates a contracting economy and.

Speaker Change: The Eurozone is 19 months below 50, again, indicating a contracting economy, we know that Germany is in fact in a recession.

Speaker Change: The largest customer excuse me largest country for us in terms of sales and typically what happens in Germany drives Europe and this seems to be the case in terms of Europe's muted growth or in fact contraction in many areas and then for China that really has been no real recovery they've been going sideways.

Colin Gavea: And this seems to be the case in terms of Europe's muted growth or, in fact, contraction in many areas. And then for China, there really has been no real recovery. They've been going sideways since the lifting of the COVID, the COVID restrictions. So in terms of when do we feel like these markets will come back? Well, even though these indices are below 50.

Speaker Change: The lifting of the Covid.

The COVID-19 restrictions so in terms of when do we feel like these markets will come back well even though.

Speaker Change: These indices are below 50, we've seen steady improvement in both Europe and in U S and so they seem to be working towards a place where they can be back on track at some point, which we anticipate sometime this year and same for China, I think a big piece of China's turnaround will result from some of the stimulus.

Colin Gavea: We've seen steady improvement in both Europe and in the US, and so they seem to be working towards a place where they can be back on track at some point, which we anticipate sometime this year. And the same for China.

Colin Gavea: I think a big piece of China's turnaround will result from some of the stimulus work they did prior to the end of last year, which takes around six to eight months to really get some traction. And perhaps they might do something else also. The other thing is, we spend a lot of time talking with our customers, and they feel the same thing. So, as they feel like. It was quite a tough year last year and a tough start to this year, you know; they're seeing the same thing.

Speaker Change: Work they have done prior to the end of last year, which takes around six to eight months too.

Speaker Change: I think really get some traction and perhaps they might do something else also.

Speaker Change: Other thing is we spend a lot of time talking with our customers and they feel the same thing so as they feel like it's been quite a tough year last year and a tough start to this year.

Speaker Change: We're seeing the same thing so we've done a lot of calibration. So we're looking for improvement in the second half of the year.

Colin Gavea: So we've done a lot of calibration, so we're looking for improvement in the second half of the year. As Ram mentioned in his prepared remarks, we feel like Q1 will be the low point, you know, or the first low point of our results in 2024, and we're preparing for improvement in the second half. Thank you, that's super helpful. And another question: if demand does not improve over the next quarter or two, are there additional cost reduction actions that you're prepared to take to improve margins and profitability relative to your Q1 guidance? I mean, I can start and take that.

Speaker Change: Rob mentioned in his prepared remarks, we feel like Q1 will be the low point.

Speaker Change: Our low point of our results in 2024, and we're preparing for improvement in the second half of the year.

Speaker Change: Thank you Super helpful and another question if demand does not improve over the next quarter or two so there are additional cost reduction actions that you are prepared to take to improve margins and profitability relative to your Q1 guidance.

Speaker Change: I mean, I can start and take that so last year, we did take some aggressive action on cost reductions to marry up our operations and organization versus the demand economy, and so that is always an option we can pursue.

Colin Gavea: So last year, we did take some aggressive action on cost reductions to marry up our operations, an organization versus the demand economy. And so that is always an option we can pursue. But in our opinion at this point, we really feel like there'll be some recovery, and we want to be prepared to capture it. If that doesn't happen, then we'll look at several different options that we could take, which might include, you know, something like you just did. But we're optimistic that things will get better in the middle of the year and go forward. We also have a lot of CapEx in flight, growth CapEx, along with operations and maintenance CapEx.

Speaker Change: In our opinion at this point, we really feel like there'll be some recovery and we want to be prepared to capture it.

Speaker Change: That doesn't happen then we will look at several different options that we could take which might include.

Speaker Change: Something like you just mentioned, but we're optimistic that things will get better in the middle of the year and go forward.

Speaker Change: Also have a lot of capex in flight growth Capex, along with operations and maintenance Capex and amount is literally just to make a comment where we've put in a lot of scenarios, where if things are slowing more than we thought or not ramping we can pull the trigger and pushed out some things Larry would you like to continue with this yes.

Colin Gavea: And I might ask Larry just to make a comment about how we've put in a lot of scenarios where, if things are slowing more than we thought or not ramping up, we can pull the trigger and push out some things. Larry, would you like to continue with this? Yeah.

Larry Schmid: So, Will, to build on what Colin said, I think you hit the right things. I think we'll continue to, of course, drive some of the productivity improvements we talked about. That's paramount, and we want to maintain that as a priority in the procurement and manufacturing space. We will obviously take action to maintain very, very close control of discretionary spending, and that could include some headcount. But we want to be careful about how we manage that with respect to potential snapbacks.

Larry: So we'll I think that to build on what Colin said I think you hit the right things I think we will continue to of course drive some of the productivity improvements we talked about that's paramount and we want to maintain that as a priority and that's in the procurement and manufacturing space.

Larry: We will obviously take action to maintain very very close control of discretionary spending and that could include some head count but.

Larry: But we want to be careful about how we manage that with respect to potential snapback.

Larry Schmid: And as Colin also alluded, we've actually developed some scenario planning where we will start to take a look now at if we need to reduce capital, where will that be and in what order. So we've prioritized that, and we're talking with the businesses now there. Oh, okay. Very helpful. Thank you very much for taking my question. It is our pleasure. Thank you. As a reminder, that's star number one to be placed in the question queue.

Larry: As Colin also alluded we've actually developed some scenario planning, where we will start to take a look now at.

Larry: If we need to reduce capital where will that be and in what order. So we prioritize that and we're talking with the businesses now there.

Larry: Okay.

Speaker Change: Okay very helpful. Thank you very much for taking my questions.

Speaker Change: Our pleasure. Thank you. Thanks.

Speaker Change: As a reminder, Thats star one to be placed in the question queue.

Operator: One moment, please, while we pull for further questions. We've reached the end of our question and answer session. I'd like to turn the floor back over to anyone with further or closing comments. Thank you everyone for joining us today, and we look forward to catching up with some folks here over the next several days in Callback. And in the meantime, have a good evening. Thanks for joining us. Thank you. That does conclude today's teleconference and webcast. You may disconnect your line at this time and have a wonderful day. We thank you for your participation today.

Speaker Change: Hello, Milan Paisley poll for further questions.

Speaker Change: We reached end of our question and answer session I'd like to turn the floor back over for any further or closing comments.

Speaker Change: Thank you everyone for joining today and we look forward to catching up with some folks here over the next several days and callbacks.

Speaker Change: In the meantime have a good evening thanks for joining.

Speaker Change: Thank you that does conclude today's teleconference and webcast you may disconnect. Your line at this time and have a wonderful day, we thank you for your participation today.