Q1 2024 Materion Corp Earnings Call

Greetings welcome to the materials first quarter 2024 earnings conference call. At this time, all participants are in a listen only mode.

Operator: Reading. Welcome to the Materion first quarter 2024 earnings conference call. At this time, all participants are in a listen only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note that this conference is being recorded. I will now turn the conference over to your host, Kyle Kelleher, Director of Investor Relations and Corporate FP&A. You may begin.

Operator: A question and answer session will follow the formal presentation.

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

Operator: Please note this conference is being recorded.

Operator: I will now turn the conference over to your host Tayo Kelleher Director Investor Relations and corporate S. P. N. A you may begin.

Kyle Kelleher: Good morning, and thank you for joining us on our first quarter 2024 earnings conference call. This is Kyle Kelleher, Director of Investor Relations and Corporate FP&A. Before we begin our remarks this morning, I would like to point out that we have posted material on the company's website that we will reference as part of today's review of the quarterly results. You can access the materials through the download feature on the earnings call webcast. With me today is Jugal Vijayvargiya, President and Chief Executive Officer, and Shelly Chadwick, Vice President and Chief Financial Officer.

Operator: Good morning, and thank you for joining us on our first quarter of 2024 earnings Conference call. This is Pat Gallagher director Investor Relations and corporate SG&A before we begin our remarks. This morning, I would like to point out that we've posted materials on the company's website that we will reference as part of today's review of the quarterly result.

Kyle Kelleher: You can access the material through the download feature on the earnings call webcast link.

Kyle Kelleher: With me today is jugal, <unk>, President and Chief Executive Officer, and Shelly Chadwick, Vice President and Chief Financial Officer.

Kyle Kelleher: Our format for today's conference call is as follows. Jugal will provide opening comments on the quarter. Following Jugal, Shelly will review the detailed financial results for the quarter in addition to discussing our expectations for the remainder of 2024. We will then open up the call to questions.

Jugal K. Vijayvargiya: Our format for today's conference call is as follows jugal will provide opening comments on the quarter. Following jugal Shelly who will review the detailed financial results for the quarter. In addition to discussing our expectations for the remainder of 2024. We will then open up the call for questions let.

Kyle Kelleher: Let me remind investors that any forward-looking statements made in the presentation, including those in the outlook section and during the question and answer portion, are based on current expectations. The company's actual performance may materially differ from that contemplated by the forward-looking statements as a result of a variety of factors. Those factors are listed in the earnings press release we issued yesterday. 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 4th through 8th of the price range. 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.

Kyle Kelleher: 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.

Kyle Kelleher: 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 listed in the earnings press release, we issued yesterday.

Kyle Kelleher: Additionally comments regarding earnings before interest taxes, depreciation depletion and amortization net income and earnings per share reflect the adjusted GAAP numbers shown in attachment fourth grade of the press release.

Kyle Kelleher: Adjustments are made in the prior year periods 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.

Kyle Kelleher: And now, I'll turn over the call to Jugal for his comment.

Jugal K. Vijayvargiya: Thanks, Kyle, and welcome, everybody. It's nice to be with you today to discuss our first quarter performance, as well as our current outlook for 2025. Our results for the first quarter fell far short of our expectations, while we were expecting to be roughly in line with Q1 of 23. Some operational challenges, mainly in our performance materials business, and some pockets of slowing and market demand led to lower sales and earnings. I'm proud of our team's quick actions to mitigate these short-term headwinds, delivering roughly flat EBITDA margins year-over-year despite a nearly $40 million sales decline.

Jugal: Thanks, Kyle and welcome everyone.

Jugal K. Vijayvargiya: It's nice to be with you today to discuss our first quarter performance as well as our current outlook for 2024.

Jugal K. Vijayvargiya: Our results for the first quarter fell far short of our expectations.

Jugal K. Vijayvargiya: While we were expecting to be roughly in line with Q1 of 'twenty three some operational challenges mainly in our performance materials business and some pockets of slowing end market demand led to lower sales and earnings.

Jugal K. Vijayvargiya: I'm proud of our team's quick actions to mitigate the short term headwinds delivering roughly flat EBITDA margins year over year, despite a nearly $40 million sales decline.

Jugal K. Vijayvargiya: We have taken a number of targeted cost actions that are benefiting not only our short-term results but are providing longer-term structural improvements that will enhance profitability as key markets recover. Looking more closely at sales performance, continued semiconductor weakness represented roughly half of the year-over-year decline.

Jugal K. Vijayvargiya: We have taken a number of targeted cost actions that are benefiting not only our short term results, but are providing longer term structural improvements that will enhance profitability as key markets recover.

Jugal K. Vijayvargiya: Looking more closely at the sales performance.

Jugal K. Vijayvargiya: <unk> semiconductor weakness represented roughly half of the year over year decline.

Jugal K. Vijayvargiya: In addition, the expected inventory destocking of our beryllium nickel product used in non-residential construction had a meaningful impact. Our results were further limited by delayed shipments due to operational challenges, mainly performance maturity. While we had anticipated the softness and somber and marked, Demand for commercial aerospace and automotive was softer than we expected due to reduced aircraft build rates and slowing growth for electric vehicles. Airplane deliveries were down significantly year over year in the first quarter and are expected to be depressed for the year.

Jugal K. Vijayvargiya: In addition, the expected inventory destocking of our beryllium nickel product used in nonresidential construction had a meaningful impact.

Jugal K. Vijayvargiya: Our results were further limited by delayed shipments due to the operational challenges mainly in performance materials.

Jugal K. Vijayvargiya: While we had anticipated the softness in some of our end markets demand in.

Jugal K. Vijayvargiya: In commercial aerospace and automotive was softer than we expected due to reduced aircraft build rates and slowing growth for electric vehicles.

Jugal K. Vijayvargiya: Airplane deliveries were down significantly year over year in the first quarter and are expected to be depressed for the year.

Jugal K. Vijayvargiya: Upsetting these declines, we saw strong growth across space and defense, where we are providing critical materials for space propulsion systems and on a growing number of defense platforms. Short-term operational challenges further impacted sales on a temporary basis in the quarter. Addressing some yield and equipment issues, our operations team responded quickly to address the issues and return our assets to normal output levels. Operational excellence initiatives have been core to our performance as we deal with market headwinds and other short-term challenges.

Jugal K. Vijayvargiya: Offsetting these declines we saw strong growth across space and defense, where we are providing critical materials for space propulsion systems and on a growing number of defense platforms.

Jugal K. Vijayvargiya: Short term operational challenges further impacted sales on a temporary basis in the quarter.

Jugal K. Vijayvargiya: Addressing some yield and equipment issues. Our operations team responded quickly to address the issues and retire assets to normal output levels.

Jugal K. Vijayvargiya: Operational excellence initiatives have been core to our performance as we deal with market headwinds and other short term challenges.

Jugal K. Vijayvargiya: We have taken multiple targeted actions to adjust our cost structure while continuing to invest in the areas that drive organic growth for our business. These important moves have helped to deliver strong margin performance in a softer end market environment. Despite the decline in sales, our overall EBITDA margin for Q1 was roughly flat on a year-over-year basis, representing a strong 20% decremental margin.

Jugal K. Vijayvargiya: We have taken multiple targeted actions to adjust our cost structure, while continuing to invest in the areas that drive organic growth for our business.

Jugal K. Vijayvargiya: These important moves have helped to deliver strong margin performance and a softer end market environment.

Jugal K. Vijayvargiya: Despite the decline in sales our overall EBITDA margin for Q1 was roughly flat on a year over year basis, representing.

Jugal K. Vijayvargiya: Representing a strong 20% decremental margin.

Jugal K. Vijayvargiya: Our laser focus on driving margin improvement in electronic materials delivered EBITDA expansion of approximately 500 basis points in the quarter, even with a 25% VHL. This strong performance leaves us extremely well positioned to drive even higher levels of performance as markets recover. Our focus on managing the business through some short-term headwinds is complemented by our relentless efforts to invest for the future, as we continue to seed the pipeline for long-term organic growth. We remain confident in our strategy.

Jugal K. Vijayvargiya: Our laser focus on driving margin improvement and electronic materials delivered EBITDA expansion of approximately 500 basis points in the quarter, even with a 25% VA sales declined.

Jugal K. Vijayvargiya: This strong performance leaves us extremely well positioned to drive even higher levels of performance as markets recover.

Jugal K. Vijayvargiya: Our focus on managing the business through some short term headwinds is complemented by our relentless efforts to invest for the future as we continue to see the pipeline for long term organic growth.

Jugal K. Vijayvargiya: We remain confident in our strategy.

Jugal K. Vijayvargiya: We believe that our robust organic pipeline and portfolio of cost-improvement initiatives will help drive earnings growth for the balance of the year. We expect to see continued strength in the space and defense markets as we move through the year. Many of our advanced materials are engineered to perform in the harshest environments, making them an ideal fit for these demanding applications.

Jugal K. Vijayvargiya: We believe that our robust organic pipeline and portfolio of cost improvement initiatives will help drive earnings growth for the balance of the year.

Jugal K. Vijayvargiya: We expect to see continued strength in our space and defense markets as we move through the year.

Jugal K. Vijayvargiya: Many of our advanced materials are engineer to perform in the harshest environments.

Jugal K. Vijayvargiya: Making them an ideal fit for these demanding applications.

Jugal K. Vijayvargiya: New defense business wins, in addition to the previously announced R&D partnerships for various government-funded projects, further solidify our position as a key supplier for advanced materials across aerospace, defense, and new energy markets. In the semi-market, near-term growth in memory and logic chips used in high-performance computing is expected to drive the rebound in our sales this year, with demand for power and industrial chips coming back later in the cycle. We believe Q1 was the bottom of the downturn.

Jugal K. Vijayvargiya: New defense business wins in addition to the previously announced R&D partnerships for various government funded projects further solidify our position as a key supplier for advanced materials across aerospace defense and new energy markets.

Jugal K. Vijayvargiya: In the semi market near term growth in memory and logic chips used in high performance computing is expected to drive the rebound in our sales this year.

Jugal K. Vijayvargiya: The demand for power and industrial chips coming back later in the cycle.

Jugal K. Vijayvargiya: We believe Q1 was the bottom of the downturn for us as we see order rates picking up coming into the second quarter, giving us confidence that our topline will continue to improve as we move through the year.

Jugal K. Vijayvargiya: As we see order rates picking up coming into the second quarter, giving us confidence that our top line will continue to improve as we move through the year. The industry is continuing to prepare for the global shift toward broader AI adoption, and Materion is a vital part of that. We continue to advance our broad portfolio of semiconductor products and are investing to increase capacity in key production areas to ensure we are ready to support that increased demand.

Jugal K. Vijayvargiya: The industry is continuing to prepare for the global shift towards broader AI adoption and material is a vital part of that supply chain.

Jugal K. Vijayvargiya: We continue to advance our broad portfolio of semiconductor products and are investing to increase capacity and keep production areas to ensure we are ready to support that increased demand.

Jugal K. Vijayvargiya: The precision clad strip project continues to be a significant driver of organic growth for us, and our partnership with our customer is strong. The expansion of our new facility remains on track to start up late this year. As the customer's global rollout progresses, and our teams have driven higher levels of output and performance at our new facility, we will now begin to ramp down production at our legacy facility. Additionally, our customer has indicated an adjustment to their inventory levels for the second half of the year, which will impact our shipments.

Jugal K. Vijayvargiya: The precision Kladstrup project continues to be a significant driver of organic growth for us and our partnership with our customer is strong the expansion of our new facility remains on track to startup late this year.

Jugal K. Vijayvargiya: As the customer's global rollout progresses, and our teams have driven higher levels of output and performance at our new facility.

Jugal K. Vijayvargiya: We will now begin to ramp down production and our legacy facility.

Jugal K. Vijayvargiya: Our customers indicated an adjustment to their inventory levels for the second half of the year, which will impact our shipments.

Jugal K. Vijayvargiya: This adjustment does not correlate to weaker end product sales as the customer's global rollout remains on track and their projections support a robust long-term outlook for our business. Our team has done an exceptional job of steering the company through some short-term challenges while maintaining a longer-term focus that will further position Materion for sustainable growth and value creation. With the start of the recovery in SEMI and improved operational performance, we expect to deliver a much stronger Q2, with additional step-ups in the third and fourth quarters, resulting in another record year for Materion in 2024. Now, I will turn the call over to Shelly to cover more details on the finances.

Jugal K. Vijayvargiya: This adjustment does not correlate to weaker end product sales as our customers global rollout remains on track and their projections to support a robust long term outlook for our business.

Shelly: Our team has done an exceptional job of steering the company through some short term challenges, while maintaining a longer term focus that will further position metairie on for sustainable growth and value creation.

Shelly: With the start of the recovery in semi and improved operational performance, we expect to deliver a much stronger Q2.

Shelly: With additional step ups in the third and fourth quarter, resulting in another record year for materials in 2024.

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

Shelly M. Chadwick: Thanks Jugal and good morning everyone. During my comments, I will reference the slides posted on our website last night, starting on slide 9. In the first quarter, value-added sales, which exclude the impact of pass-through precious metal costs, were $257.8 million, down 14% from the prior year. Despite strength in aerospace and defense and consumer electronics, our sales were negatively impacted by declines in semiconductor and automotive, plus the expected inventory correction for our non-residential construction material. Additionally, as Jugal commented, some temporary operational challenges limited our shipments, particularly for performance materials.

Shelly: Thank you Bill and good morning, everyone. During my comments I will reference the slides posted on our website last night starting on slide one.

Shelly M. Chadwick: In the first quarter value added sales, which exclude the impact of pass through precious metal cost.

Shelly M. Chadwick: $257 8 million down 14% from prior year.

Shelly M. Chadwick: Despite strength in aerospace and defense and consumer electronics, our sales were negatively impacted by declines in semiconductor and automotive plus the expected inventory correction for our nonresidential construction material.

Shelly M. Chadwick: Additionally, as Joe commented some temporary operational challenges limited our shipments, particularly in performance materials.

Shelly M. Chadwick: Our teams have made meaningful progress in mitigating these challenges and expect more normal levels of output in the second quarter.

Shelly M. Chadwick: When looking at earnings per share we delivered adjusted earnings of 96 cents in the first quarter down 28% from prior year.

Shelly M. Chadwick: Our teams have made meaningful progress in mitigating these challenges and expect more normal levels of output in the second quarter. When looking at earnings per share, we delivered adjusted earnings of $0.96 in the first quarter, down 28% from the prior year. Moving to slide 10, adjusted EBITDA in the quarter was $45.2 million, 17.5% of value added sales, down 15% from the prior year with roughly flat margins. Despite the significant sales decline, the strong margin performance was driven by positive price and the benefit of our cost improvement initiative, partially offsetting the volume decline.

Shelly M. Chadwick: Moving to slide 10, adjusted EBITDA in the quarter was $45 2 million 17, 5% of value added sales down 15% from the prior year with roughly flat margins.

Shelly M. Chadwick: Despite the significant sales decline the strong margin performance was driven by positive pricing and the benefit of our cost improvement initiatives, partially offsetting the volume decline.

Shelly M. Chadwick: Moving to slide 11, let me now review first quarter performance by business segment. Starting with performance materials, value added sales were $155.6 million, down 7% from the prior year. This year-over-year sales drop was driven by lower demand in automotive, commercial aerospace, and the non-residential construction application within the industry. Space and defense remains a bright spot, with significant contribution from the emerging space market and strong defense demand, more than offsetting declines in commercial aerospace.

Speaker Change: Moving to Slide 11, let me now review first quarter performance by business segment.

Shelly M. Chadwick: Starting with performance materials value added sales were $155 6 million down 7% from prior year.

Shelly M. Chadwick: This year over year sales drop was driven by lower demand in automotive commercial aerospace and nonresidential construction applications within industrial.

Shelly M. Chadwick: Space and defense remains a bright spot with significant contribution from the emerging space market and strong defense demand more than offsetting declines in commercial aerospace.

Shelly M. Chadwick: EBITDA excluding special items, $35.7 million, or 22.9% of value-added sales, down 17% from the prior year period. This decrease was driven by lower volume, partially offset by targeted cost improvement initiatives. Moving to the outlook, we expect space and defense to remain strong throughout the balance of 2024 and again expect the operational challenges to improve as we move into the second. Next, turning to electronic materials on slide 12.

Shelly M. Chadwick: EBITDA, excluding special items was $35 7 million or 22, 9% of value added sales.

Shelly M. Chadwick: Down 17% from the prior year period.

Shelly M. Chadwick: This decrease was driven by the lower volume, partially offset by targeted cost improvement initiatives.

Shelly M. Chadwick: Moving to the outlook, we expect space and defense remains strong throughout the balance of 'twenty 'twenty four and again expect the operational challenges to improve as we move into the second quarter.

Shelly M. Chadwick: Value added sales were $77.6 million, down 25% compared to the prior year, as a result of continued weakness in the semiconductor market. Evita excluding special items with $14.5 million, or 18.7% of value added sales in the quarter. Despite significantly lower volumes, operational performance and cost improvement initiatives helped mitigate the semiconductor slowdown, which drove approximately 500 basis points of margin expansion year on year. As we look out to the rest of the year, we expect a gradual semiconductor recovery from Q1, with sequential improvement as we move through the balance of the year.

Shelly M. Chadwick: Next turning to electronic materials on slide 12 value added sales were $77 6 million down 25% compared to the prior year as a result of continued weakness in the semiconductor market.

Shelly M. Chadwick: EBITDA, excluding special items was $14 5 million or 18, 7% of value added sales in the quarter.

Shelly M. Chadwick: Despite significantly lower volume operational performance and cost improvement initiatives helped mitigate the semiconductor slowdown, which drove approximately 500 basis points of margin expansion year on year.

Shelly M. Chadwick: As we look out to the rest of the year, we expect a gradual semiconductor recovery from Q1 with sequential improvement as we move through the balance of the year.

Shelly M. Chadwick: Finally, turning to the precision optics segment on slide 13, value-added sales were $24.6 million, down 8% compared to the prior year. This year-on-year decrease was mainly driven by reduced demand in industrial and automotive, partially offset by strength in space and defense. Precision optics also saw some operational challenges, which delayed some shipments out of Q1. Ivica, excluding special items, with 0.4 million or 1.8% of value added sales. The decrease in volume was a significant driver of this year-over-year decline, in addition to unfavorable products.

Shelly M. Chadwick: Finally, turning to precision optics segment on slide 13 value added sales were $24 6 million down 8% compared to the prior year. This.

Shelly M. Chadwick: This year on year decrease was mainly driven by reduced demand in industrial and automotive, partially offset by strength in space and defense.

Shelly M. Chadwick: Precision optics also saw some operational challenges, which delayed some shipments out of Q1.

Shelly M. Chadwick: EBITDA, excluding special items was <unk> 4 million or one 8% of value added sales.

Shelly M. Chadwick: The decrease in volume was a significant driver of its year over year decline in addition to unfavorable product mix.

Shelly M. Chadwick: Looking out over the next few quarters, we expect a meaningful step-up in margin performance in Q2, with stronger demand and continued focus on cost improvement initiatives. Moving now to cash, debt, and liquidity on slide 14. We ended the quarter with a net debt position of approximately $462 million and approximately $130 million of available capacity on the company's existing credit facility.

Shelly M. Chadwick: Looking out over the next few quarters do you expect a meaningful step up in margin performance in Q2 with stronger demand and continued focus on cost improvement initiatives.

Shelly M. Chadwick: Moving now to cash debt and liquidity on slide 14.

Shelly M. Chadwick: We ended the quarter with a net debt position of approximately $462 million and approximately $130 million of available capacity on the company's existing credit facility.

Shelly M. Chadwick: Lastly, let me transition to slide 15 and address the full year outlook. Despite the slow start to the year, we expect to deliver another year of record results with our organic and operational initiatives more than offsetting some market slowdowns. Since our initial buy for 2024, the outlook for commercial aerospace and electric vehicles has softened, and as Jugal mentioned, we are expecting some inventory correction from our precision-clad strip customer in the back half of the year.

Shelly M. Chadwick: Our leverage at two two times, maybe just slightly below the midpoint of our target range.

Shelly M. Chadwick: Lastly, let me transition to slide 15, and address the full year outlook.

Shelly M. Chadwick: Despite the slow start to the year, we expect to deliver another year of record results with our organic and operational initiatives more than offsetting some market softness.

Shelly M. Chadwick: Since our initial guide for 2020 for the outlook for commercial aerospace and electric vehicles has softened and as Yuval mentioned, we are expecting some inventory correction from our precision plaid stripped customer in the back half of the year.

Shelly M. Chadwick: We also expect slightly higher interest expense based on the current rate outlook.

Shelly M. Chadwick: We also expect slightly higher interest expense based on the current rate outlook. While we will work to mitigate most of these headwinds, we are adjusting our full year guide to a wider range of $5.60 to $6.20 adjusted earnings per share, a 5% increase from the midpoint versus the prior year. Despite the mixed market environment, Materion remains poised to deliver another year of strong execution and record results in 2024. This concludes our prepared remarks. We will now open the line for questions.

Speaker Change: Well, we will work to mitigate much of these headwinds we are adjusting our full year guide to a wider range of $5 60 to $6 20 adjusted earnings per share a 5% increase from the midpoint versus the prior year.

Shelly M. Chadwick: Despite the mixed market environment material remains poised to deliver another year of strong execution and record results in 2024.

Shelly M. Chadwick: This concludes our prepared remarks, we will now open the line for questions.

Operator: Thank you. At this time, we will be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for questions. Our first question is from Phil Gibbs from KeyBank. Fill your line is live; you may proceed.

Speaker Change: Thank you at this time, we will be conducting a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad.

Philip Ross Gibbs: 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 for.

Philip Ross Gibbs: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys, one moment, please while we poll for questions.

Operator: Yeah.

Operator: Our first question is coming from Phil Gibbs from Keybanc.

Philip Ross Gibbs: Phil Your line is life you May proceed.

Philip Ross Gibbs: Hey, Thank you good morning.

Philip Ross Gibbs: Good morning Bill.

Philip Ross Gibbs: I'm glad you teased up the message here a little bit. I, I, I hear you talking about inventory reductions at the customer and ramping down as a legacy facility, but you're also saying nothing has changed in terms of long-term demand. And you still plan on phase 2 being a meaningful contributor in the future. Can you just help maybe lay out the land a little bit better here for us? It seems to have some things moving in different directions. Yeah,

Philip Ross Gibbs: I'm glad he sees off the message here a little bit.

Philip Ross Gibbs: Did I hear you talking about inventory reductions at the customer and ramping down of the legacy facility, but you're also saying nothing changed on long term demand and you still plan on phase two being a meaningful contributor in the future.

Philip Ross Gibbs: So.

Philip Ross Gibbs: Jenny can you just help maybe lay it lay out the land a little bit better here for us. It seems it seems to have some things moving in different directions.

Jugal K. Vijayvargiya: Well, Phil, as you know, this program has been, you know, really a great success for us over the last couple of years. I mean, our team has just done a fantastic job of driving yield improvement and operational improvements in our new facility, while we continue to deliver from our legacy facility. I think what we're talking about is really a short-term issue where the customer has continued to look at, if they've gone through the launch phase, how do they make sure that they've got the right levels of inventory to support their global rollout. So, that's one part of it.

Philip Ross Gibbs: Well, Phil as you know this program has been really a great success for us over the last couple of years I mean, our team has just done a fantastic job.

Jugal K. Vijayvargiya: Driving yield improvements operational improvements in our new facility, while we continue to deliver from our legacy facility.

Jugal K. Vijayvargiya: I think what we're talking about is it really a short term.

Jugal K. Vijayvargiya: Issue, where the customer has continued to look at if they gone through the launch phase how do they make sure that they've got the right levels of inventory.

Jugal K. Vijayvargiya: To support their global rollout. So that's one part of it I think the second part of it is just the great improvements that frankly, our team has made on our on our new facility that has allowed us to deliver a at a rate that.

Jugal K. Vijayvargiya: I think the second part of it is just the great improvements that, frankly, our team has made in our new facility that have allowed us to deliver at a rate that I think is very, very satisfactory to the customer. So, you know, the combination of that, I mean, they're just looking at the back half of the year and looking at making some adjustments to make sure that they're properly positioned. And then we would expect that in the new year, come 2025, because their demand will continue to be robust, we will continue to support them in a meaningful way.

Jugal K. Vijayvargiya: That I think is very very satisfactory to the customer. So the combination of that I mean, they're just looking at the back half of the year and looking at making some adjustments to make sure that they're properly positioned and then we would expect that in the new year from 2025, because their demand will continue to be robust and we will continue to support them in a meaningful way.

Jugal K. Vijayvargiya: So, I think all of these things actually tie together, and that's why we say phase two is on track. It's going to contribute into 2025. We've been saying that, I think, all along, that, you know, it would be late 2024, really nothing of substance or meaningful delivery here at the end of the year, but really contributing into 2025, and at the same time, making sure that we can continue to support phase one.

Jugal K. Vijayvargiya: So I think all of these things actually tied together.

Jugal K. Vijayvargiya: And that's why we say the.

Jugal K. Vijayvargiya: Phase II is on track it is going to contribute into the 2025, we have been saying that I think all along that.

Jugal K. Vijayvargiya: It would be late 'twenty, four really nothing of substance for meaningful deliveries here at the end of the year, but really contributing in 2025 and at the same time, making sure that we can we can continue to support from the phase one and and then we've talked of course over the last year year and a half because I think my questions have been thereabout. Okay. When are you going to start producing from the.

Jugal K. Vijayvargiya: And then we've talked, of course, over the last year and a half because I think the questions have been there about, okay, when are you going to stop producing from the legacy facility? And I think, considering some of the adjustments that the customer is looking at for the back half of the year, it's about the right time to be able to start doing that, and in support, of course, of the yield and performance improvements at our new facility. So, I think it's just a natural sort of evolution of where the program is at with some corrections here for a couple of quarters but continued success on a long-term basis.

Jugal K. Vijayvargiya: From the legacy facility and I think considering the some of the adjustments that the customer is looking out for the back half of the year is about the right time to be able to start doing that and in support of course of the of the yield and performance improvements at our new facility. So I think it's just a natural sort of evolution of where the program is that with.

Jugal K. Vijayvargiya: Some corrections here for a couple of quarters, but but continued.

Jugal K. Vijayvargiya: Continued success on a long term basis.

Philip Ross Gibbs: Thank you, Jugal. And then on the commercial aerospace side, you talked about some slowing and build down. I mean, I think the only meaningful place where we've seen builds down, at least to our knowledge, has been on the MAX program, but I know you also have a lot of maintenance. Does this or should this suggest to us that you just have more exposure to Boeing at this point, or are you seeing other program adjustments?

Speaker Change: Thank you jugal and and then on the commercial aerospace side, you talked about some slowing in the.

Philip Ross Gibbs: And builds down I mean, I think the only meaningful place where we've seen builds down at least our knowledge has been on the Max program, but I know you also have a lot of maintenance.

Philip Ross Gibbs: Exposure to the commercial side as well and maintenance has been strong yes.

Philip Ross Gibbs: Does this or does this.

Philip Ross Gibbs: Suggests to us that you just have.

Jugal: It's more exposure to to Boeing at this point or are you seeing other program adjustments.

Jugal K. Vijayvargiya: Phil, as we look at commercial aerospace, we see a real build challenge across both of the major customers, both Airbus and Boeing. If you look at some of the data, for example, the WeTrack, for build rates, if you go back to Q1 of last year, the build rate combined was around 250, 260 planes. This Q1, it was around 225. If you look at Q4, the Q4 build rate on a combined basis was over 350. So the number is probably around 370, I think, for build rate.

Philip Ross Gibbs: So.

Philip Ross Gibbs: Phil as we look at commercial aerospace I mean, there we see really a.

Jugal K. Vijayvargiya: Build a challenge across both of the major <unk>.

Jugal K. Vijayvargiya: Customers, both Airbus and Boeing I mean, if you look at some of the data for example that we track for.

Jugal K. Vijayvargiya: For build.

Jugal K. Vijayvargiya: So bill rates.

Jugal K. Vijayvargiya: If you go back to Q1 of last year. The Bill rate combined was around 250 to 260.

Jugal K. Vijayvargiya: <unk>.

Jugal K. Vijayvargiya: Q1, it was around $2 25, if you look at Q4 Q4 build rate on a combined basis was over 350. So the number is probably around 370 I think for bill rate. So substantial decrease here in Q1 across actually both.

Jugal K. Vijayvargiya: So, substantial decrease here in Q1 across actually both. There's a number of supply chain issues that, frankly, Airbus has talked about very openly that they are facing, so more of a supply chain issue on the Airbus side. And then, of course, we know the challenges that Boeing is facing, not only with the 737 MAX, but I think, in general, I would say that they have really, really looked at their production processes to ensure that quality is at the forefront and are really taking steps, I think, to adjust their build schedule as necessary.

Jugal K. Vijayvargiya: There's a number of supply chain issues that frankly Airbus has talked about very.

Jugal K. Vijayvargiya: Very openly that they are facing so more of a supply chain.

Jugal K. Vijayvargiya: Issue on the Airbus side, and then of course, we know the challenges the Boeing is facing not only on the not only in the 737, Max but I think in general I would say that they have really really looked at their production processes to ensure that quality is at the forefront and and really taking steps I think to to adjust their build schedule as necessary.

Jugal K. Vijayvargiya: So, you know, significant downturn in Q1 for commercial aerospace, which I would say is more than what we had anticipated. And then, as we think about the recovery for the rest of the year, I would expect that the build rates are going to improve, but certainly those build rates are not going to get to that. At the very least, we don't think that they're going to get to the levels that they were over the last year or so. So I do expect commercial aerospace in general to be challenged. This is absolutely not a share issue at all.

Jugal K. Vijayvargiya: So you don't.

Jugal K. Vijayvargiya: Significant down in the in the Q1 for commercial aerospace, which I would say is more than what we had anticipated and then as we think about the recovery for the rest of the year I would expect that the bill rates are going to improve but certainly those build rates are not going to get to that at least we don't think that they're going to get to the levels that they were over the last.

Jugal K. Vijayvargiya: A year or so.

Jugal K. Vijayvargiya: I do expect commercial aerospace in general to be challenge. This is absolutely not a share issue at all as you know we have been gaining content across.

Jugal K. Vijayvargiya: As you know, we have been gaining content across multiple materials and products that we have on both single-aisle and wide-body planes. So our content growth is there. Our share is there. We just need these two megacompanies to increase their build rates as we go forward. So we'll just, you know, we'll monitor the situation, but we do see this as a caution for the full year.

Jugal K. Vijayvargiya: Multiple.

Jugal K. Vijayvargiya: Materials and products that we have on both single aisle and wide body planes. So our content growth is there our share there.

Jugal K. Vijayvargiya: Just need these too.

Jugal K. Vijayvargiya: Mega companies to increase their build rates as we go forward. So we'll.

Jugal K. Vijayvargiya: We'll just we'll monitor the situation, but we do see this as a caution for for the full year.

Philip Ross Gibbs: And then lastly, for me, the operational challenges that you cited several weeks ago and then talked a little bit about today. Can you maybe pinpoint these are issues that when they started to occur?

Jugal K. Vijayvargiya: And then lastly for me the operational challenges.

Philip Ross Gibbs: But you you cited several weeks ago, and then you talked a little bit about today can you maybe pinpoint.

Philip Ross Gibbs: So is your issues there when they started to occur.

Philip Ross Gibbs: What gives you confidence that they're behind you?

Philip Ross Gibbs: What gives you confidence that they're behind you.

Shelly M. Chadwick: Hey, Phil, I'll take that one. So, you know, as we mentioned, the majority of that issue was in performance materials. And really, what we saw there were some yield challenges coming out of an early production process that impacted many of our downstream product lines in performance materials. That started, you know, really early in the quarter, if you would.

Speaker Change: Hey, Phil I'll take that one so as we mentioned at the majority of that issue was in performance materials and really what we saw there was some yield challenges coming out of an early production process that impacts many of our downstream product lines in performance materials that started really.

Shelly M. Chadwick: Early ish in the quarter, if you would and we started to see that we werent going to be able to service all of the demand all of the orders that we had on the books, which is when we reevaluate it and then came out with a bit of the early caution.

Shelly M. Chadwick: And we started to see that we weren't going to be able to service all of the demand, all of the orders that we had on the books, which is when we reevaluated and then came out with a bit of early caution. But that is getting better. The issues are being addressed. I think the team, you know, got together quickly to make sure that we could get those yields back up to be able to service the full order book.

Shelly M. Chadwick: That is getting better the issues are being addressed I think the team got together quickly to make sure that we can get those yields back up to be able to service. The full order book and there were a couple of other items. We had some delays at an outside tolling partner that were an impact and then some small yield challenges and precision optics.

Shelly M. Chadwick: There were a couple of other items. We had some delays with an outside tolling partner that had an impact, and then, you know, some small yield challenges in precision optics. So, we just had a few things that kind of fell under the bucket of operational challenges that we think we've got addressed, but they were big enough to talk about. Yeah. And, Phil, I would add that, you know, as we look at our two.

Shelly M. Chadwick: So we just had a few things that kind of fell under the bucket of operational challenges that we think we've got addressed.

Speaker Change: But they were big enough to talk about.

Jugal K. Vijayvargiya: Yeah. And Phil, I would add that, you know, as we look at our Q2, and as we've indicated, we expect Q2 to be a step up, a significant step up from Q1. Getting those operational challenges behind us is core to that. And based on how we have been running here in the month of April and how we expect to run the rest of the quarter, I would expect that we've made a marked improvement in those operational challenges.

Shelly M. Chadwick: And Phil I would add that as we look at our Q2.

Jugal K. Vijayvargiya: As we've indicated we expect Q2 to be a step up a significant step up from from Q1.

Jugal K. Vijayvargiya: Getting those operational challenges behind us is core to that and and.

Jugal K. Vijayvargiya: Based on how we have been running.

Jugal K. Vijayvargiya: Here in the in the month of April and how we expect to run the rest of the quarter I would expect that we're we've made a marked improvement in those operational challenges.

Speaker Change: Thank you.

Jugal K. Vijayvargiya: Yeah.

Phil: Thanks Bill.

Operator: Thank you. Your next question is coming from Daniel Moore from CJS Securities. Daniel, your line is live. Please go ahead.

Jugal K. Vijayvargiya: Thank you. Your next question is coming from Daniel Moore from CJS Securities. Daniel Your line is live. Please go ahead.

Daniel Joseph Moore: Thank you, Jugal. Thank you, Shelly. Good morning. Good morning, Dan. Jugal, are you in the preparatory march? Thank you. You mentioned the start of the recovery in SEMI. Maybe you could just elaborate on your conversations, dialogues with customers, and your confidence that demand should continue to improve sequentially beyond Q2 for the next few quarters. Yeah, well, as you know,

Daniel Joseph Moore: Thank you jugal Michele good morning.

Speaker Change: Joining me in the prepared remarks, thank you.

Daniel Joseph Moore: Mentioned the start of a recovery in semi maybe just elaborate on conversations dialogues with customers and your confidence that demand should continue to improve sequentially.

Daniel Joseph Moore: Beyond Q2 for the next few quarters.

Jugal K. Vijayvargiya: Yeah. Well, as you know, this market has been a very challenging market, not only for us, but for the entire industry, right? And there have been some starts and stops and thinking, "When is the bottom?". We do believe, based on orders and based on conversations with our customers, that Q1 was the low point for us. We see improvements going into Q2. We see improvements here in the first few weeks of the quarter, as well as, I think, what we will see for the next couple of months as well.

Daniel Joseph Moore: Yeah, well as you.

Daniel Joseph Moore: This market has been a very challenging market not only for us, but for the entire industry right and and.

Jugal K. Vijayvargiya: And there have been some starts and stops and thinking when is the right. One is the bottom we do believe based on orders and based on conversations with our customers that Q1 was the low point for US we see we see improvements going into Q2, we see improvements here in the first few weeks of <unk>.

Jugal K. Vijayvargiya: First few weeks of the quarter as well as I think what we see for the next couple of months as well.

Jugal K. Vijayvargiya: Our discussions with customers, as well as, I think, what we hear externally, continue to indicate that logic and memory, in particular, are starting to lead the recovery. And I think it will continue to lead the recovery in Q3 and Q4. There are some challenges on the power side, those challenges being, frankly, the EB, the slowing growth of the EB. I think that's going to take a little bit more time for the power side, but logic and memory, I think, are starting to make more of a recovery.

Jugal K. Vijayvargiya: Our discussions with the customers as well as I think what we hear externally.

Jugal K. Vijayvargiya: <unk> continues to indicate that logic and memory in particular is starting to lead the recovery and I think it will continue to lead the recovery in Q3 and Q4 there are some challenges on the power side those challenges being frankly the EV.

Jugal K. Vijayvargiya: The slowing growth of the EV I think that's going to I think thats going to take a little bit more time for the power side, but logic and memory I think are making.

Jugal K. Vijayvargiya: Starting to make more of a recovery when I look at our order backlog. Our order backlog has continued to improve over the last couple of months.

Jugal K. Vijayvargiya: When I look at our order backlog, our order backlog has continued to improve over the last couple of months. We see, probably, from about three months ago to where we are today, approximately, I'm going to say, double-digit order backlog improvement for the semi-business, which gives us confidence, not only for Q2, but I think it gives us confidence for the back half of the year. So, I would say, you know, if I look at the last few quarters, this is the first time that I can sense a little bit more data that gives us confidence for the recovery to start to happen here in Q2, with Q1 being the low point and then continuing in Q3 and Q4.

Jugal K. Vijayvargiya: We see probably from about three months ago to where we are today, approximately I'm going to say double digit order backlog improvement.

Jugal K. Vijayvargiya: For the for the semi business, which gives us confidence not only for Q2, but I think it gives us confidence for the back half of the year. So I would say if I look at the last few quarters.

Jugal K. Vijayvargiya: It's the first time that I can I can sense, a little bit more.

Jugal K. Vijayvargiya: Data that gives us confidence for the recovery to start to happen here in Q2 with Q1 being the low point and then and then continuing in Q3 and Q4.

Daniel Joseph Moore: Very helpful. And pulling on that string, as we think about 25 and beyond, and, you know, I guess it's probably more into 26. But the build rates expected for a lot of the fabs that are expected to come online, you know, just talk about your confidence. When do you expect a more meaningful inflection in that sort of core end market as far as when we might see the uptick to longer term, you know, high single-digit type growth?

Speaker Change: Very helpful.

Jugal K. Vijayvargiya: On that string as we think about 'twenty five and beyond.

Daniel Joseph Moore: Sure.

Daniel Joseph Moore: I guess, it's probably more into 'twenty six but the build rates expected for a lot of the fabs that are expected to come online.

Daniel Joseph Moore: Just talk about your confidence when do you expect a more meaningful inflection.

Daniel Joseph Moore: And that sort of core end markets as far as.

Daniel Joseph Moore: When we might see the uptick to longer term.

Daniel Joseph Moore: High single digit type growth.

Jugal K. Vijayvargiya: Yeah, so I

Jugal K. Vijayvargiya: Yeah, so when you look at the build rates in terms of the FABs and some of the investments that are being made, we certainly saw some of the investments slow down commentary over the last 12, 18 months as the overall market started to become more challenged. However, what we are seeing now, I think, is starting to have some more positive discussions around the investments. We're seeing some of the investments in the US, for example, some of the government investments coming into play, and some recent announcements at large companies with the aid the government's providing.

Daniel Joseph Moore: Yeah. So I think when you look at the build rates in terms of the Fabs and some of the investments that are being made.

Jugal K. Vijayvargiya: We certainly saw some of the investments slowdown commentary over the last 12 to 18 months as the overall market has started to become more challenged however, what we are seeing now I think is starting to have some more positive discussions around.

Jugal K. Vijayvargiya: The investments we're seeing some of the investments in the U S. For example, some of the government investments coming into play some recent announcements at that large large companies.

Jugal K. Vijayvargiya: With the aid governments, providing I think we're starting to see kind of almost starting back up of the investment investment activity in Asia as well.

Jugal K. Vijayvargiya: I think we're starting to see kind of the almost starting back up of the investment activity in Asia as well. So the investments are happening, but perhaps a slight delay from what they were talking about maybe two years ago. So probably a one to two year delay, but the investments are clearly getting back on track. When I look at the levels that we had in the 22 timeframe, I mean, that was really a peak on the semi side.

Jugal K. Vijayvargiya: So.

Jugal K. Vijayvargiya: It's the investments are happening, but perhaps a slight delay right from what they were talking about maybe two years ago. So probably a one to two year delay, but the investments are clearly clearly getting back getting back on track when I look at the.

Jugal K. Vijayvargiya: The levels that we had in the 'twenty two timeframe I mean that was really a peak out of the semi side.

Jugal K. Vijayvargiya: The thought was that those levels would start to come into play probably in the back half of 25. Now, perhaps those peaks would be, maybe, in the front half of 26. So a slight delay, a couple of quarters delay from some of the overall recovery that's happened. But I do continue to see, over the next 24 to 36 months, I think a steady improvement and recovery in the semi market. Again, led by logic and memory, but then followed by other areas as well.

Jugal K. Vijayvargiya: The thought was that those levels will start to come into play probably in the back half of 'twenty five.

Jugal K. Vijayvargiya: Perhaps now the perhaps some of those peaks would be maybe the front half of 2006, so a slight delay.

Jugal K. Vijayvargiya: A quarter delay from from some of the overall recovery that's happened, but but I do continue to see over the next 24 to 36 months I think a steady improvement and recovery in the in the semi market again led by logic and memory, but then followed by the other areas as well.

Daniel Joseph Moore: Perfect. And then last for me, and I'll jump back, the incremental capacity that you would have from shifting production from the legacy facility to the new cloud strip facility. Is that something that you can think about actively selling to alternative potential customers? Or is it more likely to be shut down? Thanks.

Speaker Change: Perfect and then last for me and I'll jump back.

Daniel Joseph Moore: The incremental capacity that you would have from shifting production from the legacy facility to the new cloud strip facility is that something that you can think about actively selling to alternative potential customers.

Daniel Joseph Moore: Or is it more likely to be shuttered. Thanks.

Jugal K. Vijayvargiya: Yeah, so, you know, as we indicated, we would be looking at starting to slow down, certainly not stopping production. So the incremental capacity is absolutely something that, you know, I think is very usable because it's capacity that we were using, right, prior to starting this program. And so we will simply shift that capacity to other activities in the commercial sector or consumer sector or the automotive sector. So we will make sure that that capacity is being utilized appropriately. If, for some reason, we have issues with that, we'll take appropriate action to adjust the cost.

Speaker Change: Yeah. So.

Speaker Change: As we indicated we would be looking at starting to slowdown.

Jugal K. Vijayvargiya: We're not stopping production so the incremental capacity is absolutely something that I think.

Jugal K. Vijayvargiya: Very usable because its capacity that we were using prior to starting this.

Jugal K. Vijayvargiya: This program and so we will we will simply shift that capacity to other activities and.

Jugal K. Vijayvargiya: The commercial sector consumer sector or the or the automotive sector. So we will make sure that that capacity is being utilized appropriately if for some reason.

Jugal K. Vijayvargiya: We have issues with that we will take appropriate actions to adjust the just the cost structure.

Daniel Joseph Moore: Very helpful. Thank you again.

Speaker Change: That's very helpful. Thank you again.

Operator: Thank you. Thank you, Sam. Next question. Your next question is coming from Mike Harrison from Seaport Research Partners. Mike, your line is live. You may proceed.

Speaker Change: Thank you.

Speaker Change: Next question.

Operator: Your next question is coming from Mike Harrison from Seaport Research Partners. Mike. Your line is live you May proceed.

Michael Joseph Harrison: Hi, good morning good.

Michael Joseph Harrison: I was wondering, I appreciate all the detail you provided on the semi outlook, but just was hoping that maybe we could focus on the performance In the first quarter, particularly on the margin side, I know you called out the nice year-on-year improvement, but I think what was more interesting was the improvement sequentially on essentially the same level of value-added sales. Can you talk about what led the margin to be so much better in Q1 than it was in Q4, even though the value-added sales level was pretty similar?

Michael Joseph Harrison: I was wondering.

Michael Joseph Harrison: Appreciate all the detail you provided on the SEBI outlook, but just was hoping maybe we could focus on the performance.

Michael Joseph Harrison: In the first quarter, particularly on the margin side I know you called out.

Michael Joseph Harrison: The nice year on year improvement, but I think what was more interesting was the improvement sequentially on essentially the same level of value added sales.

Michael Joseph Harrison: Can you talk about.

Michael Joseph Harrison: What was the margin to be so much better in Q1 than it was in Q4, even though that that value added sales level was pretty similar.

Jugal K. Vijayvargiya: Yeah, let me, let me start with that. And then, certainly, Shelly can add to that.

Speaker Change: Yeah, Let me, let me start with that and then certainly shall we can add to that as you know.

Jugal K. Vijayvargiya: As you know, EM has been a focus area for us for margin improvement, right? We have talked about how we need all of our businesses to contribute so that the overall company is able to get to 20% EBITDA margins or better. You know, as the, as the semi-decline started to happen, and I'm going to go back to probably Q1 of last year, right? Q1 was almost kind of a peak quarter for us in sales, and our margins started to be, frankly, impacted.

Speaker Change: <unk> has been a focus area for us for margin improvement right. We've talked about how we need all of our businesses to contribute so.

Jugal K. Vijayvargiya: So that the overall company is able to get to 20% EBITDA margins are better.

Jugal K. Vijayvargiya: The last as the as the semi decline started to happen and I am going to go back to probably Q1 of last year Q1 was almost kind of a peak quarter for us in sales.

Jugal K. Vijayvargiya: Our margins started to frankly get impacted.

Jugal K. Vijayvargiya: We started to make significant cost improvement initiatives, starting in the second quarter, but more importantly, I would say, in the back half of the year. And as you know, sometimes, as you're making those plant improvements and operational improvements, they take a little bit of time to get into play. And so, you know, we're starting to see the benefits of that. And, and so I'm really, really proud of what the team has been able to do and to drive that improvement.

Jugal K. Vijayvargiya: We started to make significant cost improvement.

Jugal K. Vijayvargiya: Initiatives, starting in the second quarter, but more importantly, I would say in the back half of the year and as you know, sometimes you know as youre, making those plant improvements and operational improvements they take a little bit of time to get into place and so we're starting to see the benefits of that and so I'm really really proud of I think what the team has been able to do and to draw.

Jugal K. Vijayvargiya: I would expect that, you know, some of these improvements are going to continue, and I can assure you, we're not going to back off on that. Some of these improvements are going to continue, and we're going to hopefully be able to drive margin enhancement, you know, as the market recovery happens. So that's a big part of it. Now, certainly, there's always, you know, sometimes there's a little bit of one-time issues, or sometimes there's a little bit of mixed issues, you know, those things go back and forth, you know, every quarter, but I think fundamentally, it's really the core improvements and the operational improvements that our teams have been driving over the last six, nine months that are starting to bear fruit and starting to deliver here in Q1.

Jugal K. Vijayvargiya: That improvement I would expect that some of these improvements are going to continue and.

Jugal K. Vijayvargiya: I can assure you we're not going to back off on that some of these improvements are going to continue and we're going to hopefully be able to drive margin enhancement as the as the market recovery happens. So that's a big part of it and that's certainly Theres always.

Jugal K. Vijayvargiya: Sometimes theres a little bit of one time issues or sometimes are a little bit of mix issues. Those things go back and forth every quarter, but I think fundamentally it's really the core improvements in the operational improvements that our teams have been driving over the last six to nine months that are starting to bear fruit and and starting to deliver here.

Jugal K. Vijayvargiya: And I would expect that we continue to keep a focus on that. We need our EM business to deliver and, and, and contribute towards the, you know, the 20% objective of EBITDA margins that we have.

Jugal K. Vijayvargiya: In Q1, and I would expect that we continue to keep a focus on that we need our ECM business to deliver and.

Jugal K. Vijayvargiya: And contribute towards the towards the 20%.

Jugal K. Vijayvargiya: Objective of EBITDA margins that we have.

Michael Joseph Harrison: All right, thank you for that. And then I was also wondering if you could.

Speaker Change: Alright. Thank you for that and then was also wondering if you can.

Michael Joseph Harrison: Lay out where we are in this inventory corruption that's going on in the industrial business, these beryllium nickel springs, I believe, for commercial sprinkler systems. Can you just, Kind of help us understand? I mean, we've seen destocking in a lot of different pockets of the economy, but this seems to be one that kind of cropped up later. I'd be curious if you feel like things are improving or if it's going to be something that's weak for the remainder of the year.

Michael Joseph Harrison: Lay out where we are.

Michael Joseph Harrison: Inventory correction, that's going on in the industrial business. These were really a nickel spring I believe for.

Michael Joseph Harrison: Commercial sprinkler systems can.

Michael Joseph Harrison: Can you just.

Michael Joseph Harrison: Help us understand I mean, we've seen destocking in a lot of different pockets of the economy, but this seems to be one that kind of cropped up later and just curious if you feel like things are improving or.

Michael Joseph Harrison: It's going to be something that's weak for the remainder of the year.

Jugal K. Vijayvargiya: Yeah, you know, this is one that is a kind of a fairly unique product, right, in the industrial sector, and it's hard to correlate it to a PMI index or some other type of an index, right? That's a kind of unique product and used for this non-residential construction. We are obviously the provider of these for the market.

Michael Joseph Harrison: Yeah.

Michael Joseph Harrison: This is one that is a kind of a kind of a fairly unique product right.

Jugal K. Vijayvargiya: In the industrial sector, and it's hard to correlate it to a PMI index or some other type of an index rates that thats, a kind of a unique product and used for these nonresidential construction.

Jugal K. Vijayvargiya: Obviously the provider of these for the for the market.

Jugal K. Vijayvargiya: There was significant growth that happened coming out of COVID. And I think the channel, frankly, you know, got a little flushed with inventory as interest rates and some of the inflation activities and some of just the general downturn, I think, you know, that we all know that that's happening in the overall commercial construction and occupancy. As a result of that, you know, or we are just going through that inventory correction, it started to happen late last year.

Jugal K. Vijayvargiya: There was a significant growth that happened coming out of Covid and I think the channel frankly that the low flushed with the with the inventory.

Jugal K. Vijayvargiya: The interest rates and some of the inflation activities and some of the just the general downturn I think that we.

Jugal K. Vijayvargiya: No that's happening in the overall commercial construction and occupancy.

Jugal K. Vijayvargiya: So maybe, let's say, in Q4, but I would expect that the first half of this year is going to be, you know, a meaningful inventory correction that's going to happen in this business. And we would expect to start picking back up in the back half of the year, but I would expect the pickup to be, let's say, a slight but then more meaningful pickup in 25 as that inventory is worked through.

Jugal K. Vijayvargiya: As a result of that.

Jugal K. Vijayvargiya: We are just going through that inventory correction has started to happen.

Jugal K. Vijayvargiya: Late last year, so maybe let's say in Q4, but I would expect that the first half of this year is going to be a meaningful inventory correction, that's going to happen in this business and we would expect.

Jugal K. Vijayvargiya: To start picking back up in the in the back half of the year, but I would expect the pickup to be.

Jugal K. Vijayvargiya: Let's say a slight but then more meaningful pick up in 'twenty five as that inventory is worked through so again I want to emphasize I think that this is not this is not a share loss issue. This is simply just a inventory.

Jugal K. Vijayvargiya: So, again, I want to emphasize that this is not a share loss issue. This is simply just an inventory correction on a more specific element of what we consider in the industrial sector. And we would expect a small turnaround in the back half, but then a meaningful turnaround in the next 25.

Jugal K. Vijayvargiya: Correction on a more specific element of what we consider in the industrial sector and we would expect a small turnaround in the back half, but then a meaningful.

Jugal K. Vijayvargiya: Turnaround in 'twenty five.

Michael Joseph Harrison: All right, very helpful. And then, you know, with your balance sheet, you mentioned just below the midpoint of your target leverage range. Curious if you could give us an update on your acquisition pipeline, what you're seeing in the M&A marketplace, and maybe talk about the potential for some acquisition activity later in the year.

Speaker Change: Alright very helpful. And then last question for me is just.

Michael Joseph Harrison: With your balance sheet, you mentioned just below the midpoint of your target leverage range I'm curious if you can give us an update on your acquisition pipeline.

Michael Joseph Harrison: What youre seeing in the M&A marketplace.

Michael Joseph Harrison: Maybe talk about the potential for some acquisition activity later in the year.

Shelly M. Chadwick: Yeah, Mike, so I'll take that one. Yeah, as you mentioned, our leverage right now is about 2.2 times, which is, you know, half between our one and a half to three times targeted range. So we feel comfortable where we are, as you know, we're doing a lot of organic investing, which is really what's kind of keeping that propped up after, you know, the acquisition we did of HCS electronic materials. We've not focused on debt paydown, but rather on organic growth.

Speaker Change: Yeah, Mike I'll take that one yeah as you mentioned our leverage right now is at about two two times, which is half between our one 5% to three times targeted range. So we feel comfortable where we are as you know we're doing a lot of organic investing which is really what's kind of keeping that propped up after the.

Shelly M. Chadwick: <unk>, we did have HCS electronic materials, we've not focused on debt paydown, but rather on organic growth.

Speaker Change: Given that we've got capacity certainly we still can do an acquisition and we're always looking kind of evaluating options and seeing where there might be any targets that would add.

Shelly M. Chadwick: You know, given that we've got capacity, certainly, we can still do an acquisition. And we're always looking, you know, kind of evaluating options and seeing where there might be targets that would add, you know, either to our product portfolio, build that out, or something that's geographically desirable, that would build on our footprint. But it's not I wouldn't say today, it's a must do. So I wouldn't say that we're out there saying we've got to get an acquisition done this year. But we certainly want to be opportunistic there and could do that if the right thing comes along.

Shelly M. Chadwick: <unk> to our product portfolio to build that out or something that is geographically desirable that we filled out our footprint, but it's not I wouldn't say today. It's a must do so I wouldnt say that were out there, saying we've got to get an acquisition done this year, but we certainly want to be opportunistic there and could do that if the right thing comes along.

Michael Joseph Harrison: All right, thanks very much. Thanks.

Speaker Change: Alright, thanks very much.

Speaker Change: Thanks, Mike.

Michael Joseph Harrison: Thank you. Your next question is coming from David Silver from CL King.

Michael Joseph Harrison: David Your line is live you May proceed.

Michael Joseph Harrison: Yeah.

David Cyrus Silver: Yeah, hi, good morning. Good morning, David. So it's a true statement that all of my top questions have been asked. However, that's never stopped me before. But just giving you a warning, this might be a little. Scattershot.

Speaker Change: Yes, hi, good morning.

Speaker Change: Good morning, David.

Speaker Change: So it's a true statement that all of my top questions have been asked however, that's never stopped me before but.

Speaker Change: This is giving you a warning this might be a little.

David Cyrus Silver: I mean, I do have several issues I wanted to touch on. First, would just be a clarification on some of Jugal's earlier comments about the precision clad strip and the transition, I guess, from phase one in the back half of 2024 to phase two, maybe beginning early 2025. So, Jugal, I believe you talked about kind of inventory drawdowns at the customer, you know, back half of this year. [inaudible] you know, and then the ramp up of production from the new facility.

Speaker Change: Scattershot I mean, I do have several issues I wanted to touch on.

David Cyrus Silver: First would just be a clarification to some of <unk> earlier comments has to do with precision strip and the transition I guess from phase one in the back half of 2020 forward to phase two and maybe beginning early 2025, so jugal I believe you talked about.

David Cyrus Silver: What kind of inventory draw downs at the customer.

David Cyrus Silver: Back half of this year.

David Cyrus Silver: And then the ramp up of production from the new facility.

David Cyrus Silver: Can you just clarify, is there a qualitatively or structurally different product that you're supplying from the new precision clad strip unit? In other words, why would, if the products were relatively similar, why would the customer, you know, need to adjust the legacy, I guess, inventory levels later this year?

David Cyrus Silver: Can can you just clarify is is there a qualitatively are structurally different product that youre supplying from the new precision strip unit in other words why would if the products were relatively similar why would the customer need too.

David Cyrus Silver: Just maybe I'm missing something, but if you could just maybe discuss that transition with you, as you discussed earlier, thank you. Yeah.

David Cyrus Silver: Adjusted.

Speaker Change: Legacy I guess inventory levels later in this year, just maybe I'm missing something but if you could just.

David Cyrus Silver: Maybe discuss that transition as you as you discussed earlier thank you.

Jugal K. Vijayvargiya: Yeah. David, going back, actually, to about, I'm going to say, almost three years ago, when we started talking about this program, what we indicated was that the customer had, at that time, a product that they had in the marketplace, and it used technology that was not ours. We were not involved in that.

Speaker Change: Yes, David going back actually to but I'm going to say almost three years ago, probably when we started talking about this.

Jugal K. Vijayvargiya: Program, what we've indicated is that the customer.

Jugal K. Vijayvargiya: Has had at that time.

Jugal K. Vijayvargiya: <unk> that they had in the marketplace it used a technology.

Jugal K. Vijayvargiya: <unk>.

Jugal K. Vijayvargiya: It was not ours, we were not involved in that the customer introduced a next generation product one.

Jugal K. Vijayvargiya: The customer introduced a next-generation product. When they introduced the next-generation product, then our technology, so the precision clad that we provide, is what is used with that customer. They have been, let's say, phasing out the older generation and phasing in the newer generation and rolling that out around the world. As that ramp-up has happened, and as they have continued to build inventory and continue to put a product in the marketplace, we have supplied them.

Jugal K. Vijayvargiya: When they introduced the next generation product.

Jugal K. Vijayvargiya: Our technologies are precision clat, we provide is what is used with.

Jugal K. Vijayvargiya: With that customer so they have been they have been let's say phasing out the older generation and phasing in the newer generation bite and rolling that out around the world and so as that ramp up has happened and as as they have continued to build inventory and continue to put our product.

Jugal K. Vijayvargiya: The marketplace.

Jugal K. Vijayvargiya: We have we have supplied to them we have supplied to them from the legacy facility and we supplied to them from our new facility and I think.

Jugal K. Vijayvargiya: We have supplied to them from the legacy facility, and we've supplied to them from our new facility. I think the, and I'm really proud of our team for that, I mean, I think the fantastic work that our team has done on the new facility, in particular, driving yield improvements, driving output improvements, I think has been a great support to the customer's launch and the rollout that they've been able to do.

Jugal K. Vijayvargiya: And I'm really proud of our team for that I mean, I think the fantastic work that our team has done on the new facility in particular, but driving yield improvements driving output improvements I think it's been a it's been a great support to the customers launch and the rollout, but they have been that <unk> been able to do I think.

Jugal K. Vijayvargiya: I think all of that, combined with just how they are managing it, the global rollout, they are really making sure that they've got the right levels of inventory now to support their rollout. And that's really kind of where it is, David. And so, short-term, couple-quarter type of adjustments, but nothing of concern to us because this is a program that, as far as we know, from the customer, and we meet with the customer on a very frequent basis, they see this as a very successful program and one that will continue to be successful for the upcoming years.

Jugal K. Vijayvargiya: All of that combined with just how are they managing it the global rollout. They are really they are really making sure that they've got the right levels of inventory now to support the rollout and.

Jugal K. Vijayvargiya: And Thats really kind of where it is David and so short term couple of quarter type of type of adjustments, but nothing nothing of concern to us because this is a this is a program that as far as we know from the customer and we meet with a customer on a very frequent basis. They see this as a very successful.

Jugal K. Vijayvargiya: Program and one that will continue to be successful.

Jugal K. Vijayvargiya: Sure.

Jugal K. Vijayvargiya: For the upcoming upcoming years.

David Cyrus Silver: Okay, thank you for that. Very, very clear.

Speaker Change: Okay. Thank you for that very very clear I appreciate it.

David Cyrus Silver: Longer term perspective.

David Cyrus Silver: I appreciate the longer-term perspective. Maybe a couple for, you know, Shelly here, but I was hoping you could just give us the final kind of determination from Materion's perspective on the production tax credit, I believe, or manufacturing credit that you're in line to receive, you know, as part of your participation with critical materials. But, you know, you kind of made a judgment earlier in 2023 that you reduced later in the year upon further clarification, I believe, from Treasury on the particular details of how the credit would be calculated.

Speaker Change: Maybe a couple for surely here, but I.

David Cyrus Silver: I was hoping you could just give us the final kind of determination from materials perspective on the.

David Cyrus Silver: Production tax credit I believe or manufacturing credit that you're.

Shelly: We're in line to receive.

Shelly: As part of your participation I guess critical materials, but.

David Cyrus Silver: You did kind of make a judgment earlier in 2023 that you.

David Cyrus Silver: Reduced.

David Cyrus Silver: Later in the year upon further clarification I believe from Treasury on.

David Cyrus Silver: The particular details of how the credit would be calculated.

David Cyrus Silver: So just level set us there, though, but are you at a point now where you can kind of confidently talk about, you know, the final, I guess, expectations for that credit, and is there kind of a ballpark estimate for what that could add on an annual basis?

David Cyrus Silver: Just level set us there, though but are you at a point now where you can kind of confidently talk about the final I guess expectations for that.

David Cyrus Silver: Credit and is there kind of a ballpark.

David Cyrus Silver: Estimate for what that.

David Cyrus Silver: That could add on a annual basis.

Shelly M. Chadwick: Yeah, thanks for that question, David. It's good to kind of give an update there. You know, as you know, we're really excited about that credit as it gives us a reduction in our overall cost to produce, you know, high purity beryllium products. When the act was first announced, the definition of production costs was a bit more broad and maybe less defined, but did include material raw material costs. The update that came from the Treasury Department late last year used a different definition of production costs that would take raw materials out. As you might recall, there was then a comment period and hearings and a number of other items that were discussed before final guidance was given. We have not gotten any updates since then.

Shelly: Yes, thanks for that question David.

Shelly M. Chadwick: Good to kind of give an update there as you know we're really excited about that credit as it gives us a reduction in our overall cost.

Shelly M. Chadwick: Pretty high purity beryllium products when the.

Shelly M. Chadwick: When the act was first announced the definition of production costs with a bit more broad and maybe less defined but did include material raw material costs.

Shelly M. Chadwick: The update that came from the Treasury Department late last year used a different definition of production cost that would take raw materials out.

Shelly M. Chadwick: As you might recall, there was that a comment period and hearings and a number of other items that were being discussed before a final guidance is given we have not gotten any update since then we did kind of look at what was said at these hearings in the different papers that were written on it but we don't expect final guidance till later this year.

Shelly M. Chadwick: We did, you know, kind of look at what was said at these hearings and the different papers that were written on it, but we don't expect final guidance till later this year. So we have adjusted our approach really for that material item and are accruing at a more conservative rate. You know, in fact, if you think about Q1 last year, we would have recorded about a million dollars more of a credit than what we recorded this year, just based on a more conservative methodology. But we still believe we've taken a pretty, you know, middle of the road approach and, you know, look forward to getting more clarity as the year progresses.

Shelly M. Chadwick: So we have adjusted our approach really for that material item.

Shelly M. Chadwick: Truly had a more conservative rate in fact, if you think about Q1 last year, we would have recorded about $1 million more of a credit than what we recorded this year just based on a more conservative methodology, but we still believe we have taken a pretty middle of the road approach.

Shelly M. Chadwick: And look forward to getting more clarity as the year progresses.

Shelly M. Chadwick: Yes.

David Cyrus Silver: Okay, thank you with that. And then maybe one more on the beryllium side. But, you know, I'm looking at the full year 2024 guidance. Sorry, slide 15.

Speaker Change: Okay. Thank you with that and then maybe one more on the beryllium.

David Cyrus Silver: But.

David Cyrus Silver: I'm looking at the full year 2020 forward guidance.

David Cyrus Silver: Sorry.

David Cyrus Silver: Slide 15.

David Cyrus Silver: And in particular, in the right-hand column, the mine development dash new pit opening $13 million. You know, there's always been a small or moderate amount in that column. But I was wondering, the new pit opening, is that designed to expand, you know, your capacity for the mineral that you require for your beryllium production? Or is this really a replacement? In other words, are you investing to prepare for anticipated growth? Or is this maybe just the normal transition from a worn out portion of the mine to a new, new part of the mine? Yeah, thanks.

David Cyrus Silver: And in particular on the right hand column the mine development.

David Cyrus Silver: New pit opening $13 million.

David Cyrus Silver: There's always been a small or a moderate amount in that column, but I was wondering the new pit opening is that designed to expand.

David Cyrus Silver: Your capacity for the mineral.

David Cyrus Silver: For.

David Cyrus Silver: That you require for your beryllium production or is this really a replacement in other words is the.

David Cyrus Silver: Are you investing to prepare for anticipated growth or just is this.

David Cyrus Silver: Maybe just the normal transition from a played out portion of the mine to a new new part of the mine.

Shelly M. Chadwick: Yeah, thanks for that. I'll start on that one.

Speaker Change: Yeah. Thanks for that I'll I'll start on that one so as you know we've got a mine out in Utah that we have the various pits that really to obtain our raw material. So you've heard Jim will explain this process before is basically we have an open pit, we dig dirt and process it to get the beryllium.

Shelly M. Chadwick: So you know, as you know, we've got a mine out in Utah that we have dug various pits at to obtain our raw material. So you know, you've heard Jugal explain this process before, is basically we have an open pit, we dig dirt and process it to get the beryllium products out of the ground. When we do that, we have to capitalize that really from an accounting treatment. So I like to think of mine development as really raw material costs that are amortized over the period in which we use the raw material.

Shelly M. Chadwick: Out of the ground.

Shelly M. Chadwick: And when we do that we have to capitalize that really from an accounting treatment. So I like to think of mine development as really raw material costs that are amortized over the period in which we use.

Shelly M. Chadwick: So it's, I wouldn't think of it as this is a different capital investment, but really, it is the size and the amount of the dig and the cost of that, which may be amortized over a different period, or certainly, you know, a higher quantity. We do see an uptick in our beryllium processing and our beryllium-related sales and opportunities. So we're making sure that we dig deep enough to have the product to support that demand. But really, what you see there is just something that goes on the balance sheet and amortizes off with production.

Shelly M. Chadwick: Use the raw material, so I wouldn't think of it as this is.

Shelly M. Chadwick: A different capital investment, but really it is the size and the amount of the day.

Shelly M. Chadwick: And the cost of that which may be amortized over a different period or certainly more a higher quantity.

Shelly M. Chadwick: We do see an uptick in our beryllium processing in our beryllium related sales and opportunities. So we're making sure that we're digging enough to have the products to support that demand, but really what you see there is just something that goes on the balance sheet and amortize off with production.

David Cyrus Silver: Okay, very good. And last one from me, and I'll apologize in advance if I misquote Jugal on this, but the topic would be your expansions on the electronic materials side at Newton and Milwaukee. But one or two quarters ago, I believe, Jugal, you talked about the timing of completion, how it had changed or whatnot, and I, you know, again, I'm paraphrasing, but I believe you said, well, you know, the slowdown in Electronic Materials Demand that was happening then, you thought it would jive very nicely with your planned expansions. In other words, you wouldn't have to accelerate or anything.

Speaker Change: Okay, very good and last one for me.

David Cyrus Silver: I'll apologize in advance if I misquote this.

David Cyrus Silver: <unk> on this but the topic would be your expansions on the electronic materials side.

David Cyrus Silver: Newton and Milwaukee.

David Cyrus Silver: But one or two quarters ago, I believe jugal you talked about.

David Cyrus Silver: I asked you about the timing.

David Cyrus Silver: Completion has it changed or whatnot.

David Cyrus Silver: Again, I'm paraphrasing, but I believe you said well the slowdown in elektron.

David Cyrus Silver: You could complete the expansions and upgrades, you know, at a desired pace, based on your comments today about maybe a more drawn-out recovery or rebound in the core electronic materials portfolio. How are you thinking about that, completing that expansion and, you know, the timing of the startup with customer demand? Any shift in that thinking?

David Cyrus Silver: Electronic materials demand.

David Cyrus Silver: Happening than you thought it would.

David Cyrus Silver: <unk> very nicely with your planned.

David Cyrus Silver: Expansions in other words, you wouldn't have to accelerate or anything you could complete the expansions and upgrades.

David Cyrus Silver: The desired pace.

David Cyrus Silver: Based on your comments today about maybe a more drawn out.

David Cyrus Silver: Recovery or rebound.

David Cyrus Silver: In the core electronic materials portfolio.

David Cyrus Silver: Or are you thinking about that.

David Cyrus Silver: Completing that expansion.

David Cyrus Silver: The timing of the startup with with customer demand any any shift in that thinking.

Jugal K. Vijayvargiya: No, I would say, in whole, there is no shift in our thinking on that. We're continuing to progress on those expansions. We want to make sure that we're properly positioned from a capacity standpoint as the market recovery happens. And I think we'll just continue to work on that, David, and make sure that all of our equipment is being installed, is being qualified with our various customers, and that we're fully prepared to support them, you know, as the recovery happens in the various types of segments of the semi-market. So I would say we're on track and continuing down that path.

Speaker Change: No I would say.

Speaker Change: Oh, there is no shift in our thinking on that we're continuing to progress on on those expansions, we want to make sure that we're properly positioned from a capacity standpoint as the market recovery happens in <unk>.

Jugal K. Vijayvargiya: And I think we'll just continue to work that David and make sure that all of our equipment.

Jugal K. Vijayvargiya: Is being installed as being qualified with our various customers.

Jugal K. Vijayvargiya: And we're fully prepared to support them as the recovery happens at the various types of the segments of the SME market. So we I would say, we're on track and and continuing down that path.

David Cyrus Silver: Okay, great. That's it for me. I appreciate all the color. Thank you.

Speaker Change: Okay, Great. That's it for me I appreciate all the color. Thank you. Thanks, Dan Thanks, David.

David Cyrus Silver: Thanks David. Thanks David. Thanks.

Operator: Thank you. Your next question is coming from Dave Storms from Stonegate Capital Market. Dave, your line is live. You may proceed.

David Cyrus Silver: Thank you. Your next question is coming from Dave storms from Stonegate capital markets.

David Joseph Storms: Dave Your line is live you May proceed.

Operator: Morning.

David Joseph Storms: Good morning, Dave.

David Joseph Storms: I'm just hoping to get a feel for pacing. On last call, it was estimated that value-added sales would be split roughly 45-55 between the first half and second half. Does the anticipated step up in Q2 maintain that ratio, or should we adjust those expectations?

David Joseph Storms: Just hoping to get a feel for pacing last call. It was estimated that you added sales will be split roughly 45 55 between them.

David Joseph Storms: The first half and second half does the anticipated step up in Q to maintain that ratio or should we adjust those expectations.

Shelly M. Chadwick: Yeah, that's a good question. We spend a lot of time thinking about that and really look more at, I guess, think about the cadence of our earnings. And we did talk last time about that being, you know, kind of a 45-55 split as we move through the year. But with our soft Q1, of course, we had to kind of take another look at what that might look like. We do see a significant step up in Q2, but it will affect the balance of earnings where, you know, we'll probably be a little better than 40% in the first half.

David Joseph Storms: So that's a good question, we spend a lot of time thinking about that and really look more like I think the cadence of our earnings and we did talk last time about that being kind of a 45 55 split as we move through the year with our soft Q1 of course, we had to kind of take another look at what that might look like and we do see the significant step up in Q2.

Shelly M. Chadwick: But it will affect the balance of earnings where we'll probably be a little better than 40% in the first half. When we think about Q2 will probably do a little bit better than Q2 of last year, but we're going to really see the meaningful step up in Q3, and Q4 to kind of hit the midpoint of our guide. So if you think 40 60.

Shelly M. Chadwick: You know, when we think about Q2, we'll probably do a little bit better than Q2 of last year, but we're going to really see a meaningful step up in Q3 and Q4 to kind of hit the midpoint of our guide. So, if you think, you know, 40-60, maybe, you know, 41-59, something like that, we're kind of in that zip code right now, at least how we think about it.

Shelly M. Chadwick: $41 59, something like that were kind of in that ZIP code right now at least how we're thinking about it.

David Joseph Storms: That's very helpful, thank you. And Jugal, you mentioned with shares coming down, sorry, with volumes coming down, you're not really seeing share losses. Has that been because you've had to compete on price? Is there any upside to competing on price to maybe get some share gains? Basically, just how are you thinking about your pricing environment, given the softer volumes?

Speaker Change: That's very helpful. Thank you.

Shelly M. Chadwick: You mentioned with shares coming down excuse me with volumes coming down you're not really seeing share losses.

David Joseph Storms: Has that been because you've had to compete on price is there any upside to compete on price to maybe get some share gains.

David Joseph Storms: Basically just how does how are you thinking about.

David Joseph Storms: Youre pricing environment, given the softer volumes.

Jugal K. Vijayvargiya: Yeah, well, when I talk about the share situation, there are a number of different programs we spoke about, you know, beryllium nickel was one of them, for example, and making sure that, you know, everybody understands that this is not a share issue, but just simply an inventory stocking issue, right? And I think that's the case for a number of different things. Some of the declines that we had in Q1 in sales were simply due to operational losses.

David Joseph Storms: Yes.

David Joseph Storms: When I talk about the share.

Jugal K. Vijayvargiya: Situation Theres a number of different programs, we spoke about beryllium nickel was one of them for example in making sure that everybody understands that this is not a share issue. It's just simply an inventory destocking issue right and I think thats. The case for a number of different things some of the some of the declines that we have in Q1 in sales. It was simply due to operationalize it wasn't due to order rates.

Jugal K. Vijayvargiya: It wasn't due to order rates; it was, you know, we just weren't able to get the product, you know, out the door. So I think it's a combination of things between those various items. Now, when you look at pricing in general, certainly, there's always pricing pressure. I mean, there's no doubt, right?

Jugal K. Vijayvargiya: Just weren't able to get the product out the door. So I think it's a combination of things between between those various items now when you look at pricing in general.

Jugal K. Vijayvargiya: Certainly there is always pricing pressure I mean, there's no doubt customers are always looking for ways that we can do things more efficiently and then pass on those benefits to them.

Jugal K. Vijayvargiya: Customers are always looking for ways that we can do things more efficiently and then pass on those benefits to them. So we continue to work that we continue to drive operational excellence initiatives on our side so that any type of price cuts that we have to give to our customers, we're, we're offsetting those with cost outs. But in general, what I will tell you is that if you look at our business over the last several years, we tend to be price positive.

Jugal K. Vijayvargiya: So we continue to work that we can turn to drive operational excellence initiatives on our side. So that any type of price downs that we have to give to our customers, where we're offsetting those with with cost outs.

Jugal K. Vijayvargiya: But in general what I will tell you is if you look at our business over the last several years.

Jugal K. Vijayvargiya: So what we do, and what I mean by that is, we tend to be more, I would say, on the price up side than on the price down side across the board. And so, and so we'll continue to keep a focus on that. You know, our sales teams know very well, as they work with our product teams, what the cost structure is that we have in our various businesses and how to properly price the product and make sure that we're looking at, you know, appropriate value-based pricing.

Jugal K. Vijayvargiya: We tend to be price positive so.

Jugal K. Vijayvargiya: And what I mean by that is is we tend to be more I would say on the price up and down the price downs.

Jugal K. Vijayvargiya: Across the board.

Jugal K. Vijayvargiya: And so and so we'll continue to keep a focus on that in.

Jugal K. Vijayvargiya: Our sales teams know very well.

Jugal K. Vijayvargiya: As they work with our product teams on what the cost structure is that we have in our various businesses and how to properly price the product and making sure that we're looking at.

Jugal K. Vijayvargiya: Brokered value based value based pricing so pricing has been a key important enabler for us I expect it to continue to be a key important enabler for us and.

Jugal K. Vijayvargiya: So, you know, pricing is a key important enabler for us, and I expect it to continue to be a key important enabler for us. And, and we're always, as I said, managing between what the pricing is and what the share is, and how can we make sure that we're properly balancing, you know, both those items.

Jugal K. Vijayvargiya: And we're always as I said managing between what the pricing is and what the share is and how can we make sure that we're properly balancing.

Jugal K. Vijayvargiya: Both of those items.

David Joseph Storms: That's very helpful. Thank you for taking the time to answer my questions and good luck. Thank you.

Speaker Change: That's very helpful. Thank you for taking my questions and good luck in Q2.

David Joseph Storms: Thank you. Great.

Speaker Change: Okay. Thanks.

Kyle Kelleher: Thank you. We have reached the end of the question and answer session, and I will now turn the call over to Kyle Kelleher for closing remarks.

David Joseph Storms: Thank you we have reached the end of the question and answer session and I will now turn the call over to Kyle Kelleher for closing remarks.

Kyle Kelleher: Thank you. This concludes our first quarter 2024 earnings call. A recorded playback of this call will be available on the company's website, materion.com. I'd like to thank you for participating 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 again.

Kyle Kelleher: Thank you. This concludes our first quarter 2024 earnings call. We reported playback of this call will be available on the company's website material on dot com.

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

Kyle Kelleher: Thank you for participating on this call and your interest in material.

Operator: I'll be available for any follow up questions. My number is 206 383 493, one thank you again.

Operator: Thank you. This concludes today's call today's conference and you may disconnect. Your lines at this time. Thank you for your participation.