Q1 2025 Materion Corp Earnings Call
Good morning, ladies and gentlemen, please remain on the line your conference will begin in approximately two minutes. Please remain on the line. Your conference will begin in approximately two minutes.
[music].
Speaker Change: Good day, everyone welcome to the materials first quarter 2025 earnings conference call.
At this time all participants are in a listen only mode.
Speaker Change: Question and answer session will follow the formal presentation.
Speaker Change: If anyone should require operator assistance during the conference. Please press star zero on your telephone keypad. Please.
Speaker Change: Please note that this conference is being recorded.
Speaker Change: I will now turn the conference over to your host Kyle Kelleher Director Investor Relations and corporate S. P. N. A you may begin.
Speaker Change: Good morning, and thank you for joining us on our first quarter of 2025 earnings Conference calls. This is Scott Taylor director of 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 results.
Speaker Change: Can also access to materials the download feature on the earnings call webcast link.
With me today is jugal, <unk>, President and Chief Executive Officer, and Shelly Chadwick, Vice President and Chief Financial Officer.
Speaker Change: Our format for todays 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 expectations for the remainder of 2025, we will then open up the call for questions.
Shelly Chadwick: 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.
Shelly Chadwick: <unk> actual performance may materially differ from that contemplated by the forward looking statements as a result of a variety of factors. Those factors are listed in the earnings press release, we issued this morning.
Shelly Chadwick: <unk> comments regarding earnings before interest taxes, depreciation depletion and amortization net income and earnings per share reflect the adjusted GAAP numbers shown in attachment for through nine in this morning's press release.
Jugal: 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 will turn the call over to jugal for his comments.
Jugal: Thank you Kyle and welcome everyone.
Jugal: It's a pleasure to be with you today to discuss our first quarter results and provide an update on our outlook for the remainder of 2025.
Jugal: I am very pleased with our first quarter results.
Jugal: We delivered record first quarter margins led by strong operational performance.
Jugal: Year over year, EBITDA margins improved by 130 basis points.
Jugal: Sales developed in line with our expectations up about 4% from prior year, excluding the PMI inventory correction.
Jugal: In total we were up about 1% with stronger demand from semiconductor energy industrial and aerospace more than offsetting continued softness in automotive and consumer electronics, including the precision kladstrup inventory correction.
Jugal: Semiconductor market continues to show signs of gradual improvement led by demand from data storage and advanced logic and memory applications.
Jugal: However, power semiconductor shipments remained sluggish impacted by slow demand in automotive and industrial applications.
Jugal: Aerospace continues to be a strong growth market for us up more than 30% in the quarter led by both commercial aerospace and space applications.
Jugal: Airplane builds were up almost 20% in the quarter and we outpaced that right with our sales up 25% year over year.
Jugal: As we mentioned last quarter orders have started to come back for a beryllium nickel spring material, which drove above market growth of 8% in industrial for Q1.
Jugal: In the energy market, we deliver materials for a new multi year agreement with Idaho National Labs to support nuclear energy research and development.
Jugal: We are excited about this partnership and our continued growth in the nuclear energy space.
Jugal: The remainder of our energy business also saw year over year growth.
Jugal: Automotive market continued to pull back as lower customer build rates and inventory destocking led to sales being down 13% year over year.
Jugal: For the quarter, we benefited from structural cost reductions implemented 12 last year and strong plant performance, resulting in record EBITDA margin for the first quarter.
Jugal: Cash flow was a highlight for the quarter with $35 million improvement year over year.
Jugal: We are keenly focused on improving cash flow and 25 by structurally driving down working capital and pacing capital investments as the business grows.
Jugal: Our performance in the first quarter would put us on track to achieve our earnings guidance for the full year.
Jugal: However, we acknowledge that the noise and volatility around tariffs has inserted a level of uncertainty that makes the rest of the year difficult to pinpoint.
Jugal: While we are taking all necessary actions to minimize the impact we do expect to see an impact in the second quarter, which could continue in the second half if tariff conditions persist.
Jugal: From a sourcing perspective, we have some exposure, but in most cases, we are dual source and can shift demand to non tariff countries.
Jugal: We have a handful of materials that are sourced from China, and we have a healthy quantity of those materials on hand.
Jugal: Or are we doing for import tariffs, we expect to recover those costs through surcharges and pricing adjustments.
Jugal: We executed this very well during Covid times, and I would expect us to do the same in this situation.
Jugal: On the sales front, we shipped approximately $100 million of product to China from the U S annually.
Jugal: And that business is one were watching very closely.
Jugal: In many cases, our customers are pausing order activity waiting to see what the outcome will be.
Jugal: While I don't expect all of that business to be at risk if tariff conditions persist, we would expect to see an impact.
Jugal: On a more positive note our substantial U S footprint positions us favorably compared to our international competitors.
Jugal: We are actively working with customers to identify opportunities that could provide sales upside in the U S.
Jugal: As we move through the rest of 2025.
Jugal: We are committed to minimizing tariff impacts driving operational excellence staying focused on structural cost improvements all leading to a 20% plus EBITDA margin for the year.
Jugal: We will continue working capital improvements and pace capital investments, leading to strong cash generation for the year.
Jugal: I would like to thank our global team for their unwavering commitment to improving our company for all of our stakeholders.
Shelly Chadwick: Now, let me turn the call over to Shelly to cover more details on the financials.
Shelly Chadwick: Thanks, Joel and good morning, everyone. During my comments I will reference the slides posted on our website. This morning, starting on slide 10.
Shelly Chadwick: In the first quarter value added sales, which exclude the impact of pass through precious metal costs were $259 3 million up 1% from prior year.
Shelly Chadwick: This year over year increase was driven by growth in space energy and improving demand in semiconductor, partially offset by lower PMI shipments.
Shelly Chadwick: When looking at earnings per share, we delivered quarterly adjusted earnings of $1 13 up 18% from prior year.
Shelly Chadwick: Moving to slide 11, adjusted EBITDA was $48 7 million or a first quarter record of 18, 8% of value added sales up 8% with 130 basis points of margin expansion from the prior year.
Shelly Chadwick: This increase was driven primarily by strong operational performance and structural cost improvements.
Shelly Chadwick: Moving to Slide 12, let me review first quarter performance by business segment.
Shelly Chadwick: Starting with performance materials value added sales were $160 million up 3% from the first quarter of 'twenty four.
This year over year increase was driven primarily by strength in space and energy, partially offset by lower PMI shipments and automotive market weakness.
Shelly Chadwick: EBITDA, excluding special items was $40 9 million or 25, 6% of value added sales up 15% compared to the prior year period with 270 basis points of year over year margin expansion.
Shelly Chadwick: This increase was driven by higher volumes and stronger operational performance.
Shelly Chadwick: Moving now to the remainder of 2025, we expect to see continued strength across the aerospace and defense and energy end markets. We expect that operational performance and cost improvement initiatives will help deliver another year of strong bottom line results.
Shelly Chadwick: Next turning to electronic materials on slide 13.
Shelly Chadwick: Value added sales were $77 8 million up slightly from the prior year.
Shelly Chadwick: This increase was driven by improvement in semiconductor, particularly in data storage and logic and memory devices.
Shelly Chadwick: Excluding the divested Albuquerque large area targets business. The top line was up 5% versus the prior year.
Shelly Chadwick: EBITDA, excluding special items was $13 3 million or 17, 1% of value added sales in the quarter down 8% from the prior year largely due to some nonrecurring onetime items.
Shelly Chadwick: This decrease was partially offset by continued cost management and operational performance.
Shelly Chadwick: As we look out to the remainder of the year, we expect the semiconductor market to improve as the year progresses, particularly within the logic and memory devices and data storage applications.
Shelly Chadwick: We still expect our power semi business to remain challenged with inflated levels of customer inventories and weak underlying demand.
Shelly Chadwick: We expect strong bottom line results, resulting from our cost improvement initiatives and operational performance.
Shelly Chadwick: Turning to the precision optics segment on slide 14 value added sales were $21 5 million down 13% compared to the prior year.
Shelly Chadwick: The lower volume was driven by market weakness in several end markets and order timing, partially offset by strength in defense and semiconductor.
Shelly Chadwick: EBITDA, excluding special items was a loss of <unk> 1 million versus income of <unk> 4 million in the prior year.
Shelly Chadwick: The decrease was driven primarily by lower volume and unfavorable product mix, partially offset by the impact of cost reduction initiatives.
Shelly Chadwick: Looking at the business sequentially margins improved 460 basis points as we start to see the impact of the business transformation initiatives, we announced in the second half of 2024.
Shelly Chadwick: As we look out to the remainder of 2025, we expect those transformation efforts to result in meaningful year over year improvement in both the top and bottom line.
Shelly Chadwick: Moving now to cash debt and liquidity on slide 15, we ended the quarter with a net debt position of approximately $436 million.
Shelly Chadwick: And approximately $172 million of available capacity on the company's existing credit facility.
Shelly Chadwick: We're pleased to see another quarter, where leverage remains below two times as cash flow is an important focus.
Shelly Chadwick: We expect to generate strong free cash flow throughout 'twenty, five as we manage working capital levels and pace our capital investments.
Shelly Chadwick: As jugal mentioned free cash flow improved $35 million versus the first quarter of 2024.
Shelly Chadwick: A significant contributor of this improvement came from inventory, which was 27 million lower than one year ago as a direct result of our inventory improvement initiatives.
Shelly Chadwick: Lastly, let me transition to slide 16, and address the full year of 2025 outlook.
Shelly Chadwick: While our performance expectations for twenty-five are largely unchanged from our initial guide of $5 30 to $5 70 adjusted earnings per share for the full year.
Shelly Chadwick: We continue to review and monitor the potential impact from the unresolved global tariff situation.
Shelly Chadwick: As of today, we are expecting the second quarter to be slightly better than the first quarter, including a 10 to 15 cents earnings per share headwind relating to the current China tariffs, which have customers electing to freeze orders as they await further clarity.
Shelly Chadwick: When looking out to the back half of the year. If these conditions were to continue we could expect an additional impact of 40 to 50 earnings per share.
Shelly Chadwick: We remain focused on taking swift action to adjust supply chains, where possible, while managing costs and passing on any tariff expenses incurred.
Shelly Chadwick: And with our focus on cash generation, we have reduced our capital expenditure expectation by $10 million for the full year.
Shelly Chadwick: This concludes our prepared remarks, we will now open the line for questions.
Certainly at this time, we will be conducting the question and answer session.
Shelly Chadwick: If you would like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue. You May press star two if he would like to remove your question from the queue.
Shelly Chadwick: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Please hold for just a few moment, while we poll for any questions.
Speaker Change: Your first question is coming from Phil Gibbs with Keybanc. Please pose your question your mine is five.
Speaker Change: Thank you so much a lot to lots of sit through but I just wanted to get to the commentary around.
Speaker Change: The fact, you you you pointed out what the tariff impacts could be you pointed out you were working to minimize the tariff impact and then you mentioned the comment you want them to be over 20% EBITDA margin for the year.
Speaker Change: I don't know if that.
Speaker Change: You don't include some of these impacts or exclude some of these impacts so maybe just take us through that to start.
Speaker Change: Yeah.
Speaker Change: Let me, let me start and then Kelly can can jump in and maybe get into a more but you know our commitment as you know is to get to a 23% EBITDA margin for the mid term, we announced that in the last earnings call, we're still committed to that.
Speaker Change: We want to make sure that on a performance basis, we're driving the actions that are necessary within the company to achieve that.
Speaker Change: In order for us to get to that 23% margin target, we have to make improvements each year right. We can't make the full 23% jumped 20% 23% last.
Speaker Change: Last year of the of the journey and so we're committed.
Speaker Change: We're going to do everything we can to ensure that if there are tariff impacts we're driving performance improvement to get to that 20% plus EBITDA margin.
Speaker Change: But I will tell you that it's a bit of a tricky situation right for the second half of the year.
Speaker Change: It's hard to know what impacts are going to be there.
Speaker Change: I'm not sure if there were really some recessionary things that we'll have to deal with in the second half and so I think there is a bit of uncertainty.
Speaker Change: But I can tell you that you know we and our teams are committed to continue the journey that we announced last quarter, which is to get to the 23% for the midterm timeframe.
Speaker Change: Yeah, well said jugal and I think you know the only thing I would add Phil as you know obviously, we're doing a lot of scenario planning right. So we're kind of taking a look at different scenarios and what the outcome might be assuming that you know if the tariffs were to persist how we would perform and still deliver 20% I'm. You know are there other scenarios if the economy slows way down that may be.
Speaker Change: More challenging of course, but you know kind of what we're working on is how is our business performing what do we expect from the markets and then if we've got the tariffs you know how do we still see our twenty-first yet and until if I can add one other thing and I don't feel you Didnt ask about this but you know I think it's important for us to comment on is that we are extremely focused on our cash.
Speaker Change: Regardless of whether there was the tariff situation or not.
Speaker Change: We had a really.
Speaker Change: Hum a marked improved first quarter from historical levels and.
Speaker Change: Regardless of what the rest of the year, we'll bring on some of these uncertainties that we have.
Speaker Change: We're making sure that we're very well positioned on driving cash improvement initiatives.
Speaker Change: Thank you so much and then you mentioned.
Speaker Change: <unk> orders from from buyers with within China.
Speaker Change: What vertical and what businesses are torturing is it largely the zumiez business or is there some some overlap in the other segments.
Speaker Change: Yeah. So we mentioned that we have about $100 million worth of sales.
Speaker Change: From the U S into China annually, I would say approximately half of those are for the semi market.
Speaker Change: The other half or.
Speaker Change: Distributed between auto.
Speaker Change: Between consumer electronics, a little bit in the data data and telecom area.
Speaker Change: And so when we look at kind of the situation that we're facing with these customers I would say it really goes across all of those markets.
Speaker Change: You can you can kind of estimate that you know as I said roughly half of our sales of our semi and so that's clearly an important market, where I think customers are pausing and working through.
Speaker Change: Inventory and looking at they're looking at their supply chain, but that's how the business is kind of split up you know for our sales into China.
Speaker Change: And one last question is around the tariffs when you when you guys.
Speaker Change: <unk> came up with this.
Speaker Change: 10 to 15 set here and in the.
Speaker Change: Because <unk> hit in the second half.
Speaker Change: Was that.
Speaker Change: Was that merely just an impact from your your.
Speaker Change: Your expectation of just lost volume.
Speaker Change: And in the overhead absorption associated with volume and.
Speaker Change: And I also know you made some comments that you are you where you would work on displacing that are bringing down cost mitigation. So that's that's sort of a pause it feels to me like it was almost on maximum.
Speaker Change: You know impact the way that you framed isn't if I'm understanding you correctly, but.
Speaker Change: How do you come up with the numbers I guess is what I'm asking.
Speaker Change: Yeah, I think as we noted and we included a slide on tariffs.
Speaker Change: Yes, our primary our primary impact that we're looking at where tariffs is China. It's the sales going into China, I think the sales coming from the rest of the world into the U S. R. A minimal number for us.
Speaker Change: Well as I think the raw material side, I think we will be able to manage the raw material impacts if they're already so I would say if this is primarily China related sales going into China.
Speaker Change: Looking at what type of situation there could be from maybe perhaps continuing.
Speaker Change: Customers are using up.
Speaker Change: Inventory freezing waters, reducing orders are.
Speaker Change: Perhaps loss of share, although we're going to do everything we can to make sure that there is not a loss of share as we continue to look at our supply chains and then to your point you mentioned you know the absorption issues in our factories.
Speaker Change: And then offsetting that wed.
Speaker Change: Operational and cost containment actions that are we're making sure are happening across the company. So that's kind of how I would put the.
Speaker Change: Our assessment of that impact that we can be shared.
Speaker Change: Thanks, so much.
Speaker Change: Your next question is coming from Dan Moore with CJS Securities. Please pose your question your line is live.
Speaker Change: Hi, This is Justin on for Dan.
Speaker Change: Hi, there going high.
Speaker Change: Question on tariffs, it's a bit of a clarification the 50 to 65 total impact.
Speaker Change: Is that so.
Speaker Change: So.
Speaker Change: If there's no change to the tariff environment without reduce that $5 30 to $5 70 range or does that 530 to $5 70 range include that potential impact.
Speaker Change: No I I can I can tell you that that's an easy one obviously it does not.
Speaker Change: That would have to mean that we would be in the $6 range.
Speaker Change: You know are higher for our for our business and clearly you know with the current environment. That's not you know where things are and so I think what we're communicating is that operational performance that we have is extremely strong. Our Q1 is off to a great start and if business conditions continue the way I'll call it normal business conditions.
Speaker Change: <unk> would be very much in line to deliver on our guide that we have that we've noted. However, we have these impacts that are there and we've identified what those impacts are and it's hard to know exactly how things will play out in the second half of the year I mean, we're more certain about the impact that we've shared for Q2, the 10% to 15.
Speaker Change: We've identified what could be the impact in the back half of the year.
Speaker Change: But I think every day, we're monitoring the situation and we're working around the clock to minimize the impact.
Okay, and then I know you talked about some of the mitigation efforts is there any way you can help.
Speaker Change: Help us triangulate.
Speaker Change: Triangulate how much of that like the actual amount that you can mitigate through some of those efforts.
Speaker Change: I would say, we're continuing to work those actions.
Speaker Change: But whether it would be the raw material sourcing that we have where we're looking at dual sourcing that we have for a lot of our materials working with our supply base.
To ensure that we don't have a tariff impact or we have the least amount of tariff impact because that would mean that we would have the least amount of pricing discussions that we would need to have with our customers and then from a manufacturing standpoint, where we're continuing to study it will continue to look at options.
Speaker Change: So it's work in process and every day.
Speaker Change: Okay, and then just one last one if I could what are you hearing from your semi customers about their capex plans, but not necessarily for the next one to two quarters, but you know over the next two to three years. Our plan is getting pushed out or put on the shelf given the significant tariff and macro uncertainty like what are you hearing in real time I'm here I guess.
Speaker Change: Yeah, I think in general I would say that you know, it's a relatively new situation I think I think our semi customers are looking at it is perhaps more of a shorter term.
Speaker Change: You know impact here, and then perhaps continuing to business as usual as they move forward, although they may need to make some manufacturing decisions on regions. I think overall, we're not seeing a significant change in the Capex planning I mean, there are some announcements I mean for example.
Speaker Change: One large.
Speaker Change: I mean manufacturer announced some decrease there.
Speaker Change: There are some that have talked about perhaps a slight delay, but I say I would say in general.
Speaker Change: I think the semiconductor market for the longer term is his position.
Speaker Change: Positioned to deliver the mid single digits.
Speaker Change: Higher single digits type of growth that it has delivered over the last 2030 years.
Speaker Change: That's very helpful. I appreciate you taking the question. Thank you.
Speaker Change: Okay.
Speaker Change: Your next question is coming from David Silver with C. L. King. Please pose your question your line is live.
David Silver: Yeah, Hi, thank you.
David Silver: Alright, David Hey, good morning.
So I have a couple of questions.
David Silver: I guess regarding.
David Silver: Regarding kind of.
David Silver: Knock on effects from the tariffs are not direct but maybe if.
David Silver: Theyre not near term, but maybe a little bit over the horizon.
David Silver: But you know in particular I guess are you know you do have R&D and you do do a lot of product development work I would say in close collaboration with a lot of your customers.
David Silver: And you know ultimately that leads to contract wins and things that develop over a period of time.
David Silver: Can you look at the can you just comment I mean in the current environment of high near term uncertainty would you say your product development efforts or your collaborative work.
David Silver: With key customers for projects that may develop let's say over the next year or two.
David Silver: Have your customer has your customers' behavior shift extended you know to maybe pausing on some of those are multi year development plans or Alternatively are you still seeing a lot of you know incoming requests for bids and.
David Silver: Opportunities to begin you know new collaborations thank you.
David Silver: Yeah, David No I would say the short answer is no no impact.
David Silver: We have very very strong relationships with our customers really in all the verticals that we operate in globally.
David Silver: We have a number of initiatives that we're involved in.
In each of those verticals and our discussions are continuing with the customers.
David Silver: They recognize obviously that there is this uncertainty but at the end of the day, there is still going to need product right, there's still going to need product a year from now two years from now three years from now and so that product development cycle has to continue now the manufacturing or some of the supply chain things that may need to evolve over time, that's something that of course, we will work with our customers on.
David Silver: But I think product development R&D activities, continuing I mean, we have a we have a number of large activities. For example that we're doing on clean energy.
David Silver: And that is continuing in fact, I would say the energy.
David Silver: The additional energy generation.
David Silver: Generation sort of actions are accelerating EBIT because of the increased use of energy around data centers and other areas. So I think in general I don't see any change customers are working with us and are in close collaboration and developing development products.
David Silver: Okay.
David Silver: Okay, great. Thank you for that I appreciate it.
David Silver:
David Silver: Just a question about I guess your comments on aerospace and defense. So historically you know in terms of end market performance. That's been one of your very strongest.
David Silver: End markets, let's say over the last couple of years.
David Silver: And I guess it was kind of a tale of two cities. This time right, where your aerospace continues very strong in defense I mean, you cited timing, but you.
David Silver: You know.
David Silver: Anyway, I'm, just wondering on the defense side.
David Silver: Is your you know one to two year projection kind of for more you know continued trendline demand growth on the defense side or.
David Silver: You know in contrast might that be something where you know there was a bump.
David Silver: Up over the last year or two maybe related to geopolitical.
David Silver: Drivers that and then maybe that portion of your business is due to moderate Ah you know on a multi year period. So if you could separate you know aerospace from defense I mean, how how how does the defense side of that portion of your end market.
David Silver: The profile.
David Silver: Look, let's say on a one to two year basis.
David Silver: Yeah, Let me let me just start I think with the overall comment on the aerospace and defense that's been a really really a strong market for us I think this quarter. We reported is the 16th consecutive quarter of year over year growth in that market.
David Silver: It's been it's been led by really all three parts of it which is the commercial aerospace.
David Silver: Commercial space and then defense all three have contributed meaningfully to that I would say, probably a little bit less so on the commercial aerospace over the last couple of years, just because of the build rate challenges that that.
David Silver: That oes.
David Silver: I haven't had both the European OEM, the North American OE that some of the bill rate challenges that they've had over the last couple of years have certainly been an issue, but I would say overall, it's been a very very strong market for us.
David Silver: For Us defense.
It's been a strong market not only for North America, but I think one of the things that we've really focused on the defense side and we talked about this in our earlier calls is our global activity.
David Silver: Spent a lot of time on understanding the markets on the possibilities in Europe and Asia.
David Silver: We've been working with the price here in the U S for those applications, but then also our customers are directly in those regions. So I think defense in general over the next several years I would continue to see as a good.
David Silver: A growth market for us this quarter, it's strictly a timing I think we've talked about it a number of times of defense is a choppy market.
David Silver: With the orders.
David Silver: A lot of them end up being shipments at the end of the ended the year and so that creates some lumpiness on the on the defense market, but overall I see defense is a good strong market for us, particularly for us.
David Silver: Global.
David Silver: Defense.
David Silver: So I I think this overall aerospace and defense will we will continue to be a good market.
David Silver: Okay. Thank you.
David Silver: And then I did want to maybe.
David Silver: They ask a question I guess about <unk>.
Shelly Chadwick: I think Shelly you used the term scenario planning.
Shelly Chadwick: And you know in the current environment that certainly makes sense.
Shelly Chadwick: Different aspects of that but.
Shelly Chadwick: It's not a perfect playbook, but I think you've had to do some scenario planning over the past couple of years due to the.
Shelly Chadwick: Pandemic.
Shelly Chadwick: And I'm just wondering if maybe a couple of those pages you know.
Shelly Chadwick: Apply in the current environment. So in particular you know.
Shelly Chadwick: You talked about inventory reductions this year. This this quarter and I'm. Just wondering you know about whether you know due to the tariff impacts and potential retaliation from different countries or maybe just extended negotiations.
Shelly Chadwick: No.
Shelly Chadwick: Did you consider you know increasing inventories selectively and maybe some strategic areas are areas, where there might be you could under scenario planning and you could imagine some vulnerabilities.
Shelly Chadwick: And then I'm also wondering you know.
Shelly Chadwick: Would it have been prudent or had you considered increasing I guess.
Shelly Chadwick: You know your borrowing capability from banks either for you know either for defense or for offense, you know to take advantage of opportunities, but they may be just a finer point on you know steps you've maybe taken in the current environment too.
Shelly Chadwick: Just to enhance your positioning to respond to different.
Shelly Chadwick: Types of uncertainty that may or may not develop over the.
Shelly Chadwick: Over the next quarter or two.
Shelly Chadwick: Yeah, David Let me comment on a couple of things and then I'll turn it over to Shelly to talk about.
Shelly Chadwick: Borrowing in particular and any other comments that she would have clearly the playbook that we employed <unk>.
Shelly Chadwick: Relative employed during the Covid times.
Shelly Chadwick: This is a playbook that we've looked at.
Shelly Chadwick: I guess, it's a coincidence that.
Shelly Chadwick: The timing of that was right around the March of <unk>.
Shelly Chadwick: <unk> thousand 20 timeframe so right at the end of Q1 and here. We are we are kind.
Shelly Chadwick: Kind of a Q1 Q2, and if you recall the biggest impact I think not only on us but on many companies was in Q2 with the with the with immediate changes that happened as a result of Covid and so.
I guess similar timing in a way.
Shelly Chadwick: During the year, but certainly we have.
Shelly Chadwick: I have a lot of lessons that we learned at that time, including how to manage pricing.
Shelly Chadwick: With our supply chains, and logistics and I think each of those things, we're making sure that we're where we're leveraging those those lessons learned in this in this environment.
Shelly Chadwick: We have looked at inventory I mean, we mentioned for example that for the materials are we.
Shelly Chadwick: From China, we have a good healthy levels of inventory on those on those on hand, so that we can continue to work with our customers support our customers in a meaningful way and so I think where it makes sense. We've made sure that we're making the right moves on inventory and of course, we're where we can continue to improve on our inventory levels, we have I mean <unk>.
Shelly Chadwick: One was a was a was a really a good quarter for us on a year over year basis, as we indicated about $27 million less inventory in Q1 of this year than we had in Q1 of last year. So I think the lessons that we learned and the work that our teams are doing.
Shelly Chadwick: It is a balance of making sure we can continue to support our customers, but at the same time driving the important.
Shelly Chadwick: Important metric of cash preservation conservation generation.
Shelly Chadwick: Within within our company.
Shelly Chadwick: I guess and just to address the borrowing side you know certainly we keep close eye on liquidity and we talk about that in our releases and in our 10-Q.
Shelly Chadwick: I'm pretty happy with what we have for liquidity today. It just so happens that our revolver does come up for renewal this year and so we're taking a look at you know where do we want optionality as our terms improve and what kind of needs could we foresee so we're definitely taking that into account.
Speaker Change: Okay, Great I appreciate all the color. Thank you very much.
David Silver: Thank you David.
Dave Storms: Your next question is coming from Dave storms with Stonegate. Please pose your question your line is live.
Dave Storms: Good morning, everyone and thanks for taking my questions.
David Silver: Hum.
David Silver: You mentioned on inventory.
David Silver: The strategic build in some parts of yourself.
David Silver: I know.
David Silver: Parents materials had a strong quarter important thanks to volumes any sense of how much of this may be your customers, having a bit of a demand pull forward.
David Silver: To try to put it.
David Silver: The same reasons.
Speaker Change: Yeah, I mean, clearly you know just like we've looked at things I'm sure. You know there are some customers that have.
Speaker Change: Looked at that as well, but I think I would say that there is the opposite side, where customers have also paused and I've really question, whether that's something that they want to take on so although there may be some.
Speaker Change: Our level of inventory that they have full I think there is probably an equal number of customers that probably have.
Speaker Change: Have paused and so on a whole are I'm not sure I would credit much of the.
Speaker Change: Q1 performance to a net pull from our customers.
Speaker Change: Understood very helpful and then.
Speaker Change: We should do.
Speaker Change: The macro insurgency is clear up in the next quarter or two which will be fantastic is there any sense of how much of the 10% to 15 cents loss of your expected in Q2, the impact that you're expecting in Q2 any sense on how much of that could be made up through the balance of 2025 or.
Speaker Change: Is that structurally gone.
Speaker Change: No I mean, we're very much focused on figuring out how we could possibly recover that.
Speaker Change: If the tariff issues were resolved too.
Speaker Change: Sort of the satisfaction of our customers would start putting in orders back in and we could start shipping and our goal and objective would be to get get.
Speaker Change: Get that and you know as.
Speaker Change: As much as possible. This year I think it just depends on the timing right of I mean here we are.
Speaker Change: Today is may 1st right. So we just got to wait and see on.
How things proceed and but again our goal would be to certainly get that this year, but but if things move forward into next year based on negotiations than then.
Speaker Change: That's what will take it.
Speaker Change: That's great color. Thank you.
Speaker Change: We have reached the end of our question and answer session and I will now turn the call back over to Kyle Kelleher for closing remarks.
Speaker Change: Thank you. This concludes our first quarter 2025 earnings call recorded playback of this call will be available on the company's website materially on dot com I'd like to thank you for participating on this call and your interest in midstream.
Speaker Change: Be available for any follow up questions. My number is 21633 493, one thank you again.
Speaker Change: This concludes today's conference and you may disconnect. Your lines at this time. Thank you for your participation.