Greetings, welcome to the Materion Fourth Quarter and Full Year 2023 Earnings Conference Call. At this time, all participants are on a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] Please note, this conference is being recorded. I will now turn the conference over to your host, Kyle Kelleher, Manager of Investor Relations. You may begin.

Good morning and thank you for joining us on our fourth quarter 2023 earnings conference call. This is Kyle Kelleher, Manager, Investor Relations. Before we begin our remarks this morning, I would like to point out that we have posted materials on the company's website, that we will reference as part of today's review of the quarterly results. You can also access the materials through the download feature on the earnings call webcast link. With me today is Jugal Vijayvargiya, President and Chief Executive Officer; and Shelly Chadwick, Vice President and Chief Financial Officer. Our format for today's conference call is as follows. Jugal will provide opening comments on the quarter and full year, as well as an update on key strategic initiatives. Following Jugal, Shelly will review the detailed financial results for the quarter and full year, in addition to discussing our expectations for 2024. We will then open up the call for questions. Let me remind investors that any forward-looking statements made in the presentation, including those in the outlook section and during the question-and-answer portion are based on current expectations. The company's actual performance may materially differ from that contemplated by the forward-looking statements as a result of a variety of factors. Those factors are listed in the earnings press release, we issued this morning. Additionally, comments regarding earnings before interest, taxes, depreciation, depletion and amortization, net income and earnings per share, reflect the adjusted GAAP numbers shown in attachments 4 through 8 in this morning's press release. The adjustments are made in the prior-year period for comparative purposes and removed special items, non-cash charges and certain discrete income tax adjustments. And now, I'll turn over the call over to Jugal for his comments.

Thanks, Kyle, and welcome, everyone. It's great to be with you today to talk about our fourth quarter performance and our record results for full-year 2023. I'm proud of our team's focus and resilience, leading our company to another year of record sales and earnings. We overcame significant headwinds in some of our largest markets to deliver strong results, demonstrating the power of our balanced portfolio and the extraordinary potential of our unique customer partnerships. Our sharp focus on operational excellence led to continued meaningful margin expansion, structurally improving our profitability, and preparing us to maximize performance as markets recover. And while we managed our costs closely, adjusting to uncertain economic conditions, we continue to invest for the future, seeding the pipeline for long-term organic outgrowth. In the fourth quarter, the diversity of our portfolio continued to be a highlight, while several of our markets remained challenged. When excluding semiconductor, our largest market, which is experiencing significant market weakness, our sales were up slightly. Our aerospace and defense sales grew nearly 70% year-over-year, representing the 11th consecutive quarter of growth for this market. In addition to the benefits from significant organic wins in space and defense, we also saw the impact of continued increase in our content per plane. On the other hand, our semiconductor and industrial end markets continued to show significant weakness in Q4. In semi, we saw our third consecutive quarter of meaningful year-on-year declines, but the order patterns are starting to show signs of stabilization. We are also seeing some positive indicators in the broader market and expect that the related increase in demand will positively impact us starting in the second half. Our performance in the industrial space is impacted by its largest application related to non-residential and warehouse construction bills. With the impact of…

Thanks, Jugal, and good morning, everyone. During my comments, I will reference the slides posted on our website this morning starting on slide 13. In the fourth quarter, value added sales, which exclude the impact of pass-through precious metal costs were $289.7 million down slightly from prior year, but up 7% sequentially. Despite strength in aerospace and defense, semiconductor and industrial remain challenged as Jubal outlined. When looking at the earnings per share, we delivered adjusted earnings of $1.41 in the fourth quarter down slightly from prior year. Moving to slide 14, adjusted EBITDA in the quarter was $53.3 million, or 18.4% of value added sales, down 4% from the prior year with margin expansion of 10 basis points. This year-over-year decrease is mainly due to the volume decline, but strong price mix and operational performance, including the targeted cost improvement initiatives are contributing to the increase in margins. These results also include the year-to-date adjustment to the expected manufacturer's production credit benefit, as we announced earlier this year. Moving to slide 15, let me now review fourth quarter performance by business segment. Starting with performance materials, value added sales were $186 million, up 5% compared to prior year, and up 10% sequentially. This record quarter and year-over-year increase was driven by strength across the aerospace and defense end markets, including meaningful contributions from space applications. EBITDA excluding special items was $46 million, or 24.7% of value added sales, up 4% compared to $44.3 million in the fourth quarter of 2022. This growth was primarily due to higher volume, favorable price mix, and strong operational performance, despite the unfavorable year-to-date adjustment to the manufacturer's production credit. Moving to the outlook, we expect aerospace and defense to remain strong in 2024, and we'll remain on track with the expansion of our…

Thank you. At this time, we'll be conducting a question and answer session. [Operator Instructions] And the first question today is coming from Daniel Moore from CJS Securities. Daniel, your line is live.

Thank you. Good morning, Jugal. Morning, Shelly. Thanks for taking the questions.

Hey, good morning Dan.

Good morning. Maybe start with the outlook and appreciate all the color. Just give us a sense for what level of value added sales growth is associated with your guide for '24 and maybe just talk to the cadence a little bit, given a much tougher comp in Q1, as you described embedded within those assumptions?

Yes, Dan, as you look at our deck that we provided, we did share some of the end market growth outlooks between the various markets that we serve. We see a couple of markets on the positive favorable side, I'd say more than a 3% type of a growth, particularly aerospace, defense, and then more of the space segment of aerospace with the new business wins that we've had, I would say low single digits on several of our markets and a couple of markets that we frankly see contracting. So when we look at our overall growth for year-over-year, I would say mid single digits, it's probably reasonable for the full year. However, I would see that skewed to the back half of the year. I think the first half of the year, especially with our Q1 comps semi, as Shelly noted, was a very, very strong quarter for us last year in Q1, one of the strongest, I think, in the company's history, as the semi slowdown had not caught up to us. Whereas now, of course, we're in the full semi slowdown mode and it'll start to show the signs of recovery here in the second half of the year. So, I would expect just light growth in the first half of the year, but a much more robust growth in the back half of the year led by semi, but then also other markets as well, as well as new business activities, and so I could see a roughly a mid single digit overall for the year.

Yes. And as you heard in my comments first quarter is going to look a lot like first quarter last year. So when I think about the year from an earnings perspective, I'm expecting maybe a 45%, 55% waiting first half to second half.

Very helpful. It makes perfect sense. And then shifting gears a little bit longer term, I appreciate all the commentary on the semi side beyond the market growth, how should we think about the opportunity for content gains driven by higher powered logic chips, some of those which you described, Jugal in your prepared remarks looking out over the next three to five years and has that outlook changed at all?

Right. Frankly, the outlook has not changed at all for us for a longer term. Semi is our largest market. It's one that we're very, very excited about. And we continue to be very excited about where things are headed in the next three to five years. We are continuing to invest in the semi space. For example we just mentioned that today that we're launching two new ALD materials. These are atomic layer deposition materials that are going to be used for advanced memory and AI applications. We all are hearing what's going on the AI front. And I think we're really, really well prepared for both advanced memory as well as advanced logic with our tantalum portfolio, as well as the number of other materials that we have. And in addition to that, I think when you look at overall semi investments on the capacity side, we're putting the right investments in on the capacity side for the short-term update, but also be able to capture the long-term growth. So I think on the semi side we remain excited. I would say we should probably even more so than we were earlier because of the uptake that's going to happen here in the near term, but then continued growth in the three to five years. Our portfolio is really well-positioned. Last comment, I think on the power side, as you know, power semiconductor is an important part of our portfolio. We see the applications for power semiconductor continuing to increase, whether it's EV applications or other industrial applications and our positioning with the portfolio, the product portfolio that we have, but also I would say just equally as important the customer portfolio that we have on the power semi, it's extremely, extremely strong. So we are feeling very confident I think in our ability to grow both short term and long term for the semi market.

Perfect. Last one I'll jump out is the guide implies, we're closing in on that 20% EBITDA margin goal. Just wondering maybe if not necessarily providing an updated goal today, but talk about the operating leverage ability of the business beyond what you've already generated over the last two to three years? Thanks again.

Yes. So let me just comment a little bit first of all on '23, right? Two of the four quarters we delivered a 20% margins and I've said this a number of times that we'd like to go to see that on a more consistent basis. I feel that we're positioning ourselves more and more to be able to deliver that on a consistent basis, and would not be surprised if '24 represents a much more consistent basis for that 20% margin delivery. And then, clearly, that's not the end for us. As you know, we continue to challenge ourselves more and more and we will be setting up an objective that I'm sure we'll be talking to you at some point that defines what we think we can be in three to five years from now. And that's something we're looking forward to, and perhaps having that discussion during '24.

Look forward to it. Thank you again.

Thanks, Dan.

Thank you. The next question is coming from Mike Harrison from Seaport Research Partners. Mike, your line is live.

Hi, good morning.

Good morning.

Good Morning, Mike.

Jugal, I was wondering if you could maybe I'm just -- I'm looking at slide seven here that shows your end market performance. And it's kind of striking that of your seven and the end markets that you call out, five of them are showing dramatic declines, right, double digit declines. Is this an indication of what's going on in the underlying market or is there some de-stocking going on or timing issues? Maybe just give us a little bit more color. I think we understand what's going on in semiconductor. But if you could talk in a little more detail about industrial energy, automotive, I guess those three and what's driving those big declines in the fourth quarter?

Yes. I think Mike, it's important to note and you highlighted the keyword I think is here, which is the fourth quarter. If you look at, of course, in the full year the numbers are much less, right, declines on a full year basis, but much higher declines in the fourth quarter. And I can tell you that it is the underlying market/de-stocking going on in these markets. We've done extensive reviews with our teams on where are we in terms of share growth, new business wins and we know that we have a good growth and good business wins to be to have confidence that '24, as the markets turn around, we'll have the right growth in '24 and into '25. So, this is clearly -- this is really, clearly, a market/de-stocking and I can kind of walk through each market, of course, be able to help understand that and help talk through that. As we look at '24, I would see the industrial market, I think, we do have one sort of special thing going on in the industrial market, and that's related to our Beryllium nickel sprinkler systems or the springs that we provide for those. In there, I see that as more of a one time correction. I think that's going to happen probably during the '24 timeframe. But other than that, I really do see this as a market situation and just de-stocking and would expect that during '24, these markets are turning around for us. The one thing that I'll note is despite these reductions in Q4 and you see our performance, the team has done a fantastic job of driving performance across the company, whether it's price, whether it's mix related improvements, operational performance in the plants, our SG&A cost control, targeted cost actions, all those things that we should be doing, the team has done a really a fantastic job of driving those. So to me, this is a -- I think this is a temporary situation that we would see turning around as we indicated earlier that we expect about a mid, mid single-digit growth really heavily weighted towards the back half of the year.

All right. Thanks for that. And maybe on a brighter note, the aerospace and defense market has been extremely strong here. You noted the $60 million of additional orders that you've secured. I know that that defense market in particular can have some lumpiness to it. So I'm just curious if some of the strength that you're seeing, just timing related, or are you optimistic that you're seeing a sustained pickup in opportunities and applications within that market?

Yes. Well, first of all, let's take that market and just peel it a little bit, right? And then there's three major components I would say that we should talk about. One is the commercial aerospace market. The other one is the defense market. And then the third is the very emerging space market. Let me start with that emerging space market. That's been a fantastic market for us. We indicated about $90 million of new business orders. Today we announced this fourth order of $36 million for supplying for space proposal systems. This is the fourth order. If you kind of look at what's happened over the last year or so and look at the first three orders, add that up, that's roughly about $70 million of orders just in the space market combine that with our ToughMet business in the space market, our optical assistance business in the space market. And we're looking at roughly about $90 million. So, very good, strong market for us in '23, growing, accelerating market for us in '24, and we would hope that can continue beyond that. The aerospace market, the commercial aerospace market, we've gained content, 25% more content done on average on planes now versus pre-pandemic just in the last few years, both at the Boeing side as well as the air bus side. So good content growth as well as you know, the build rates continue to increase, temporary situation on the Boeing side as we all are aware of, but in general, the build rates continue to increase for the airplanes. So we would expect our material content to continue to increase. And on the defense side, the team has done a fantastic job of getting our materials more and more ingrained into the defense applications. And I would expect that even though there's lumpiness, and I agree with you completely that there's lumpiness on the defense orders, we would expect a good market and good growth for defense overall for the year. So I think all three components of the aerospace and defense market we feel really good about for '24 and positioning well for '25 and beyond.

All right, very helpful. And then just a couple of quick ones, the electronic materials business in the margin or EBITDA commentary you mentioned some one time unfavorable items hitting that business. Can you give a little more color on what those items were? And maybe how we should think about the EBITDA margin progression in 2024 in that EM business?

Yes. Thanks for that question. They did see some items, but there weren't one-time items. There was nothing that was really big that stood out, a couple of accrual adjustments, a couple of expenses that just came in at the end of the year. We do expect that from a quarter on quarter we will see a positive move in the margins as we enter into '24. So, we think you know, Q4 was a bit impacted just by those few one-time items and we'll see things kind of pick up in '24.

Yes. And Mike to add to that, if you look at our Q2 and Q3 results, we were on 17%, 18% EBITDA margins in the Q2, Q3 time frame, certainly a Q4, we had the impact of the one-time items that Shelly mentioned, but also there was a significant impact based on the mix for memory devices. And you know, what's happened to the memory side, particularly in the last year. And so, that was a mix hit for us. But we would expect and we see this I think happening during the year as Shelly indicated that those one-time items are behind us and we would expect continued progression back towards the Q2, Q3 type margins and then pushing those forward after that.

All right. And then last one for me is you called out $5.6 million worth of startup costs and scrap costs for the second phase of this precision clad strip project. Is that all the startup costs or is that just a portion that you guys considered unusual? I guess I'm just looking for a little more clarity on how we should be modeling those startup costs through late 2024 if you could provide some more detail there?

Yes. Sure. Thanks. Thanks for that. If you probably know, when we were working through the initial phases of the ramp of the clad strip facility, we did not specialed out any of those ramp costs. We, we took them to the P&L and we discussed and disclosed what they were. Once we were at kind of full run rate in that facility, and we had some process tweaks and some formulation tweaks that we were working on with the customer, we did incur some additional charges that we would assume are, or we would call unusual. And we didn't want that to mask the performance of the business. So we called them out and we special those charges in '22. Similarly, we're doing a little of that again, and we did that in a Q4 where we had some process runs and things that were for qualifications that needed to be scrapped. And so a lot of it is there. In addition to some resources that we've brought in just to make sure the ramp goes well. So now that we're really fully running, we don't want to have the business results skewed by up and down on the startup costs. So if we have unusual costs, we will continue to special them so that you don't have to worry about, hey, is that margin going to come down, come up during the year.

So I guess as we're thinking about the performance materials business on an adjusted basis going forward, we should assume that there's not startup costs in there, that those are going to be specialed out? Or are there still going to be some, some headwinds, I guess as that's ramping on an adjusted basis?

Yes. On an adjusted basis, you should assume that those will be specialed out. And you know, as we've talked about the ramp of that will start late in '24 of the sales related to that.

Right. Right, understood. Okay. Thank you very much for all the help.

Sure.

Thanks, Mike.

Thank you. The next question is coming from David Silver from CL King. David, your line is live.

Okay. Thank you. Good morning.

Good morning David.

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

Yes. David, if we actually go back a couple of quarters, I do, you highlight a fourth quarter. I think the world was thinking and we were thinking that this market, semi market was going to bottom out in Q2 and start to see an uptake in Q3. And then as we noticed from all the major semi companies, the recovery got a bit delayed, a bit delayed, a bit delayed, and now the most recent information is that Q1 is expected to be the low point and then slight recovery in Q2, but then really more of the recovery happening in the back up of this year. So -- and that's just a combination of the usage around the world as well as the inventory de-stocking that was happening at all of the semi companies. So, I think that clearly impacts us as we are a key supplier into that value chain. The recovery for us will be slightly later than what the semi companies will recover, just based on the cycle and kind of where we fit in the value chain, but we'll follow that recovery as it happens. So, I think really it's a very much associated with sort of the market dynamics and what we've been -- what we were hearing from the various semi producers. The one item that was more specific I think to us, which again is a market dependent item is the memory mix issue that I mentioned where we did have some specific product portfolio, which we count on every quarter and we had a significant drop just based on inventory correction that our customers are going through. And as a result, that created a heavy negative mix for us for the quarter. But we would expect that to start to recover in Q1 and into Q2 and so on. So, I think we're lined up extremely well to be able to hit the ground running as the semi producers start to produce more and get the recovery going.

Okay, very good. And I'm going to ask you to parse one comment you made near your opening remarks. But again, on electronic materials, I believe you indicated that the order book that you're seeing is kind of indicating maybe early signs of stabilization, I think was your wording. And when I think about an order book in electronic, your electronic materials business, I kind of think, well, are the orders that you're seeing, are they reflective of maybe legacy products? In which case maybe it's indicating the customer inventory liquidation is nearing an end, or alternatively, is it for more leading edge or newer applications, which kind of points to the rollout of the ramp up of new customer facilities. Is there some way you could maybe parse that the order book that you're seeing and maybe read the tea leaves there a little bit?

Yes. I think it's a combination from what you just indicated. So for example, when you talk about the leading edge, we indicated that we launched two new ALD materials for the advanced memory applications and AI applications. We're starting to -- as we're having discussions with our customers, we're starting to feel that they are going to start to put orders in that then we'll translate into sales in the Q2, Q3 timeframe. So I think that's an example of where there's newer products that we believe we're going to contribute to a sales uptake. And at the same time, I think on the legacy products, as you know, we have a lot of precious metals business, non-precious metals business. We're watching the inventory levels very closely with our customers. And then from what we can see the last few weeks, I mean, the orders have -- there's not been a decline, let's put it that way. So we feel good about, I think the fact that, okay, maybe we're bottoming out and we would expect to see over the next few weeks slight uptake in the order rate for those legacy products. So that's kind of really where our commentary is coming from. And that's where we feel that there will be a slight uptake in Q2, but really a bigger uptake in Q3, Q4. And I think we're hearing that also from the various other earnings calls or other announcements that the semi producers are making as well.

Okay. And then you did mention the two new ALD materials and please don't tell me anything you shouldn't tell me. But should I assume that the new materials are tantalum related the new ALD materials? Or is this kind of new-new materials, something beyond kind of use the tantalum based activity, you know products and activities, development activities that you have ongoing?

Yes. So our ALD portfolio that we have is not a tantalum based ALD portfolio. It is not something that we created as part of the acquisition that we made from H.C. Starck, ALD, something that we've been working on for a number of years. It's an organic activity that we started to invest in when we started to see that this was a emerging area. And so, over the last four or five years we've been developing and we're now up to a total of five materials. And so really advanced chemicals is what the category is that we put it in internal to the company. But they're -- so they're not tantalum related. They're really much more advanced materials that as I said, end up in the next generation memory applications which then we'll end up in the various AI applications that we would see.

Very interesting. So it sounds like Milwaukee, not Newton. So thank you for that. Okay. I just wanted to switch over maybe we don't really talk too much about your optical segment, but you've done a lot of restructuring work there. I'm just wondering if you maybe have an outlook for 2024 for that segment. I mean, is this the time when that group finally presumes organic growth. And if so, what would you say would be kind of the one or two leading sources of that turnaround?

Yes. Well, I think first of all that business despite the sales prop that happened, has done a really nice job of managing the performance and the cost management of that business various cost control activities that we put in. We've now had three consecutive quarters of -- three quarters I'd say, Q2, Q3, Q4, where we've had EBITDA improvement. It's our expectation that we'll continue to drive improvement in that business on the bottom line throughout '24. And then on the top line, if you look at the last time that we did an earnings call, which was the Q3 earnings call, we talked about space and defense related orders in the optic space. Today we're talking about contract and the LIDAR technology for autonomous vehicles. And so, I think those are the type of areas that are going to contribute. So automotive is going to be a contributor in this thing defense, the space market is going to be a contributor, I think to the growth here in '24. And then of course longer term as well in '25 and '26. So, our expectation is that this business is going to be a top line contributor in '24, as well as a continued bottom line contributor as it has done over the last couple of quarters.

Okay. And then just last one for me not the biggest issue, but there was a commentary, a comment or two regarding your share repurchase authorization and whatnot. And this is just my opinion, but I don't necessarily think your typical investor is demanding that kind of activity on your part. But just remind me, I mean, is your authorization there to offset dilution? Is it for handling options related issuance? I mean, how do you anticipate your share repurchase activity fitting into your overall capital structure and cash deployment strategy?

Yes, I'll take that one. Thanks. We think a lot about capital allocation and where we want to invest our money. We do have the 8 million available on the share repurchase program that was last authorized, but we haven't had any activity on that in a couple of years. And really the reason is because we're more focused on that organic growth. So deploying our capital to our organic growth is more important to us right now than kind of offsetting dilution or bringing that share count down. And we think we're delivering really well. The returns are very good. So we've got that lever there. Should we choose to use it? But right now it's something we're not very active on.

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

Okay. Thanks, Dave.

Thank you. The next question is coming from Samuel McKinney from KeyBanc Capital Markets. Samuel, your line is live.

Hey, good morning. It's Phil Gibbs. How are you?

Hi, Phil.

Good morning Phil.

Hi Phil.

Thanks for talking about the aerospace and defense and space market and thinking about those buckets kind of leads me into the question that I had. How much is space right now as a percentage of that total bucket? And I would think that includes satellites and commercial space?

Yes. Well, it's becoming a much larger part, right? As you know, Phil, right? You'll be following our company for quite a while and space was relatively small component of our business, more related to government type activity or just large projects such as the James Webb or something like that. And now, space has become a much larger part of our component. Defense has continued to grow. The commercial aerospace has continued to grow. But I would say -- I'd say, probably we're looking at maybe about a quarter to a little less than third is probably the space component, but I would expect to continue to see growth in that in that business.

Thank you. And then, well, a lot of questions on margins, on electronic materials, but hoping to just simplify it a little bit. Obviously the mix wasn't ideal in the quarter. And it sounds like you're shipping under your production rates, which impacts absorption greatly when you think about that type of business. If you were shipping in line with your production rates, and if your mix was, let's just call it an average or something more ideal, where should margins have been?

Well, look, I mean, we've sat all along that that we need this business to be contributing positively to our goal of 20% EBITDA margins for the company. So I expect this business to be able to deliver those types of margins. I mean, we saw what this business was able to do in Q2 and Q3 when it had decent mix, even though we had a little bit of a sales challenge in Q2 and Q3. So I expect this business to be able to deliver favorably towards our 20% EBITDA target.

And the last one for me on the H.C. Starck acquisition from late '21 there was a little sliver in that business that was non-tantalum based. I think some of that was going to be directed toward clean energy. Any thoughts or comments that you can make along those lines? Thanks so much.

Yes. You're absolutely right and your memory is correct. I mean, we did. And I can tell you that that business is doing extremely well. Both the tantalum side by the way of non-semi application, I'll say, as well as non-tantalum business where we have pursued other markets and have grown in other markets. So, I can tell you that that business has done extremely well over the last year and a half or so with our team. And I expect a continued growth in that business over the next over the next few years.

Thanks. Best of luck.

Thank you.

Thanks, Phil.

Thank you. The next question is coming from Dave Storms from Stonegate. Dave, your line of life.

Good morning.

Good morning, Dave.

Appreciate taking the question. Just to kind of want to start looking at the general market this year, first, last year kind of what is the general customer acquisition and contracting environment look like?

Yes, I think the acquisition and contracting environment has been good even though the markets, the actual sales in '23 were challenged in some of the markets. As we've talked about new business activity and new product development activity has continued to be strong. And as a result, we're seeing some of those things already convert into new business wins, but we would expect more of that to happen during '24. So, I think what's been positive is that customers did not really slow down new development, new R&D activity, therefore working with us, and so, we would look for those to materialize and contribute to our, towards our one to three year sales window.

That's perfect. Great color. And just kind of sticking with those business wins, obviously as we've discussed, you're very well aligned with some really cutting edge technologies LIDAR, the AI, clean energy. Are there any of these technologies that you see as having, like particularly strong potential to take a leap and scale up over these next 18 to 36 months?

Yes. Well, I mean, there's a number of things I would say that have contributed and I expect them to continue. For example the space activity that we have talked about, I just indicated to, Phil, that we used to be just a small player in the space market mostly government, some of the larger projects. And here we are talking about a $90 million of new business orders, for example, on space in the '23 calendar year. That's an incredible level of growth that we've been able to drive. Now, when you look at, for example, the semi market, we have a number of things going on, ALD being one of them. So we do look for ALD as those materials are adopted more and more, as more and more advanced chips come out, as more and more AI applications happen, we would expect that to grow. When I look at LIDAR autonomous vehicles or there are different levels of autonomous vehicles, but as we see more and more autonomous vehicles come out that have LIDAR technology, we would expect that business to continue -- to then grow. So I think, we are excited about the mega trends that are out there. And I think our alignment to those mega trends with our portfolio and as you know, we love talking about that in these calls and other venues.

That's perfect. Thank you. And then just one more for me if I could. Shelly, I know you just mentioned that you're very focused on organic growth. Just curious as to how you see this in relation to any M&A activity that you think about on your horizon?

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

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

Thank you.

Hey, thanks.

Thank you. And the next question is a follow-up coming from David Silver from CL King. David, your line is live.

Okay. Thank you for that. Just one more question and I'll stipulate this might be a little unfair, but I had a question maybe about your view of the industrial economy. So you know, it is a meaningful end market and other than electronics related to end markets, it was kind of the weakest in 2023. And then I'll just say, like over the last 24 hours I guess both Japan which might be a proxy for Asia, Japan, their economy contracted in the fourth quarter and this morning, the UK announced their economy contracted in the fourth quarter as well, so maybe a sign for continued weakness in Europe. But from your perspective, I mean, what are you hearing from your industrial customers in terms of end market demand and maybe are things still declining there or are there some signs of stabilization? And then more to the point in your fiscal year, 2024, full year guidance, what kind of improvement or what kind of change in the industrial end markets you serve is kind of built in there? Thank you.

Yes. David, great question. That is a large market for us and one that as you can imagine, we're very focused on. If you look at just the general industrial market and one metric that we look at, for example, is PMI. The last time PMI was north of 50 was September of '22. So long time ago. And since then it's below it's below 50, which implies that you know, there's contraction. When you look at our slide 10 and kind of what we have indicated for our industrial market, we believe the industrial market will continue to be a challenge market in the '24 timeframe. And that's why we sort of indicate that it's less than 0%. Now in our case, as I indicated earlier, we have a specific product that also is impacted and that's related to non-residential construction with our Beryllium nickel product. But setting that aside, which is a really a one-time specific item, we expect industrial market to continue to be challenged throughout the '24. What's great about, I think our company is, we're very well diversified. So clearly industrial, we expect to be a challenge market, but we've got, if you look at that chart 10, we've got all of our markets showing positive and except automotive and industrial. So -- and that's why we're able to, I think, say that we would have about a mid single digit year-over-year growth led by semi, led by aerospace, commercial space, defense and some of the other things that we have going on as well. So I think we're kind of excited about where we're headed despite the fact that we have these headwinds for industrial PMI index being below 50 for a long time, and not sure when that's going to turn and kind of cross 50 again. The organic growth projects that we can turn to drive, we highlighted a number of them on our slide six and we'll continue to make sure that we're staying above market on all the areas that we're playing in.

Okay. And I'm just going to just finish with an observation. So this was a record year for your company. I want to say Kyle, I think that a record this quarter with the most pages in the quarterly earnings slide deck. So there's a lot to go through here. Maybe send it out a little earlier. My brain doesn't work that fast in the morning, but anyway, a lot good information here, but another record, another record set, another record setting element to the quarter. All right. Thanks very much. I appreciate that.

Thanks. Well, I know that was a comment, but I'll just add to that. This is our third year in a row of records sales, record EBITDA, record margin, I mean, so a record EPS '21, '22 and '23, our team has done just a fantastic job of delivering both on the top line and the bottom line, even during challenge times, which we experienced in '23. And I think we're extremely well-positioned to continue that into '24 and have '24 be another record year for us.

Very good. Thank you.

Thanks, David.

Thank you. And this does conclude today's question-and-answer session. I would now like to hand the call over to Kyle Kelleher for closing remarks.

Thank you. This concludes our fourth quarter 2023 earnings call. Recorded playback of this call will be available on the company's website, materion.com. I would like to thank you for participating on 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.

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