Good morning, ladies and gentlemen, and welcome to Avient Corporation's Webcast to Discuss the Company's Fourth Quarter 2023 Results. My name is Norma and I'll be your operator for today. At this time, all participants are in a listen-only mode. We will have a question-and-answer session following the company's prepared remarks. As a reminder, this conference is being recorded for replay purposes. I would now like to turn the call over to Joe Di Salvo, Vice President, Treasurer and Investor Relations. Please go ahead.

Thank you. And good morning to everyone joining us on the call today. Before beginning, I'd like to remind you that statements made during this webcast may be considered forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements will give current expectations or forecast of future events and are not guarantees of future performance. They are based on management's expectation and involve a number of business risks and uncertainties, any of which could cause actual results to differ materially from those expressed in or implied by the forward-looking statements. Please refer to the investor presentation for this webcast for a number of factors that could cause actual results to differ. During the discussion today, the company will use both GAAP and non-GAAP financial measures. Please refer to the presentation posted on the Avient website where the company describes the non-GAAP measures and provides a reconciliation or historical non-GAAP financial measures to their most directly comparable GAAP financial measures. Joining me today is our President and Chief Executive Officer, Dr. Ashish Khandpur, and Senior Vice President and Chief Financial Officer, Jamie Beggs. We also have Bob Patterson, who is serving in a transition advisory role with the company. Bob will briefly make some opening remarks before we start the discussion on performance. I will now hand the call over to Bob to begin.

Thanks, Joe. Good morning, everyone. Last November, I announced my plans to retire and pursue my lifelong passion for teaching and spending more time doing that at the University of Michigan, my alma mater. Today, I have the privilege of introducing Dr. Ashish Khandpur, who succeeds me as Avient's new president and chief executive officer. Ashish took over on December 1, and brings a fresh perspective to our specialty portfolio that has undergone a tremendous transformation over the past decade. Ashish joined us from 3M where he spent 28 years. A chemical engineer by education and trade, he began his career there and rose to become chief technology officer of the company. Over those nearly three decades, he distinguished himself as a brilliant scientist, innovator, and ultimately, a proven business leader and operator. His last role at 3M was group president of transportation and electronics, a $9 billion business. It's a business he took into high growth end markets with new technologies and applications, which is exactly where Avient is focused. I have been with the company almost 16 years in total, and nearly 10 as CEO. During that time, we have upgraded our portfolio by divesting commodity businesses and reinvesting the proceeds in two transformational and 17 bolt-on acquisitions. We are the number one leading color formulator in the world. We have built a composites portfolio from scratch, which includes Dyneema, the world's strongest fiber. We've completely transformed where EBITDA is generated from and now have 100% of our businesses dedicated to formulating specialty solutions. I look back on my time with the company with a lot of pride and appreciation for what we accomplished. The transformed portfolio is a perfect springboard for Ashish to elevate Avient to the next level of performance. I'm confident he will drive profitable growth and create long-term value for our shareholders. His background and experiences are perfect for the next era in Avient's journey. To our associates, shareholders and board of directors, I thank you for your support and trust during my tenure. I now leave you in very capable hands with Ashish, Jamie and the 9,500 associates at Avient I've had the pleasure of working with.

Thank you, Bob. And congratulations on your retirement. A transformation of any kind is difficult for an organization to go through, but even more challenging for the person leading it. These achievements of transforming Avient to a 100% specialty portfolio took commitment, talent, and certainly leadership. Bob has provided all three. It is a retirement well-earned and I wish him the very best in health and happiness. In the first two months I have been with Avient, I have had a chance to meet with several stakeholders, including investors, customers, and of course, our talented associates. A common question I get is, why did I join Avient? While there are many factors to consider when changing roles, it ultimately boils down to the tremendous potential I see to profitably grow the company. Doing so requires a culture of strong customer focus and a relevant portfolio of technologies, both of which Avient possesses. Leveraging these, along with amplifying innovation in high growth market segments around secular trends, will help us grow profitably in a sustained manner. This will also require some bold thinking, prioritization, and acting with courage, which are all leadership traits I have personally developed and honed over the years and that I will be purposeful to instill in my teams as well. Over the last several years, the company has highlighted its four key growth drivers of sustainable solutions, composites, healthcare, and emerging regions. I see these as secular growth areas, and they currently make up 60% of our business. The team did a great job laying out the market dynamics underlying sustainable solutions, as well as showcasing many of our differentiated formulations at last September's Investor Day. I'm also impressed with the trajectory of our composites portfolio as it continues to displace wood, glass, or metal in an increasing number of applications. And while a smaller portion of our portfolio currently, the healthcare business is sticky, profitable, and an area that will continue to grow steadily as our population ages and people trend towards more self-care. Now, turning to our earnings announcement this morning, I'm extremely pleased to finish the year with fourth quarter adjusted EPS of $0.52, reflecting an increase of 24% over the prior-year quarter. Jamie will provide more details on some guidance for 2024 in a moment, but first, I'm going to share a few observations on the demand trends we are seeing across the end markets and the major regions of the world that we serve. As we noted in our earnings release, our two largest end markets of packaging and consumer benefited from the slower pace of destocking during the fourth quarter. They make up a little more than 40% of our sales. And while still down year-over-year, they are much less so than in previous quarters. It is worth noting that both packaging and consumer sales were down sequentially only 4% and 3%, respectively, from the third quarter to the fourth, despite the typical fourth quarter seasonality we experienced in our business. This, along with the order trends to start the year and insights from our customers, gives us confidence that destocking has largely come to an end in these areas and that orders are more a reflection of underlying demand. We discussed the healthcare end market in detail in our last quarterly earnings call. While fourth quarter sales in healthcare were down 9% year-over-year, the pace of destocking has also started to slow. Q4 sales were up sequentially 3% from Q3. Fundamentally, the underlying demand from consumers for healthcare applications remains steady. Examples include the increased use of self-injection pens for drug delivery, continuous glucose monitors to manage diabetes, as well as catheters and tubings used in surgeries. And while some of our healthcare customers continue to manage their inventory levels to start the year, we expect to see improvement in demand as we progress through 2024. In industries sensitive to interest rates and more capital intensive, such as building and construction and industrial, we do see continued softness, both from destocking and overall demand. There are new business gains in composite applications replacing conventional building materials, which should provide some offsets to the industrial and building and construction end markets. Telecommunications was the weakest end market for us in the fourth quarter, and we expect softness to continue in the first half of 2024. Rising interest rates and destocking have definitely impacted demand here, as has the delayed timing of projects flowing from the BEAD program. Jamie will cover more details on this topic when we discuss SEM's performance. Rounding out the end markets, sales in defense applications continue to be strong, as demand remains high in light of continued geopolitical tensions and recent conflicts overseas. The primary growth is in personal protection where Dyneema plays a significant role in protecting soldiers with ballistic vests and helmets. Moving on to the regional observations. Each of the regions have different fundamentals that have resulted in varying performance in 2023 and will continue to influence how we look ahead to 2024. Starting with our largest region, we expect the US and Canada to continue to improve as the year progresses, given consumer sentiment appears to be resilient despite higher interest rates. This region does have slightly more exposure to healthcare, which implies potentially sluggish growth in the near term but should ultimately drive greater growth as destocking ends. Telecommunications will also be a significant tailwind once destocking ends and when the federal funding is fully allocated to states to expand the installation of fiber optic cable under the BEAD program. In EMEA, demand remains tepid with consumers being cautious due to prolonged geopolitical issues, higher interest rates and the lack of government stimulus or infrastructure spending compared to other regions. However, defense is a bright spot and destocking appears to have ended for packaging, which is the largest end market in the region. In Asia, our outlook remains cautious due to uncertainties in the China economy, and it remains to be seen how the new government stimulus package will translate to spurring the economy in 2024. While Latin America only represents 5% of our business, we do view it as an important region not only to tap into local market opportunities, but also as a region where our global customers look towards shifting production. Our sales were up year-over-year in Latin America in the fourth quarter in our largest end market, packaging, and we expect that momentum to continue into 2024. With that, I will now hand it off to Jamie, who will discuss our fourth quarter results as well as our initial outlook for 2024.

Thank you, Ashish. Your overview provides good context to now dive deeper into our results. As Ashish mentioned earlier, we delivered adjusted EPS of $0.52, exceeding our guidance of $0.47. This was driven by a slight beat in sales and favorable net interest expense. Fourth quarter adjusted EBITDA margins of 15.9% were also slightly ahead of our guidance and reflect a 240 basis point improvement versus the prior year. This margin expansion was driven by favorable mix, deflating input costs and prudent cost management. Favorable mix came from improving demand in packaging and consumer end markets, as well as certain applications in our composites platform, such as defense. Regionally, Europe was the key contributor to the margin expansion and drove the year-over-year earnings growth in the quarter. Looking at performance versus the prior year fourth quarter, sales were down 9%, mostly due to weaker demand, with some offset in price and mix and a marginal benefit from FX. Ultimately, our ability to price effectively, capture deflation and manage costs allowed us to grow EBITDA by 7% and adjusted EPS by 24%. From a segment perspective, Color, Additives and Inks grew EBITDA 20% in the quarter, driven by the earnings improvement in Europe. As we discussed before, many of the remaining cost synergies related to the Clariant acquisition were to come from Europe as we rationalized operations and adjusted staffing levels. These cost reductions helped the bottom line as well as the impact of raw material deflation. Color also benefited from improving demand in the consumer and packaging market, which has a favorable impact on mix for the segment. The Specialty Engineered Materials segment was down $6 million in EBITDA from the prior-year quarter, and $5 million of this reduction is due to exposure in the telecommunications end market where demand was significantly down. Specifically, this impacted our fiber line business that provides composite applications using fiber optic cable. This end market has been impacted by inventory destocking and timing of the funding related to the BEAD program. For those who aren't familiar, BEAD, also known as Broadband Equity Access and Deployment, is a $42 billion program to expand high-speed internet access by funding infrastructure and adoption programs in the US. States submitted plans to the government and approval is imminent. We anticipate fiber optic cable demand to improve in the second half of 2024 as the states begin receiving funds for their broadband deployment projects, and then become more significant in 2025. Similar to color, SEM also benefited from raw material deflation and favorable mix, driven by certain composite applications in the building and construction space, as well as in defense. These items, along with cost actions, partially offset the reduction in demand. Moving to the fourth quarter EBITDA bridge, we highlight the impact of demand, price and mix, as well as raw material costs on a year-over-year basis. Starting with demand, it is down less compared to previous quarters as the pace of destocking slowed in most end markets. Also highlighted on this bridge is the impact of pricing and deflation, which more than offset lower demand. This is the third consecutive quarter we've seen raw material deflation on a year-over-year basis, and we expect that to continue as we start 2024. Further down, you'll also see the impact of certain cost reduction activities that were initiated at the beginning of 2023, including targeted European restructuring and reduced discretionary spend, which provided a $13 million benefit in the quarter. These cost control efforts more than offset wage inflation. All in all, we were able to grow EBITDA 7% despite sales being down 9% for the quarter. Turning to 2024, we're providing guidance today for the first quarter and full year. We expect Q1 earnings per share of $0.68, which would reflect an 8% increase over the prior year. This takes into account the end market and regional trends Ashish commented on earlier. To reiterate, we are seeing improving trends in our largest end markets, packaging and consumer, and strong demand for defense applications. Balancing this is the continued destocking in telecommunications and healthcare, as well as end markets that are more sensitive to higher interest rates, such as building and construction and transportation. On a full-year basis, we anticipate adjusted earnings per share between $2.40 to $2.65 and adjusted EBITDA of $505 million to $535 million. We're providing a range to account for different scenarios of how demand could ultimately play out in 2024. We are optimistic that demand in the US will strengthen as destocking comes to an end across all markets. We also see growth in emerging regions such as Southeast Asia and Latin America, but we are more conservative on our view of China since their growth will be dependent on increased consumer spending and sentiments. Lastly, Europe's underlying demand is likely to be muted, but we can confidently say destocking is done and we believe sustainable solutions, especially in packaging, will help us grow year-over-year. We do expect raw material deflation to provide a benefit in the first half of the year. Conversely, in the back half, we have some headwinds associated with an incentive reset. Interest expense is expected to be between $105 million and $110 million in 2024. This is slightly lower than 2023 based on the most recent SOFR curves and the full-year benefit of the $100 million paydown that we did in August of last year. In addition, we expect our effective tax rate to be between 23% and 25%. We are taking a balanced view of 2024, where we are optimistic that demand will improve, but also mindful that there are certain economic factors that could influence particular end markets and regions. Before we open the lines for questions, I'll now turn the call back over to Ashish for a few closing remarks.

Thank you, Jamie. I'm very pleased that we finished the year better than expected, and we view that as positive news as we head into 2024. It has been a couple of months since I joined Avient. I have spent much of my time in great discussions with investors, customers, and employees, digging into our businesses, portfolio, and the innovation pipeline. Timing was perfect, in that just two weeks ago we hosted our annual leadership conference where we brought together our top 150 leaders to engage and align on expectations, as well as increased collaboration across businesses. Among my many encouraging takeaways from the conference is that we have a customer-focused team that loves to win and is fully committed to doing so going forward. What's next for me is to continue having robust dialogue with our many stakeholders. Given the diversity of our customer base and technology portfolio, these conversations are proving to be extremely valuable as we further evolve how and where we serve our current and future customers to profitably grow our business. Which leads me to a few top-of-mind things that will become core themes of our thinking as we evolve our strategy. First is driving profitable organic top-line growth while expanding our margins on the bottom line. We have ample opportunities to drive profitable growth by focusing on our customers, leveraging secular trends, combining our technology platforms, and winning share in the marketplace. The second is amplifying innovation. This is an area of great interest and opportunity as well. Robust customer-driven innovation is near and dear to my heart, not just because of my background, but because I've seen firsthand how it powers business and delivers growth and margin expansion. We are an innovative company and, in our future, we will be even more so. And the third is around continuing to build and invest in our leadership and people. Avient has a highly competitive and collaborative culture. We live our brand of challenge accepted and embrace the work required to deliver on those challenges. Our next chapter at Avient will challenge us in new and exciting ways. So we will continue to ensure our teams are prepared for future success. Again, I will have more to share as our strategy and plans are built out. But let me close with this. In my short time here thus far, it has clearly solidified my very first impressions that Avient is a fundamentally strong company and we have significant growth ahead of us. That concludes our prepared remarks. Jamie and I are happy to answer any of your questions now.

Our first question will come from Michael Sison with Wells Fargo.

I guess my first question, for 2024, can you give us a thought on the range of sales growth for 2024 relative to the guidance, kind of the low end/bottom end? And maybe when you think volumes will sort of inflect and turn positive?

Let me just answer that one to start with and then Jamie will add to it. As you heard in the prepared remarks, we are not providing guidance on the sales per se. But to get to the estimates that we have provided on the range, you will see that you will need sales to grow from low-single-digits to mid-single-digits as a total range. With respect to your second part of the question on inflection point, I think it's the story of first half/second half, as we see it. I think it's going to be a pretty flat first half if you ask me. And then most of the demand growth is built into the second part. So, Jamie, would you like to add something?

Mike, I think we tried to describe in the call today, the first half in particular, if we take a look at telecom and healthcare where we still see continued destocking, I think that's the reason why we believe that the first half will be slower than the second half in terms of volume recovery. But we do see some dynamics within the market in particular, if you look at defense and telecom potentially coming back, the back half will be stronger overall. Hopefully, that gives you some further clarity on how we think sales could evolve for the year.

Just a quick follow-up. Ashish, I know it's still a little bit early, but when you think about sort of the longer-term earnings power for Avient, any initial thoughts of where EBITDA could get back to in terms of a firm recovery over the next couple of years?

Mike, I think a couple of things here. One is that, in the near term, as we pointed out, our growth drivers, the four growth drivers of sustainable solutions, composites, healthcare, and the emerging regions are going to be a catalyst for not just growth, because they are in high growth markets growing at 5% plus end markets, but also for margin expansion because they're accretive to the margin. So I think that will help you with percentages to get better as that pie grows. So, right now, those four growth drivers are 60% of the revenue. And so, as they continue to grow, they become a bigger piece of the pie and create more value. Then on top of that, in the near term, we can augment that growth further by really notching up cross-selling and collaboration across businesses, as well as replication at scale, which means, really, how fast can we replicate our success with one customer at other places with scale, especially with some OEM accounts, that's a great opportunity for us. On top of that, over time, we can build the new growth vectors, which could be coming from markets that are growing fast. There's lots happening in the world of technology, in the world of regulatory, and so on. So, those create opportunities for us because materials will play a big piece as those technologies are getting realized. And so, for us, it is finding a couple of more growth vectors that will scale where our technology portfolio is relevant and where we have access to the customer. So, I think a combination of those three things that I mentioned would give us not just growth, but also good margin expansion because we will be differentiated.

The next question comes from the line of Frank Mitsch with Fermium Research.

It's Aziza on for Frank. For my first question, I was wondering, following these recent years of notable portfolio transformation that the company has undergone, how should we be thinking about capital allocation priorities for this year and maybe even next year?

As you've heard in my prepared remarks, one of our top priorities is to grow top-line growth organically and profitably. And so, I think that sets the starting point for our capital allocation strategy as well. We will invest more in organic part than we have been. And as we identify new growth vectors, that will need more resources, not just R&D, but also commercial as well as operational side. But I think organic growth will be our top priority. On the M&A side, we have done a great job with the portfolio piece that Bob mentioned in his remarks. And we are still integrating the two big acquisitions we did in the last three years. So, in the near term, I don't see any big acquisitions, but I will not rule out acquisitions per se. We have a cadence on M&A. And if any acquisitions are done, they will be smaller in size and probably bolt-on. Of course, our commitment to giving back to shareholders on dividends is there. We continue to expand the dividends as our earnings will grow. That commitment is there. Finally, we have been paying debt. Over the last 15 months, we have paid $300 million of debt. And as our earnings grow and demand comes back, we will have flexibility in either paying the debt back or buying back shares. So those decisions can be made as relevant.

Aziza, I think you notice that we have a lot of flexibility when it comes to potentially either paying down debt or share repurchases because we don't have any near-term maturities until 2025, as well as we don't have any restrictive debt covenants. So we have a lot of flexibility in our capital structure to be able to pivot as we see opportunities in the marketplace.

The commentary on the end markets and geographies, it's helpful thinking of the full-year guidance. I was wondering if it would be possible to break down that EBITDA, $505 million to $535 million. For some of the other underlying assumptions as far as net price benefit, cost inflation, just for the full year, how you guys think about effects and just some of the other underlying bridge items for 2024 EBITDA?

I'll start. Aziza, one of the things that has been factored into our guidance, one is to what Ashish mentioned earlier to Mike is probably low to mid-single-digit top line growth. First half or the second half dynamics, he explained. We do expect raw material deflation in the first half and a little bit of an unknown in the second half, depending on how market conditions roll out. But that's probably $20 million to $30 million in the first half. And we mentioned this on the call, in the back half, we do have some headwinds with regards to incentives being reset. So that's something else to consider in the range. But those are the primary factors. You mentioned FX, there's not going to be a whole lot of FX dynamics. I know the euro has strengthened from 2023 to 2024, but we also see some other currencies that have weakened against the US dollar, like the Chinese yuan, that's basically going to offset most of that.

Our next question comes from the line of Mike Harrison with Seaport Research Partners.

I was wondering if we could maybe dig in a little bit more on the improvements that you've seen in the destocking trends in packaging and consumer. Would you say that the trends have been kind of exactly the same in both of those markets? Maybe just a little more color on what you were seeing in Q4 and maybe what order patterns are looking like and what customers are saying so far in Q1?

Maybe I'll start. And if Jamie would like to add to that, she can do that. As I mentioned in the prepared remarks, right, the packaging and consumer declined slower than what we would see in typical seasonality from Q3 to Q4. So that was a positive, of course. And then, as we are looking into Q1 and how things are shaping up, we are seeing that those trends are continuing in the right direction. So we feel pretty good that most of the destocking is over in packaging and consumer markets. With respect to geographies, I think we still see some slowness in the European market with packaging and consumer. Although the destocking is over, but the demand side is a little bit slower. But rest of the world, we are seeing underlying demand to keep moving in the right direction going forward.

Mike, to add on to Ashish's comments, the packaging was down 5% on a year-over-year basis, which is a significant improvement from where we have been trending for 2023. And as we look forward to Q1, we expect that to become even lower variance on a year-over-year basis. Consumer was down 12% in the fourth quarter. Although we believe destocking has come to an end, I do think that the demand associated with consumer is really not so much of a restocking, but just lower inventory levels to manage lower demand. And then, if we take a look specifically in China, that's where we see some weakness in consumer, which is not to be unexpected, just because of that sentiment that's in that region.

Ashish, you're coming from a company with a much larger R&D organization with a lot of great capabilities. I know it's early days. But can you talk a little bit about what you see within the Avient R&D organization that you think they're doing well and maybe what areas you might look to improve?

Although I come from a big company, I can tell you Avient is pretty strong with processes and R&D capabilities as well. The biggest thing that R&D can do really well is focusing on the customer and starting from there to innovate. And I think that's one thing that Avient gets very well. So I'm really impressed with the customer focus this team has. The collection of technology portfolios, over time, with different acquisitions has given us many building blocks now that we can start putting together, mixing and matching, collaborating across businesses to create more value than what we have been doing in the past. That's an opportunity for us going forward.

The next question comes from the line of Laurence Alexander with Jefferies.

It's Dan Rizzo on for Laurence. You mentioned that raw material costs are deflating in the first half. Is that going to be followed by some price kickbacks to your customers?

From our perspective, we see that the team has done a good job maintaining the pricing discipline, even as things have begun to normalize. So we don't see much impact of pricing decrease on revenue. If there is anything, it's going to be very isolated and minimal in nature. We feel like we create differentiation, and by bringing value to the customers, and that gives us a little bit more sticking power and competitive advantage versus our competition.

As volumes turn positive and potentially accelerate, how should we think about incremental margins in the two different segments?

On the CAI side, the color side, we should see incremental margins just because we have done a lot of good work there with respect to driving synergies, but also the cost reductions and things like that. So that should translate into – and you're seeing that in fourth quarter, the results that Jaime showed, how strong the margin was. And there, the team has done a great job on cost reduction, maintaining price discipline, and also margin expansion. On the SEM side, the margin expansion story will depend on what happens to the destocking story on the telecom side, what happens to the destocking story on the healthcare side, but also how strong the demand for Dyneema remains, which, as you know, is pretty accretive to our margins. So all those three things would play a big important mix to define the margins on the SEM side, and then that, of course, determines the total margin for the company as well.

The next question comes from the line of Kristen Owen with Oppenheimer & Company.

Wanted to ask about the free cash flow outlook for next year. As you are talking about a potential return to growth and seeing some of the mix benefits and then some of the working capital that you've been carrying over the last couple of years, just how we should think about free cash flow in the context of return to growth?

There's a couple different dynamics in the cash flow just to take into consideration. The return to growth, we would expect a cash use on working capital. A good way to think about that in your models is we do have about a 12% working capital runway. We expect that to continue. The team has done a really great job managing inventory in light of sales being more uncertain. So that's going to be one of the factors that will be of use for this coming year. Another dynamic, what you saw on the guidance slide, is that our capital expenditures will move up to $140 million. We did about $120 million last year. The increase is really primarily focused on certain IT investments to drive greater productivity efficiency, as well as the use of data. And that's really centered around the S/4HANA implementation that will begin this year and will go into the next couple of years. And we gave information on the tax rate as well as interest. So that should give you the primary components as we think about free cash flow for the year.

I did want to ask about that CapEx number. So thank you for the context there. Somewhat of a related question to sort of investment for growth and organic growth opportunities. Ashish, you had mentioned in your prepared remarks, particularly around Latin America, and as we are thinking about some of the nearshoring trends, can you just help us understand that the market positioning in Latin America, how you're positioning to capture some of those trends?

Actually, with respect to R&D on the organic side, if you think about Latin America, specifically, the biggest markets are packaging and consumer. And so, we have to work – as nearshoring happens, whether that goes into whatever industries are playing, wherever our customers are playing, we have to play with them in that part of the world. And that's what gives us the market speed advantage, that's what gives us the closeness to customer advantage, and the relationships that we build. I think in the end, we follow where our customers are going. And if Latin America becomes a bigger hub, we will accordingly scale our operations and our capabilities in that part of the world as well.

And our next question comes from the line of David Huang with Deutsche Bank.

Ashish, getting your focus on organic growth, I guess two questions. One, given the service intensity your business has, should we expect a period of elevated SG&A costs, given your focus to drive growth and reinvest? Second, I think R&D historically is below 3% for Avient. Is that the right level going forward?

Service intensity, as you said, a lot is happening with respect to the world changing, as the intensity is increasing, but there's also technology getting available to serve customers better. And I think a little bit of that is what Jamie was mentioning, with the S/4HANA and utilizing data to serve customers in a more efficient way. So I don't expect our SG&A to grow bigger with respect to serving intensity for the customers, to serve our customers better. I think our teams are doing a very good job in terms of really doing the best use of customer stratification and utilizing data and information to serve our customers in a more proficient way. And even technology, especially in our color, for example, we are now using digital tools to turn around color matches faster with our customers from four days to two days, for example. And I think that's a real improvement and will give us a competitive advantage. So that's just an example of how we're using technology to serve our customers better. On the R&D at 3%, I don't think there's a magic number for R&D as a percentage. As I said right now, we are looking at how we prioritize whatever we are spending in the places where we should be spending it, which are the areas of growth for us, and are we feeding them in the appropriate way? And as we evolve our strategy and build new vectors, if we need to add more, we'll do that not just in R&D, but other parts of the organization as well because, I said, everything has to be linked to the strategy in the end. And whatever is needed to do that, we'll put resources accordingly.

On leverage, I don't think you're assuming a debt paydown this year. But I think previously, you had a target of 2.2 times by 2024. Is that still a valid target?

Our goal is to get down closer to 2 times. We ended the year about 3.1 times. Based on where we're anticipating the year to end up, we'll be below that as well. And as you know, we use a net debt number. So, regardless, if we actually pay down debt or keep it on the balance sheet, that leverage number doesn't move, but we're committed to being closer to 2 times over time.

Our next question comes from Vincent Andrews with Morgan Stanley.

This is Turner Hinrichs on for Vincent. I'm wondering if you could size or just provide additional color on the opportunity for fiber optic mentioned for 2025. And what are you expecting as that ramps up in the second half of this year?

That's our telecom business, specifically our fiber line business, which represents about 4% of sales, just to put that in context. We do expect the first half to still be in a destocking mode with some recovery in the back half. But I would say it's pretty muted. On a year-over-year basis, I don't expect there to be much growth there, considering how much first half destocking we still expect there to be. And as we look into 2025, it really is dependent on how that BEAD program is rolled out. There's a tremendous opportunity with regards to fiber optics and laying down and bringing internet access across rural areas. We did provide some information at one of our last investor days, that was back in September, about how that opportunity can grow. And we still believe in that. But we're not providing any guidance at this point for 2025.

How was your order visibility this quarter? And can you provide any notes on mix? Last quarter, specifically, you had noted visibility was shorter than normal due to plant shutdowns. Is that affecting the first quarter at all?

So, from a visibility standpoint, and we mentioned this in the last quarter as well, is that all of our customers are managing inventory very tightly as they monitor the demand from their customers. So, it's about 20 days out now versus, maybe a few months ago or a year ago, it was closer to 45 days. So it is something that we're monitoring, we have to be nimble on our supply chain to meet that. Some visibility issues as we think about the first quarter is that we're in the middle of Chinese New Year. So, right now, how Asia is going to come back is a factor that we're looking at until they actually start placing orders again. That's a factor. And then how it ends up playing out even with Easter coming in a little bit differently in the first quarter versus the second quarter last year is something that we're also watching. But that should give you some context. It's a little bit shorter. We are confident in our guidance that we're giving out for the first quarter. But it is a much shorter visibility than we've had historically.

Thank you. I'm currently showing no further questions at this time. This concludes today's conference call. Thank you for your participation. You may now disconnect. Everyone, have a wonderful day.