Good morning, everybody, and welcome to Materion's Fourth Quarter 2022 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. Please note this conference is being recorded. I would now turn the conference over to your host, Mr. John Zaranec, Chief Accounting Officer. John, over to you.

Good morning, and thank you for joining us on our fourth quarter 2022 earnings conference call. This is John Zaranec, Chief Accounting Officer. 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 the full year as well as an update on key strategic initiatives. Following Jugal, Shelly will review the detailed financial results for the quarter and the year in addition to discussing our expectations for 2023. We will then open the call for questions. Let me remind investors that any forward-looking statements made in this 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 7 in this morning's press release. The adjustments are made in the prior year period for comparative purposes and removed special items, noncash charges and certain discrete income tax adjustments. And now I'll turn over the call to Jugal for his comments.

Thanks, John, and welcome, everyone. It's great to be with you today and share details on another record quarter for Materion, which closes out a record year. This year, we marked several milestones for our company, crossing $1 billion in value-added sales, delivering over $300 million in quarterly sales, reaching nearly $200 million in EBITDA and crossing $5 for EPS. Our transformation into a global leader in high-performance Advanced Materials is delivering as we're driving a step change in both our sales and earnings. Our strong execution and delivery on strategic growth initiatives are enabling us to consistently outgrow our end markets. An expanding list of customers continues to place their trust in us for the development of next-generation solutions aligned with global mega trends. These strategic partnerships are helping to build a healthy pipeline for future growth and strengthen our position for 2023. We brought this year to a record close with an incredible 11th consecutive quarter of VA sales growth. The new facility for precision clad strip project contributed meaningfully as we fully qualify the facility. In addition, we continue to supply clad strip from our legacy plants. Our acquisition of HCS-Electronic Materials continued to outperform, delivering on robust demand from our customers. In total, the progress we've made on organic and inorganic initiatives drove record top and bottom line growth with EBITDA margins reaching 18% in the quarter, tracking well towards our midterm target of 20% and contributing to record quarterly earnings of $1.49 per share. For the full year, we delivered year-on-year increases of 30% or more across sales, EBITDA, and EPS. It was an exceptional year in our company's transformation. Organic growth investments and strategic customer partnerships contribute more meaningfully to our results. The integration of HCS-Electronic Materials has gone extremely well as the power of our combined teams generated significant commercial and operational opportunities that are driving growth beyond our already strong synergy expectations. We're investing more than $20 million in the new facility to expand capacity and capabilities to service demand in the semiconductor, industrial, and aerospace and defense markets. Our precision clad strip facility was completed and qualified during the year and is now achieving significant production levels, a noteworthy accomplishment given the size and scale of that project. As we've shared, the customer is investing an additional $40 million with us to increase capacity after the initial investment of $80 million. The construction for Phase II capacity remains on track, and we anticipate that capacity coming online in late 2024. The build-out of our new facility in Milwaukee is progressing nicely as we are installing new equipment over the next few quarters with production capabilities coming online in the first half of next year. This site will expand our capacity to support the production of the most sophisticated semiconductor chips, as well as broaden our advanced chemicals capabilities to produce materials for next-generation batteries for electric vehicles. This year, we also announced a partnership with Kairos Energy to support clean energy development with the establishment of a Molten Salt Purification Plant that produces Flibe, a reliable, safe, and cost-effective molten salt coolant used in nuclear energy production. Today, I'm happy to announce two additional customer partnerships that further develop our growth pipeline. First, we secured another customer-funded investment of $15 million to expand our capabilities and supply critical materials for clean energy power generation. We expect equipment installation to be completed this year at our facilities and look forward to completing the delivery of the materials by the end of next year. We also continue to see great interest in our capabilities for critical space applications. We recently signed a three-year agreement to supply materials for space propulsion systems. We have already received an initial $10 million order, which we will start to ship in the middle of this year. This partnership further establishes Materion as a leading partner for innovative solutions that deliver the level of performance and reliability required for critical space missions. Strategic growth projects are the cornerstone of our strategy. And in 2022, our team demonstrated an ability to execute on our commitments and to continue developing important customer partnerships. There is no better evidence of our global success as an Advanced Materials leader and the customers who continue to choose Materion and make upfront financial contributions so that we can solve their most pressing challenges. Materion's performance over the past two years has seen sales grow 70% with earnings more than doubled. And as indicated by our growing list of customer partnerships, we are continuing to build for the future and remaining laser-focused on outpacing the growth rate of the markets we serve and continuing to align ourselves with mega trends that will open additional growth avenues for years to come. With the success and progress of our outgrowth initiatives, we're heading into 2023 with excellent momentum. We will continue to drive market outgrowth even as the environment experiences its pockets of general softness, particularly in the semiconductor space. Operational excellence, disciplined cost management, combined with our outgrow will ensure we continue to advance the earnings power of our company. We will continue to drive our transformation and differentiate Materion through unparalleled technical expertise, innovation, and strong performance. As we continue to build our pipeline, we expect to deliver another year of record results at both top and bottom line. I'm proud of our global team as they continue to support our customers and help them exceed expectations. Thanks to our team's talent and dedication, we have delivered record results for two consecutive years. Together, we are driving long-term value creation for our customers, our shareholders, and our people. Now let me turn the call over to Shelly to cover the financials.

Thanks, Jugal, and good morning, everyone. During my comments, I will reference the slides posted on our website this morning, starting on Slide 13. As Jugal outlined in his opening remarks, we achieved another record quarter of value-added sales, adjusted EBITDA, and earnings per share in the fourth quarter. Value-added sales, which excludes the impact of pass-through precious metal costs, were $309.2 million for the quarter, up 30% from the prior year. This significant increase was driven by strong demand across the industrial, aerospace, and energy markets, along with higher precision clad strip sales in the fourth quarter. Organic VA sales, excluding the impact of acquisitions and currency, increased approximately 26% compared to the prior year with significant above-market growth. We delivered adjusted earnings of $1.49 per share in the fourth quarter, up 32% as compared to the prior year despite substantial interest headwind. Moving to Slide 14. Adjusted EBITDA in the quarter was $55.6 million or 18% of value-added sales, up 40% from the prior year. The increase was largely driven by higher volume, favorable price/mix, and positive contribution from our HCS-Electronic Materials acquisition. These strong growth drivers were partially offset by commercial and R&D investments as we continue to support our organic growth initiatives. Now let me review fourth-quarter performance by business segment. Starting with our Performance Materials business on Slide 15. Value-added sales were a record $177.6 million, an increase of 53% compared to the prior year. The increase was driven by strong performance in the industrial, energy, and aerospace end markets and higher defense and hydroxide shipments. In addition, the new precision clad strip plant contributed near full run rate with additional shipments from our legacy facility. EBITDA, excluding special items, was a record at $44.3 million and a record 25% of value-added sales, up 96% compared to $22.6 million in the fourth quarter of 2021. The increase in EBITDA was primarily due to increased volumes, favorable price cost, and a strong mix. Moving to the 2023 outlook. The order book for Performance Materials remained strong, and we expect another year of above-market growth. The largest markets served, including industrial, aerospace, and energy, should all see growth in 2023. And with our precision clad strip business exiting 2022 near the full run rate, we expect meaningful contributions in 2023. Next, turning to Electronic Materials on Slide 16. Fourth-quarter value-added sales were $104 million, up 16% versus the prior year and up 2% organically. The organic growth rate has been decelerating with slower shipments in semiconductor as customers work through inventory corrections. Sequentially, Electronic Materials VA declined 9% organically. EBITDA, excluding special items, was $17.1 million or 16.4% of value-added sales in the quarter, an increase of 8% from the prior year. The increase was driven largely by increased HCS volume and favorable price cost. This business also saw significant margin expansion from the third quarter of 130 basis points due to a richer mix combined with our cost control efforts. As we look forward to the coming year, we expect the Electronic Materials business to outgrow softening markets and continue to see positive contribution from HCS-Electronic Materials with higher volumes and improved price cost from that portion of the business. Finally, turning to the Precision Optics segment on Slide 17. Value-added sales were $27.7 million, down 15% compared to the prior year. This decrease was driven mainly by the discontinued consumer electronics applications and another quarter of foreign currency headwinds negatively impacting the top line by approximately $2 million. EBITDA, excluding special items, was $4 million or 14.6% of value-added sales, down from the prior year due to the lower sales volume. Despite this volume reduction, EBITDA margins have continued to expand each quarter in 2022 as we have successfully managed costs while rebuilding the growth pipeline. For 2023, we expect quarterly sequential improvement supported by new business in defense, automotive, and space exploration. Moving to Slide 18, let me quickly review the record results we saw in full year 2022. As we did in 2021, we delivered another record year of value-added sales, adjusted EBITDA, and adjusted earnings per share. VA sales reached an all-time high of $1.1 billion, up 33% from the prior year. This year-over-year increase resulted from strong demand across the semiconductor, industrial, energy, and aerospace end markets as well as the impact of our clad strip project and the addition of HCS-Electronic Materials. Excluding the impact of acquisitions and currency, organic VA increased approximately 18% when compared to the prior year, representing clear market outgrowth. Adjusted EBITDA for the year was $196 million or 17.1% of value-added sales, up 37% from the prior year. The increase was largely driven by higher volume, favorable price cost, and the impact of the HCS-Electronic Materials acquisition. We delivered $5.27 adjusted earnings per share for the year, up 30% as compared to the prior year. This resulted from the company's strong performance despite an additional $0.70 of interest expense when compared to 2021. Moving now to cash, debt, and liquidity on Slide 19. We ended the quarter with a net debt position of approximately $419 million and $185 million of available capacity on the company's credit facility. Our leverage at 2.1 times sits at the midpoint of our target range with our expanding EBITDA and $62 million of debt pay down in the fourth quarter, funded by our strong free cash flow. Lastly, transitioning to Slide 20, let me address our 2023 outlook. While we remain confident in our expanding organic initiatives pipeline, we will continue to see some end market softening, particularly in the semiconductor space. Despite this, we expect to deliver another record year for VA sales and earnings with adjusted EPS in the range of $5.50 to $5.90 per share, representing an 8% increase at the midpoint. We have also provided some updated modeling assumptions as we move into 2023. We are anticipating another strong year of growth investment with capital expenditures forecasted at approximately $95 million for both new and in-process projects. We are also forecasting roughly $11 million in mine development costs to occur in the back half of 2023 relating to a new pit opening at our beryllium mine. In closing, despite some market headwinds, 2023 is shaping up to be another exciting year of strong market outgrowth and execution from Materion, leading to record results and long-term sustainable value creation for our stakeholders. This concludes our prepared remarks. We will now open the line for questions.

Thank you. The floor is now open for questions. Your first question is coming from Daniel Moore of CJS Securities. Daniel, your line is live.

Good morning, Jugal. Good morning, Shelly. Thanks for taking the questions.

Good morning.

Good morning, Dan.

Start with the two new partnerships that you announced this morning, maybe just a little bit more detail on the specific product applications for each and what the revenue opportunity and ramp could look like over the next one to two years?

Yeah. So great partnerships. The first one we announced is a funded one with about a $15 million investment that we indicated. That investment will be spent this year really putting capacity in place. We expect to have the sales completed, I would say, this year and really primarily next year in this project. Really, as I said, exciting partnership. I'm not able to go too much into detail, Dan, on what the product is or specific materials that we're going to supply just based on the confidential nature of the contract that we have. But it is quite exciting and it actually impacts a couple of our facilities that will put capacity increases in and then be able to supply, as I said, between this year and next year with the majority of it, I would say, next year. With the second partnership, this is one that we actually have capacity today. So there’s not really any funding required for the second item, which is the critical space application. We're going to utilize our existing capacity that we have. It is a three-year agreement that we have reached with the customer. As you know, space is an important megatrend for us. We've talked about it about a year ago in one of our calls. And this is just a really exciting application in propulsion systems. So our materials are being utilized for that. We're going to start delivering yet, I would say, this year, in the second half of this year of that initial $10 million order and then into next year. And our expectation is that we'll continue to do that over that three-year timeframe and then, of course, beyond that as well. Both of these opportunities are part of our Performance Materials segment. So quite excited about continued organic growth opportunities for our company.

Very helpful. Overall, it seems like you're anticipating a positive growth year for value-added sales, possibly in the low to mid-single digits. Am I hearing that correctly? Additionally, what does the cadence look like? Are we likely to start off at that pace, or could it be a bit slower due to some near-term challenges in the semiconductor sector?

Let's begin with semiconductors, as it remains uncertain for many companies, including us. Generally, I anticipate a slower first half due to inventory corrections, followed by a stronger second half as we expect improvement. Semiconductors comprise about a third of our business, which impacts our overall performance. Therefore, I would expect sales to be somewhat slower in the first half compared to the second half, and this could also apply to our earnings. Reviewing our market outlook, which is included in our presentation on Slide 10, suggests that most of the markets we are involved in will show positive growth, with some sectors like aerospace and energy seeing increases slightly above three percent. However, semiconductors may face slight declines. Your assessment of the company's expected growth seems reasonable. I foresee the first half starting off slowly but anticipating stronger results in the second half. Overall, we are optimistic, expecting around 8% growth in earnings per share. Operational performance is projected to be in the 14-15% range, though interest costs will affect the EPS. All in all, we expect a good year ahead.

And Dan, maybe since you talked about timing, I would just talk about the sequential Q4 to Q1. We had a really strong Q4. As Jugal talked about, we'll see the semi softening in Q1. So we certainly expect to be up year-on-year, maybe 10% earnings from Q4 to Q1, but be a little bit potentially softer than Q4.

Very helpful, Shelly. Last for me, and I'll jump out. Cash flow picked up nicely in the quarter, obviously. And you gave the outlook for CapEx. Just talk about kind of what your expectations are for working capital and cash generation in fiscal 2023 and with the balance sheet now leverage down to that kind of midpoint of the range and declining any shifts in order of priority for capital allocation. Thanks.

We were happy with our cash flow generation in the fourth quarter. We're mindful of our debt levels to maintain our leverage in the low to mid range, which is our current target based on our position in the business cycle. Our capital expenditures were slightly lower due to some amounts being recorded in accounts payable at year-end, leading to a larger capital expenditure payment in the first quarter than usual. Thus, I don't anticipate a strong free cash flow number for the first quarter, but I expect a solid number for the entire year and we'll continue to reduce debt. While lowering debt isn't our top priority right now, our capital expenditure remains healthy and we have many growth opportunities ahead. You can expect to see our debt decrease; we're currently at 2.1 and should be in the high ones at this time next year.

Thank you very much. Your next question is coming from Phil Gibbs. Phil, your line is live. Phil, are you on mute?

Maybe we'll go to the next and come back to Phil.

Yes. Okay. Just one second. Just bear with me. I think there might be a technical issue with the panel, hang on a second. I'm really sorry.

Jenny, I'm assisting here. Phil Gibbs is next. Phil, your line is live. Please proceed.

Can you hear me now?

Yes, Phil. I can hear you.

All right. Perfect. Good morning. Always something, right?

Yeah.

First question is just on the defense and hydroxide piece that you mentioned. I know it's typically a good kicker to your mix, and we saw a lot of our other companies in the specialty metals arena have good quarters and defense partially maybe because of the war and international demand. So what was the pickup quarter-on-quarter for PAC, meaning how outsized was it? And then what should we expect to persist to some of these geopolitical and macro things persist?

We mentioned during our Q3 call that we were anticipating some defense orders that we believed would impact Q4 positively, and that's indeed what occurred. We expect defense to continue to be a strong market as we move into 2023. Our projections indicate growth in the zero to three percent range, which is a favorable outlook for us in Q4. Regarding hydroxide, we typically see one or two shipments each quarter based on customer needs, and in Q4, we had an additional shipment that contributed positively to our results. For 2023, we expect shipment timing to align with our historical rates, so we don't foresee anything particularly unusual—either positive or negative—from hydroxide shipments.

And maybe just to add some color on Q4. As you know, Phil, the defense shipments can be kind of lumpy. They come in chunks versus the consistent throughout the year. So year-on-year in Q4, you saw a pretty significant growth in the 20s, if you would, percentage-wise, which certainly helped with our mix.

Okay. That's helpful. And then as a second question, I know the tantalum misalignment impacted Q3, I think, to the tune of $4 million or $5 million, not really sure what it was in the fourth quarter. But I remember you expected some of those things to gradually get better. I don't think the first quarter was inclusive of that, but some better contracts and some things timing up a little bit better by the second quarter. Can you give some color in terms of where those things stand?

Yeah. Maybe I'll start on that one. So we talked about the $4 million in Q4. That looked better in Q3, closer to $3 million. We will see that still work out in Q1 as we're working through some higher cost inventory. The negotiations with the customers are largely behind us. So we're seeing some of that pricing start to feather in as we enter the year, but some contracts renegotiate in the year as well. So that's why we'll still see a little bit of a hangover as we start out 2023.

Is that still reasonable to suspect that that's done by the second quarter for the most part?

Yeah. I think what we had indicated is for the most part, it would start to phase out in the second quarter. And then the second half, we expected it to be a little bit on the clean side. So that's the expectation.

Thanks so much.

Thank you. Your next question is coming from Dave Storms from Stonegate Capital Markets. Dave, your line is live. Please proceed.

Good morning. And thanks for taking my questions. Very strong year-over-year EBIT margin expansion in Performance Metals on a value add level. Can we expect any of that to be stickier? Or is that more just a product of maybe inflation moderating or more macro trends?

Our Performance Materials business performed exceptionally well in the fourth quarter. There are several reasons for this. The business is experiencing ongoing organic growth as we progress. We have resolved some operational challenges that we faced in the third quarter. For instance, there was a positive mix with defense and hydroxide, which tend to benefit the Performance Materials business. Additionally, our precision clad business saw significant growth in the fourth quarter, which was a positive factor. Looking ahead, I anticipate that these elements will continue to be beneficial, although some one-time factors like defense and hydroxide will likely diminish. We expect Performance Materials to keep performing well into 2023, but I'm not confident that the fourth quarter's rate can be maintained throughout the year.

Yeah, this is not the new baseline. EBIT was around 18% for the year and 20% to 21% in the quarter. I believe we will perform better than the year, but 21% is definitely not the minimum.

That's perfect. And just touching on the precision clad real quick. Shelly, I know you mentioned in your comments that, that was near full run rate. Just curious, is there any color as to what full run rate would look like?

So yeah, I would say we exited the year near full run rate, so probably not from the new facility at full run rate for the whole quarter. But we did have the benefit of also shipping from our legacy facilities. So in total, it was really favorable volume. We do expect to have all the volume coming out of the new facility in 2023, and we're getting very close to full ramp in that facility.

That's perfect. Thank you. One more question, if I could. Shelly, you mentioned that the order book looks really good. I'm curious if there's anything specific regarding China and the reopening there. Also, can we expect any updates from the supply chain or anything related to that?

Yeah. No, our order book continues to look strong. I mean the mix of our order book certainly is changing a little bit just based on the market conditions. So for example, we've talked about semiconductor and what that market is doing. So our order book on that one is a little bit stressed, but we have a really positive order book on some of the other markets. So I think, overall, our order book continues to be favorable and one that supports our guide that we've provided for 2023, which is a substantial growth from 2022 levels. China opening up, certainly has a, I want to say, a positive impact, but our business in China is relatively small in comparison to our total company. So it has a small positive impact but nothing of a meaningful impact.

That's perfect. Thank you very much.

Thank you. Our next question comes from David Silver from CL King. David, your line is live. Please go ahead.

Yeah. Hi. Good morning. Thank you.

Good morning, David. I have a couple of questions, and I apologize in advance if I jump around a bit. The first thing I wanted to ask about is how currency has affected your operations this year. What assumptions did you make regarding currency impact in the fiscal year 2023 EPS guidance range? Additionally, if you have details on how this has affected revenue and adjusted EPS, that would be helpful. Thank you.

So one good thing about our business, where we have currency exposure, we've got pretty good matching on cost. So what we see on the revenue line is usually much bigger than what we would see on the EBITDA line. So we're well protected from that perspective. When we go into a new year, we're often looking at keeping it stable with where we ended the year. So we don't make big calls on what we think is going to happen with currency. What we saw this year was not overly meaningful, talking maybe $10 million or so for the top line, but nothing near that to the bottom line.

Okay. And then just maybe kind of a more theoretical question or philosophical question. But a number of my industrial and electronic materials companies have talked about the significant impact of inventory destocking during the fourth quarter, both direct their sales but also indirect maybe affecting their customers downstream. I may have missed it, I did not hear too much reference to that. And I'm just wondering, was destocking an issue? Do you think it will be an issue in the first half of 2023? Or is it the case that maybe the more Advanced Materials nature of your portfolio doesn't lend itself as readily to the kind of buffer stock buildup and drawdown that maybe has been characteristic of some of your end markets more broadly? Thank you.

Yeah. Well, I think the inventory correction issue or destocking that you mentioned is definitely an issue in the semiconductor space. Not only are we seeing it, but I think the entire market in the semi space is seeing that. We expect that to work its way out, I would say, in the first half and then pick back up in the second half. That's one of the reasons why we've got semiconductor as a market, perhaps a little bit less than zero from a year-over-year perspective. So I think that is an issue, David, and it is something that I think we're experiencing. And certainly, I'd say, pretty much the entire semi industry is experiencing. When I look at our other markets, I don't see destocking as an important element. I think other markets are continuing to move forward. I mean as we've highlighted in our chart, Chart 10 of kind of how we see 2023 coming along, we do see, in general, I would say, a little bit softer first half versus the second half, but a lot of that is due to the semiconductor side just because that business is about a third of our business. So it is an issue for part of our business, but I would say not an issue for some other parts of our business.

Next, I have a few questions regarding the Electronic Materials business. I want to reference a statement from the press release this morning. You mentioned that the successful integration of HCS and the strength of their combined teams is generating value beyond our expectations. I'm curious about this aspect of generating value beyond our expectations, particularly in relation to some of the goals or opportunities with the combination of HCS. I'm especially interested in potential revenue synergies. While cost synergies were likely anticipated and could be identified in advance to some degree, revenue synergies carry more uncertainty in terms of timing and execution. Could you share your thoughts on how the element of exceeding our expectations in the HCS acquisition integration has unfolded?

Yeah. Well, first of all, I think the HCS acquisition, just like our quota indicator, I mean it has delivered really well for us. Our teams combined with the HCS team have worked on so many different fronts to deliver. During the year, we were able to add over 20% headcount to the facility and increase our output from the facility. We announced over $20 million worth of capital investments that we're putting in place to be able to put new capacity for the business. The number of initiatives that our teams have been working on where they have worked together to go and offer our complete portfolio of Electronic Materials to the top-15 semiconductor manufacturers has been very powerful. So I think there's a number of things that have happened. Certainly, all of those things, by the way, have led to great financial results as well for that business, I would say, much better than what the synergies levels that we had indicated. I think the other thing that's been very interesting, and we've talked about this, is when you look at tantalum, and the application of tantalum continues to increase in general, right? The smaller the nodes are getting, the more application for tantalum. And so even though there's the short-term softness on the memory side, the logic side is continuing very strong, and we would expect the memory side to be recovering. So the long-term trend of this business is extremely good and extremely healthy. So I think it's a combination of things when we say beyond expectations, combination of how things have turned out on our top line with the synergies, combination of the investments that we've made, the people that we've actually put in place as well as, I think, the future opportunities that we have for our combined portfolio. So all of that put together, I think just is very, very favorable for us, and we're excited about this business.

I'd like to follow up on the outlook for Electronic Materials. I apologize if this question is a bit disjointed. In the United States, several large wafer fabs and related units are being developed, expected to start operating between early 2024 and 2026. I believe the development of these wafer fabs is progressing perhaps faster than the ecosystem, including suppliers and logistics, can keep up. With that in mind, I was wondering if you could share your thoughts on the opportunities for your products and services as these new wafer fabs come online and ramp up operations. Additionally, how does the Chips Act and the increased financial aid for semiconductor manufacturers in the country affect your growth strategies or your ability to access this financial support? I'm interested in how the previously announced growth aligns with the new federal financial assistance. Thank you.

Yeah, yeah. Well, first of all, as we've already indicated, I think, on the call and we continue to indicate, this is a space that we're very excited about. The acquisition that we did, of course, is in the semiconductor space. We see this as a long-term growth play for us. It's producing good short-term results, and we expect it to produce good long-term results. Our footprint, our R&D footprint and our manufacturing footprint are primarily in North America. And the acquisition that we made here about a year ago is also in North America. So I think we are very well positioned to continue to work with all the semiconductor manufacturers. As we indicated, we have access to all of the top-15 semiconductor manufacturers. And then we are able to have both R&D as well as manufacturing in region to support them. So we see that as a very positive for us on a go-forward basis. When you look at then what additional things we can do, I mean we certainly are involved in the Chips Act discussions. We're studying it very carefully. We're looking at what options there could be. We're looking at which of these capabilities and skill sets that we have that we could further strengthen. And so, we're involved in a number of discussions on how we can take advantage of and support the chip manufacturers as they grow their capacity. So as we have more on that to communicate, we certainly will. But yes, that is definitely one of the initiatives that we're engaged in.

Okay. I have one last question. I apologize for being a bit distracted during Shelly's part of the discussion. I want to follow up on the third segment, the Optics. I believe you mentioned that the restructuring has reached a point where that unit has stabilized and can be positioned for growth. You also talked about a healthy backlog, but could you confirm if we should expect an inflection point or a return to growth in that segment for the full year 2023 compared to 2022? Thank you.

I believe that's a reasonable statement. Looking at our 2023 performance and the new business initiatives we're pursuing, we anticipate these will start to take effect during the year, especially in the second half, which should bring more benefits than the first half. Overall, we expect the business to grow year-over-year in both revenue and profit. We're excited about this, as it has been a strong business for us, despite facing some challenges over the past year due to customer decisions and the discontinuation of certain life sciences products. Generally, this remains a strong area for us, and we look forward to demonstrating improvements throughout the year.

Very helpful. Thank you very much.

Thanks, David.

Thank you. And there are no further questions in queue. I would now like to turn the floor over to John Zaranec for any closing remarks.

Thank you. This concludes our fourth quarter 2022 earnings call. A recorded playback of this call will be available on the company's website, materion.com. I'd like to thank you for participating on the call this morning and your interest in Materion. I will be available for any follow-up questions; my number is (216) 383-4010. Thanks again.

Thank you. This does conclude today's conference call. You may disconnect your phone lines at this time and have a wonderful day. Thank you for your participation.