Mike Harrison: Hi, good morning.
Shelly Chadwick: Good morning.
Jugal Vijayvargiya: Good Morning, Mike.
Mike Harrison: 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?
Jugal Vijayvargiya: 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.
Mike Harrison: 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?
Jugal Vijayvargiya: 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.
Mike Harrison: 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?
Shelly Chadwick: 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.
