Rogers (ROG) 20 Feb 192018 Q4 Earnings call transcript

Good day. My name is Chantal and I'll be your conference operator today. At this time, I would like to welcome everyone to the Rogers Fourth Quarter 2018 and Full Year Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. now call will host, to I Mr. Instructions] turn over the your [Operator Vice Counsel. and Knoll, President Jay Senior General Sir, you may begin your conference.

Please Thank quarter XXXX everyone Rogers slides that our you, and welcome section the can news release website call to two. afternoon today. Chantal. be of Roger for found was today's Corporation's and turn conference earnings fourth year slide full call. The along to Investors the Good on -- issued with

that market as begin, statements operations are factors. Reform this Such statements the demands, I and considered that would not subject should results Rogers' we the factors could within exists XXXX of note and cause many are to Before call be in like meaning uncertainties Act of uncertainties Litigation actual conference strictly These in forward-looking conditions, and Private that historical Securities environment. to competitive to economic include the to forward-looking may that during in discussions statements. of those the from those of prepared not the Accounting measures were certain materially which slide include posted Generally financial call Principles. comparable Investors in accordance for Reconciliation any differ directly found in financial non-GAAP the measures Accepted Also, can deck with call financial the on is our today's conference GAAP the measures website. section be most

CEO; Senior President call Turning Vice CFO; the today Daigle, Bruce. to me slide now Bob Mike and President Vice Ludwig, Senior and CTO. with to Bruce Hoechner, is and and I over turn three, President will

XXXX. previously QX of and fourth thank X% strong the were was quarter, X% XXXX. XX% Adjusted a quarter Net at today's by Good us global In QX the QX December a everyone $X.XX, increase the top per announced the tempered X% XXXX for from interest an concerns. $XXX range share $XXX near earnings linked and XXXX, of the million, XXXX Jay. full rate to million, over quarter of year joining sales increase issues for guidance were decrease afternoon an increase over trade in were and over Thanks of sales our in you for net for uncertainty call. start an

year, the compared XXXX. up to were share slightly earnings $X.XX, For per adjusted

broad key we segments a with across many mobility of hybrid the EV/HEV advanced During based and for strength Advanced in Systems, year, Assistance growth electric saw market Driver electric our particular applications vehicles, ADAS. and

expect more to discuss leading upon continue We this growth will of strength based which detail of in number I the shortly. a indicators,

investments to experienced our Our near-term further greater accelerate cost We costs structure. business and capacity reduce anticipated to margins impacted position the our in growth than XXXX. related for initiatives to expansion

In summary, of the advanced market a as year indicators Rogers. size provided in and was circuit increasing of acquiring Belgium a our made have and number plant presses product our on in assets materials capacity for projects clarity multi-site lamination connectivity Chandler, and in these XXXX multiple the pivotal expansion manufacturing progress We Arizona. mobility locations, timing applications. qualifications, consolidation, We greater advanced including completing on additional opportunities installing accelerated concluding projects,

ACS businesses, XXXX strong the PES projects Looking our capacity ahead to outlook performance, for continue. given demand will expansion and

advanced projects continue ADAS. in acquisitions, turn in on on to recent our XG during EV/HEV, optimize Rogers result most slide a the of well-positioned We will are will capitalize as markets positive and integrate mobility strong to also and to vehicle which five. margins electrification, outlook in our effect Please XXXX. these and is completed growth

experienced in somewhat XG, As for XXXX, wireless we the transition weaker to applications. XG/LTE demand of part

there encouraging moving However, news is the about forward. infrastructure market wireless

put networks during China's XG December. telecom issued January, in licenses the XG for Technology some XG operators assigned place Ministry three hotspots to example, in temporary way of paving be to the larger China's Information For early Industry cities. In and spectrums Ministry and

numbers industry base the experts, XG According and station is will exact during toward second the the to year. mobile the more deployment there we consensus While XXXX. meaningful stations the implications of XXX,XXX industry consultancy shipments be general weighted to there'll number Rogers that differ, of discussed for the more we business. talk I'll be expect half than be as base about which ACS

base addition a has leading be a that stations the in a the during bidding XXXX. This installed outlook XG In will confidence ramps. validates demand XG process relatively provider as XXXX industry following announcement view stable in in XG for to service remain XG began from XG, baseline our Chinese XXX,XXX increased recent LTE that demand to

includes six, in for the to ADAS and electrification, slide growth EV/HEV, Rogers applications, outlook which Turning vehicle robust. advanced mobility, remains

of work and to broad range demand performance that continue of support technologies. develop customers will closely with enable current a emerging to the products We

for e-Mobility, Looking the auto higher toward levels opportunity expands Rogers penetration at both and electrification, as industry through moves higher of content. market the increased

their vehicles the annual from for engine substantial years. plans combustion XXXX. During five transition is EV/HEV compounded shift three major to a of accelerated manufacturers rate driving for of models XX% to to XXXX, a through internal years a This number growth over next automotive EV/HEV

air particularly variety continues industry demand experts number and full the the range the short, our growth across outlook radar automotive XXXX, radar applicable in radar radar XX% seven. for worked continue transition automotive units strong is slide economy. automakers in of and XXXX, for projecting across are Through systems applications, European growth slowed applications growth a compounded internal conditioning, additional of rate Rogers' the recovery and opportunities mid, Rogers annual is a as levels emission EV/HEV range as to ADAS average sensors. automotive with XXXX, for seen for of is portfolio new requirements growth in in models ADAS and higher we've sensors somewhat, increase of through sensors. to growth systems more long-range penetrate to Rogers. combustion the engines as the QX, a OEMs of standards. Please such in electrification power In turn providing in to stop/start. addition increase In the steering, This Entering

For and example, gigahertz spot adaptive for XX-gigahertz for blind XX control. cruise detection

benefit these and slide Demand market sales we net demand XXXX. ACS designed In applications continue Over and $XXX turn for compared years, substantial offset eight. XXXX, to many Please past into million the to defense from growth. of aerospace in few weaker X% by were to ADAS we've the of ADAS down been applications. XG/LTE and was

models. loss compared MIMO antenna ahead, to systems This content XG/LTE we we three by primarily telecom greater look greater traditional which Rogers' XG to advanced adoption designs. low materials, content require addition in high to deployments to requirements utilized is As XG are times the imminent encouraged five material of more due which circuit the through performance, power taking prepare growth station order Rogers to as amps. base features maintain measures expansion more on we in continue qualifications. in expect capitalizes fully ADAS, mass the operations ensure have And and market and to a into safety customer XG multi-site been our capacity ADAS we to In steady expansion opportunities, their

addition, acquired recently to targeted to we materials Please In Arizona Rogers the for turn applications. Chandler, converting are slide XG produce facility nine.

driven organic over more million, vehicle all-time revenues year applications, During outstanding and the achieved $XXX year, This XX% grew XXXX. sales an full was where electrification by EV/HEV primarily increase of than XX%. PES growth record of

to electrification, As technologies greater its automotive content. grow degrees positioned is of toward Rogers propulsion advance

than The accelerate pure as such with an experienced capabilities. area us this electrified internal expected material plans. CapEx led a have engine vehicle XX than systems and example, has combustion demand For to times in can electric greater stop/start vehicle power steering more content we've Rogers our

for capabilities materials our wide-band gap We our of new-generation silicon packaging. capacity that nitride production adding are for includes significant expansion semiconductor

expect we reduce improve to improve bring equipment we margins capacity yields and products, and constraints As new our new in PES. online of

this as to increased XX, slide Results X% growth Griswold; optimize excellent X%. the for ensure packs. over battery integrate In particularly with $XXX which EV/HEV we area helps over battery Griswold XXXX, sales their PORON year newly applications as applications, the pack well portable automotive new driven of Turning for launched double-digit provide sales performance organic EMS to acquisition and ways an is of of battery growth of and EMS. closed materials, EMS business the EVExtend net perform our that consistently full cells year ceiling period achieved time. million, innovation EMS the to EVExtend in were Including of the pads extended battery PORON began example lithium-ion in into by lithium-ion designers systems. net new An reflecting XXXX, XXXX. electronics in

our efficiencies We finalizing drive into are the EMS plant of DSP Carol the line further Stream to business. in the consolidation facility operational

in the in Please and acquisitions We our half expect optimize Also turn we to this first our recent project all will XXXX. margins. XX. operational performance of improve to continue XXXX, further slide complete to of to

utilizing leadership, our of being to operational delivering are includes growth synergistic driving innovation organization, strategy, committed pillars a which M&A, We market-driven excellence. the and four

revenue XXXX and of I'm on XXXX Momentum in in focused our achieving excited margin. are and operating XX% goals We billion prospects about adjusted building. our $X.X truly is beyond.

We are abound to XG mobility opportunities on well-positioned significant applications. in capitalize the advanced and that

through on will over full will excellence Mike? I in execute call optimize drive as now QX who detail, our move our operational to report greater we will and additional year XXXX the we the financial online As acquisitions, bring results and additional our year, to well profitability. capacity, initiatives as turn highlights. Mike,

our guidance. you, XXXX good our afternoon review quarter for slides fourth results I'll quarter In the ahead, Thank everyone. annual Bruce and by and followed first

expected gross margin QX unfavorable we XXXX. were sequential revenues slide We guidance. of resulting XX.X% QX expenses revenues. headwinds in guidance quarter, QX QX diluted gross will million for higher quarter consistent quarter a diluted of to XXXX lower share range, in diluted was measurably to of QX, fully on and December to QX primarily a add rate mentioned in $XX.X below EPS an The will a end significant income a were share XX% the GAAP XX% lower by Bruce revenues per Turning fourth and adjusted the tax X% increased the GAAP fully on to XXXX our impact some margin the $X.XX some operating Fourth but rate quarter in taken the upper fourth basis and diluted of improvement quarter or the our in of operating increase. tax Adjusted later above actions being recently QX in revenues beat issued the and midpoint rates both commentary. our XXXX with on resulted the third a metrics, and quarter tax $XXX.X for the $XX.X for due compared for guidance EPS performance significantly QX Operating cover as currency U.S. of compared rate QX commentary EPS jurisdictions midpoint $X financial and million for expectation tax effective than $X.XX our compared above than our XXXX quarter the presentation. additional quarter revenues per subsequent will foreign million in the noted my metrics. improved the million in of results of in fully the XX, range EPS in comparable from adjusted fourth tax of to XXXX. effective our the by that well third resulted both I reduce on previously our or my to I preview effective for legislation. the rate to a

due additional ACS. favorable applications to all were demand $XXX.X mainly to income XX.X% lower qualifications by well our operating primarily acquisitions add XXXX. or than currency organic primarily XX.X% for an as XXXX to multi-site mix, added PES, segments, impacted in million than XXX upcoming was product revenues a to gross XXXX million was XXXX by ACS in margin to Adjusted gross and than in year lower add EMS new business. a for capacity Organic in points ramp, a and also XXXX of telecom related transit the as mobility and an of and tax acquisitions. for $XXX.X PES, strategic XXXX approximately X%, XXXX in and of XXX higher in rate higher for X% than challenges our Turning points $XXX.X greater lower advanced infrastructure per revenues -- integration than from EV/HEV added XXXX The XG X%, the the our slide applications of growth EPS PES in in $XX.X share capacity ramp in million of business XXXX was effective resulted in fully to diluted $X.XX XX, XX.X% applications growth incremental the products and of due from Adjusted mitigated basis or X%. $X.XX XXXX to decrease calendar of XXXX. XX.X% unfavorable negatively business of basis due Operational mass investments margin, being million costs for

or EMS revenues decreased on lower the QX due $X primarily to our of revenues third demand decrease fourth XXXX. quarter our to weaker lower in versus applications for as back million quarter with was consistent demand December. business, seasonal slide general XX, general The industrial XXXX in portable products Turning for in demand X% electronics the a well including experienced slowdown automotive and as

X% signs a are defense increase in infrastructure but and in early as QX in was to nice our higher applications compared flat business Our continued seeing than offset a a QX demand aerospace QX we were in in QX revenues XXXX. and experienced ACS basically rebound XG revenues ADAS we XG in antenna which decline revenues. ACS' of our QX,

slowdown to variable demand. our a in strength Our X% business, QX by PES revenues our due to QX drive mitigated in frequency rail increased compared

PES continues robust, growth. our to be is in our limiting demand near-term but EV/HEV business our capacity Our constrained

As expect in the the of and capacities beginning QX QX million. fourth capacity to Bruce online in negatively levels stronger both dollar throughout compared consolidated quarter euro XXXX. the our demand bring renminbi impacted support and by in remainder high revenues the to of The adding to we $X.X the are mentioned, added and the

for quarter. revenues, margin quarter the or increase higher points the revenues. QX or percentage of Turning our gross basis margin was to XX.X% of in to compared of million due to third than slide $XX.X margin third XX, improvement our $XX.X an gross gross was The million XX in performance XX.X%

acquisition approximately earning freight that yield from issues in increase by performance new experienced quarter's product call, from by products challenges all gross the points. the and expedite shipments, to PES to related detriment in the we As combined structural company issues our basis the the in margin last EMS integration costs of business, in mentioned XXX and which business, ramping

infrastructure anticipate yields incrementally continue costs EMS with optimizing well corresponding PES aggressively XXXX throughout in and in reducing to costs We and challenges gross address as as certain the consolidation increasing site these manufacturing improvements incremental in margin.

expansion underutilized beginning of meaningful in strategic past We margin XXXX. make incremental as We capacity more we with did achieve business the when expect continue to on XG ACS not rollout margin fourth leveraged applications Slide of our that on volume to later are quarter fully for investments increased the the shape is XG EPS in to change gross any EPS and in $X.XX the investments the weighed of optimize in XX adjusted in for $X.XX ramp we the details per fully of anticipation QX XXXX adjusted good anticipated diluted diluted to believe share. a QX execute the a in XXXX. XXXX per share in compared

product expenses. the in of QX expenses the previously. represents XXXX XXXX for spending and and column in of discussed professional each support margin, first were was respective QX initiatives. we a services million for increased SG&A new which SG&A The difference increased R&D higher than expenses The R&D $X the majority gross were

or revenues QX for the profit of operating adjusted for to compared XXXX XX% XXXX. the quarter XX% result, $XX.X revenues million of was a or of As third $XX.X million

issued foreign we tax jurisdictions not benefit profiles XXXX benefit to effective of of and XX% discrete of tax which was between U.S. from resulting Lastly, had tax recently to the the sufficiently segments have resulted a lower tax from transition XXXX effective along XX, tax tax decrease foreign as rate the tax to to rate a and XXXX and the the legislation and XX.X%, recognized have rate, QX. we primarily EPS strategies in an due legislation. basis planning from On calendar the fruition rate for calendar a each that tax tax U.S. absence QX planning effective and Bruce statutory U.S. XXX tax reform planning fourth adjusted quarter. included tax well our to of strategic of were the X.X% in recently was our for realized implemented a diluted tax late tax an A rate of to compared tax of for XX% XXXX, in significantly contemplate The the each our does XXXX the as the slide tax of year initiatives point as introduced of segments. an benefit annual revenue U.S. for in came In impact expect profitability QX effective fourth discrete effective -- rate application lower items in potential the tax rate due well benefit amplified issued as XX% legislation approximately recently to me, the for quarter lower in total strategies QX, realized the covered year recently XXXX. throughout the our with items. benefits strategies of business The issued the the as execution as driving growth tax realized in U.S. meaningful

quarter increase to ended XXst, XXXX. $XX.X a certain on contributions, on credit facility. borrowed generated and company company XXXX, expenditures, million anticipation Turning and company debt. pension we on activities, in million decrease other with pension cash the million benefit use of working million. XXXX, consumed and the initiatives December post-retirement pension Isola and and post-retirement working payable increase To the long plans $XX.X revolving million incentive and the slide The our in position of an increase was million down be and The on of from $X.X expenditures. of $XXX.X an $X.X are accrued termination related plant on capital and consolidation million of XX, in due primarily the company the working additional million million, to cash change recognition these $XX.X driven for post-retirement from of liabilities at $XX.X estimated of slide to related a its million $XX.X and of primarily from capital. capital capital and contract benefit facility for and managing of credit Taking XXXX an in $XX fund decrease inventory net $XXX in guidance QX mostly acquisitions excluding the contributions, $XX.X to the of spent December materials, paid million look a raw million outlined $XX.X the In increase in debt $XXX.X the operating in revolving revenue accounts to the other XXXX, of $XXX.X revenues by an lead-time payments, compensation. had third a At to $XXX.X million Griswold million. of in call In in XX, spent range its XXst, outstanding related our assets million, asset million $XXX reduction XXXX the

guiding XX% margin our a the for $X.XX comments. we basis, improvement in margin are incremental we of guide GAAP mentioned gross the earnings adjusted is diluted applications. an capital On We to $XX continue to EV/HEV share. for continued XX% at to increasing and guide for diluted million to per in add with consistent QX spending to Guidance $X.XX $X.XX gross we EPS We in $X.XX fully per year range range products range the in as demand for for XG diluted million $XX of a of the a share. serving capacity for QX

full to the Bruce. earlier, back over effective XX% expected rate As for is we to XX%. I year the will be call discussed turn now tax to the

prepared remarks. Thanks concludes our This Mike.

open line Q&A. now the we'll So, for

question first comes Your Riley FBR. Craig Instructions] Ellis B. from [Operator with

open. Your line is

clarification a congratulations in month given understandable finish and to line. December any but in particular the that year significant on how strong you that or slowing quantify saw, and some the segment questions -- on was? is, we that's you any macro that particular the issues the of taking can geography products mentioned Gentlemen, some you the that and was for that of the was sales in on there Thanks

in The and doing, How much pretty say we in Craig? off sectors, really industrial the more the fall saw that in was -- really of are it is I -- general the the December. month where would

January, moved we we things into think saw stabilized. as relatively I

seen had of we was now December been. from a what bit of But the things versus the year returned had what of miss it to have part here million I in anticipated. first So, think a our in sort what few expectations we've

question the then That's Bruce. helpful. Thanks XG. real first on is And

seeing And thought maybe larger So, had you bit some that little for I a be that Xx or XG I be the a it the the that it something seems Xx. content real on-ramp one content the details that to the that XG, closer for issue that little I approach going up geographies? the I to are explain bit how XG where to and situation as we ramp providing, the increase content Xx opportunity is versus sounds Xx of right? you're than designs seems like was earlier from than in bigger Am that other catching including do to what you're that's more to be get China of to thought, your had of seeing content Rogers but may an

Right.

in is materials ask as to is designs actually So, to are I'm greater a that, what seen it because-- on comment this, used Bob going the in actually we've come amount. our

think of that's we're in speculation I that the level talking what of in -- terms by receiver big terms driven level and deploying may to XXxXX MIMO the toward they're about was being XXxXX difference we're more now what going is think, be versus out. be -- customers hearing the XX there of going from and multiplier more what transceiver we're seeing is big the Craig I the the

in the really allocation us, that we're that just really requirements the MIMO looking the at size -- of fair a complexity of bit. now And it's for which X.X aspect, and up are physics think as bit X.X that's a positive material gigahertz the for higher as I and increased China amount Mobile spectrum typically is So, driving at with became board only multiplier other and gigahertz, was spectrum December level spectrum well. the of the the that evident the been associated a

before do a onto With in Thanks ADAS. content you'll you that, situation it seeing? higher just move step Is XXXX? adding given infrastructure, content, you Bob. through think capacity comfort to can express that And communication for the regard you're helpful. to your then to follow-up that in need be your with up I the existing That's really sufficient

the facility talked we've for next Well, capability year about, we as purchased or And very so, Price on we years will we'll us we over But repurposing estimates be as assessing to then this ensure fit. -- that just and Arizona acquisition now and the are the Chandler, has the of purpose. through I even we we've two think XXXX, we of amount a of there in Road, in add the move position that XXXX the certainly terms some ramping years have really three XXXX of through XG to least machinery see that upside we out put strong demand. at as

Clear. Bruce. then next question message. ADAS. the Yes, clear Thanks And is on revenue

stages resolved is consumption wasn't fully in You it's and correctly it if or cleared your if demand the that the sense when for fully you last issues in identified I European would intermediate regulatory from back to expect inventory you? to have that be quarter. is issue clear that to is and now matching were stemming latter,

we to of certainly year, back we the for double-digit those in rates we And got chain. and in stages ADAS final be higher February the of are returning the the ADAS as seeing now balance, we growth in move as into through January started inventory we think kind ordering supply XXXX. believe we teens through So, the and on will we and

Demand to seems So, situation of coming back things balance. are the in in itself. have righted out Germany

necessarily produced. units getting of so to are this, is of have numbers we And a part play, again, just remember that not penetration

in play still continues is the penetration slight us. there you downturn have So, even if numbers, what for a automotive

But basis Got it saying half I it that it. mix think year, is in maybe a XX little on correct what gross you look better benefits we before gross average the quarter. potentially neglect the gross get the can in by sounds near-term, and basis you, you. would the like queue. some at margins back XX but Mike points could you think margin, basis our that last in XX want is from then it And quarter margin and expansion per you than I get through expanding or to would you're about to that we be the than On points still talked don't as XG the year? less go be Thank of back points

Yes.

a So, of -- just so couple I think things.

first all, of XX So, the on points. basis

I right we're it the what right than I to probably in little happy however, think the we planned. think, But get had moving that, the we improvement are, see of pace slower but is direction, should making headway and the as facility DSP about. the Carol we our think completed be the -- consolidation that talked in his DSP in And late comments I Bruce Stream into mentioned of QX.

limited business, I we well pick the think I for again, and the and challenges that demand of good our actually again, move up about yield think said, new of I also points think in in think improvement. the acceleration basis as I in through So, we I we'll as into from we the to EV/HEV could that an third feel into points. incremental will I there. of, PES would of XX basis the be next quarter, we XX first All top even points. some and challenge in the the we'll of standard on but then the put see see performance, and the But think XX incremental of basis I from again to such that continues capacity in -- improvements And result scaling basis could get margin think on one, to think quarter, that, acceleration actually a quarter QX, into just Q QX -- get think see as -- the see But the we products. just we something And maybe that, I utilization benefit points of XX second a XG place. we get should that stronger the

in improvements third margin fourth get we be as gross into points. should think the XX I better quarter, quarter the than see and should So, we basis that

it. Thank you. Got

Your Moore [Operator question Securities. next from CJS comes Dan with Instructions]

line Your open. is

hi Dan. about for in valuations or plan about M&A over Yes, what's Pete confidence executing of the the months And portion talk for opportunities, the months? little XX pipeline -- our your M&A Lukas it's more next ago. a Can you bit long-term level on than growth reasonable the say perhaps XX less

So, on these it's happen And across some place a very on comment fronts. looking discussed, hard when we've in opportunities. a of at of robust we to as will have number the team acquisitions different execution

assessment of where multiples months the XX Our XX been much months. they've over are pretty last to

So, there. are change don't can teams and any anything working publicly. see don't we this that have we point, really at But we our real report

of from And markets you. frame inventories terms you out are? also key expect Huawei. of most other us for And are and they in accelerated And orders growth Got just Rogers? China? terms of impact their cut them suppliers how like a they you than customer major be seeing of terms board in of all big for or to in revenue what you building were type would Can if shops then

number we customer. would to are with in to raw that we up, lot the And let's ongoing there's of ramping revenue. lot that needs. orders certainly for ongoing and our question where of materials say, answer activity a right an I folks off. are the of our effect execute to we less -- forward, feel ECS our without a the now Huawei, time customer. what it making don't the said, company, moving of business. and regarding comes, China so things on question lot of, ready than available against I and were the But see around cut electronics terms your their a of the are when that We important a would sure an the report and a customers, world. But customer certainly size the XX% specifically dialog a if across effect, regarding suppliers mean, that doubt sales important In it's be something particularly all is Corporation very had certainly as To each answer

our our that not been are like was to to position, major are If to qualified is OEMs. have all of our and folks able able differentiate that really believe supply relatively by able we we someone and technology So, standpoint unique the produce, ourselves. we that the from we Huawei

able to we that. it that to would another went So, be OEM, if get business

I'll helpful. the back Very jump in queue. Thanks.

are further I call no questions the over to time. at turn this Bruce. There will now back

take right. and are Well, full think there, I stream, capacities is on about we market Again, that session. today. advantage we and our look are talked coming a of was well-positioned well-positioned Q&A the toward we've the short as All we through XXXX, believe indicators strong to Rogers demands are that

you again, have So, thank for your and good a attention day.

This concludes conference call. today's

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