Rogers (ROG) 2 May 212021 Q1 Earnings call transcript

Good day. My name is Cody, and I’ll be your conference operator today. At this time, I would like to welcome everyone to the Rogers Corporation First Quarter 2021 Earnings Call. At the end of today’s prepared remarks, there will be an opportunity to ask questions. [Operator Instructions] I would now like to turn the call over to your host, Mr. Investor of Director Haymore, Relations. Steve now Sir, you may begin.

on And you, two. earnings Rogers the with Good the be conference website, that of everyone. Please Cody. afternoon, welcome turn found can Corporation call issued The news for to Investors along slides section our Thank call. today’s the was first today. release quarter XXXX slide to

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

Also Bruce. Xst. on today, appointed Turning call CEO; President CFO; now Senior who CFO and has three, Mayampurath, and the Vice Daigle, call will to me Vice turn earlier joining effective Senior Rogers’ to announced the and Mike and over Ludwig, slide us with May been Ram President CTO. Bruce I is is as today Bob Hoechner, President

strengthening afternoon, Advanced Rogers QX, market slide Thanks, a financial today. growth Mobility everyone. driven by in turn another joining us delivered operational continued for in Thank excellence. four. Please markets, Good you recovery strong and Steve. to performance

of of net also Gross of million improved First a the and guidance sales The per nearly XX% X% enabled of per record share. focus basis increased GAAP on of end end to exceeded our growing adjusted at was guidance. was to earnings double-digit earnings on EPS impressive in the The top our $X.XX operational reported based share ongoing result high we the quarter QX $XXX rate. our increase by margin of markets markets performance. a increased economic all and sales $X.XX our strong and and exceeded growth and as our both fast strategic broad recovery.

the XXXX. as continue strong more related Sales doubled EV topline to further our compression also and EV/HEV growth than anticipate pads solutions We on rates of solutions higher. and year-over-year. and investments and for batteries our in continue ADAS in capitalize the to to opportunities to XX% than QX of more grew innovative compared at power Advanced realize accelerating We were these were sequentially sales of technologies substrate multiyear Mobility semiconductor increased accelerate. markets especially benefits of double-digit markets. Sales

As this of additional take to opportunity. technologies investing advanced announced pad quarter, capacity ceramic substrate compression are in our we battery advantage aggressively last and for

this growth. additional also to are We and investing resources capabilities in support

positions and QX to the impressive We longer in Sales similar and strong are significant the at and in EV/HEV ADAS market capitalize markets. a the Rogers momentum our growth in and market in increased on add will to near-term rate to inflection the these markets at investments point position defense these an term.

as industrial saw sales quarter levels. to in Our focused and the QX, demand a versus resurgence new wins strategy sharply returned design and drive We and grew to prior pre-pandemic continue product in introductions growth.

capital industrial to sales seasonally and in wireless investment The and our market industrial for energy markets the inventory. quarter UTIS of Our -- improve. clean was in applications market, impact first were growing to finished as strong sales lower rates. with undamaged the consistent used infrastructure levels facility Demand the minimal showed with Other In semiconductor of as in sales the which to portable such at in our closely electronics from selling was continues a equipment. disruption result to our also sales market improvements expectations. are double-digit goods strongest QX, tied in

this lack disruptions, during track chain quarter We continue fourth resume to by to began as on in the impacts global largely this our to closely unaffected remain along of with year. the U.S. sales the but the In raw Gulf work production our certain of quarter. time sales we temper more of we we materials, were seeing somewhat and will weather supply customers gross Coast, and interruptions QX the exited availability due second margin. quarter, growth primarily

through delivering improved and profitability robust cash offset gross and higher we sales largely In expect continuing had strategy, generation. we impact our per of costs Continuing strong margin the latest market In of we outlook. moderate QX summary, five, QX, However, earnings this hedging commercial the headwind commodity are an to discuss copper growth, to the offset share. impact reduced by activities actions. costs I’ll on QX. to hedging commodity the by to slide Higher excellent quarter, end

two across strength portfolio. As is factors. our major This broad driven by seeing mentioned, are we market

in Mobility. First, with we from long tailwinds, are our benefiting such Advanced secular as strategic markets positioning

also primarily growth driven EVs in by this We of area, HEVs. accelerating the and exceptional adoption are seeing

Second, to economic continues global recovery momentum. gain the

at vaccine demand should by we stimulus facilities Our expectation and are support and maximizing activity response. in will existing near-term is economic strong improve, output manufacturing that This continue to to continue rollouts. aided measures

for investments an years vehicle updated global by to analysis than expected. automakers. Mobility, EV/HEV outlook expects extremely adoption. XXXX, continue account point an ongoing In strong the trend for outlook points estimates and earlier in four EV/HEV and Underscoring long-term BCG to their the growth global for to acceleration previously half from commitments more Advanced to Turning sales, by experts report, Recent industry that of this now EVs will HEVs is the than market. light

internal full and of segment capacity with from sizable fastest degrees of note important VW, to be this electric the over in It’s higher vehicles expected CAGR combustion to Volvo recent growing the Rogers, from This battery out announcements content our others. market phase Some weeks are Honda for because of a increases to GM in investments significant and with and XX%. of electrification. commitments include is engines opportunity examples

ceramic For concept battery applies content compression a pad in our of full The opportunity EV a $XX to approximately content mild and hybrid. used from to solutions Plug-In same HEVs a $X around in opportunity example, ranges compared to $XX in our substrate EVs. XX-volt

increases. can interconnect Other have which vehicle $XX design entire greater be wins content are battery Also, market entrants our the sealing EV secured solutions. with per market Our EV/HEV as to solutions. across include meaningfully the pack dampening several the we rises solutions promising than vibration pads battery and used power and size with

production remains the certain we see the five growth semiconductors, auto challenges levels strong but long-term penetration ADAS, potential outlook robust. Near-term years, higher limited vehicle mid-teens to to driven very next over a of supply autonomy. some Turning continue of increasing from faces rates the by and

customer continue We are design market we and our encouraged expand in by with to wins. base new progress this our

that market to energy attractive the for potential at a growth material very addition Rogers expected and we such five as to substrates. has achieve tailwinds. Please renewable drive years, six. track renewable collaborative a to combining energy The In also customer growth in drive proven our with a in We demand over and other rich in developing we CAGR will markets by engineer-to-engineer slide continue with solutions is XX% turn defense. relationships. strong these opportunities semiconductor of see results to Advanced science expertise in the markets, deep grow which next power Mobility anticipate innovation of heritage our secular robust record

key and example growth pipeline Rogers. institutions, The effective in EV/HEV global enable how a Through in strong and we maintaining Our an next staffed are a drives of develop other efficient of the made and generation R&D our universities identify, expand are at They needed we’ve and personnel technology the product development our pipeline. to partnerships can is with business centers manner. further world-class prime development innovation acquire who products. innovation cost with to research progress

For example, has of and pack and in solutions, R&D and products innovation years. silicon our advanced sales. to total through for than developed battery which form XX% solutions sealing more battery process of These our EV/HEV all our nitride pad now increased market, core substrates recent were the the

development. innovation on that currently are focus a under advanced solutions continues Our of number with

these for high some development with Some products pad battery next-generation include compression improved pipeline thermal advanced and performance, our silicon substrates antennas in performance next-generation radar. -- auto the solutions of nitride of

core to innovation through source and growth advantage strategy. element of organic Our our competitive continue ability to a Rogers will drive a of is for be

to I’ll call. recap Turning seven, slide today’s key from our messages

QX our delivered and strong First, results by markets on advanced by our recovery. market we continuing mobility strategic driven focus

aggressively drive We powerful tailwinds. also by on capitalize growth continue and opportunity investing mobility accelerate, growth. long-term sustainable to margins. This gross to in this and especially higher space, are compelling the and EV/HEV improvements is markets, opportunities operational The advanced driven to we continue extremely secular

Lastly, the been as to has announced new appointed Mayampurath a Ram CFO. as today, press in earlier serve company’s release

corporate role. have resilient and As gives and which and appreciated an a leader, held happy finance to navigate during have Mike period many partner confidence would wise seasoned a Ram. a some the a and senior for facilitate with insightful remain where with long years and to helped transition has his a operations, to join company. treasury. into senior in business Rogers of Rogers’ Ram analysis, leadership to it planning at a make impactful situations thank through business finance Rogers, financial for Rogers Mike difficult Please financial experience over and and I retirement. more has CFO seamless wishing and transition contributions XX counsel will being the employee he has has has again helped healthy like me. transformation company indispensable great longtime help me step stronger Mike’s for responsibility positions financial had Mike Ram I me

it to turn to I’ll in discuss more Now results detail. Mike QX over our

the Bruce. Thank words kind wishes, you for and well

Your my thoughts and global Rogers. and the I’ve and Rogers to It’s opportunity appreciative at of team, fortune the with a to impact results a management time a been are positive of immensely my tremendous made Board culture community. hardworking, appreciated. I’m supportive work truly senior on the Rogers dedicated have enjoyed

I’ll the the back jump review results Let’s ahead. results. our to slides XXXX quarter first and

Turning to EMS segments. slide Revenues and business delivered financial sequentially in nine, AES as Bruce quarter. results first increased strong in the mentioned, both Rogers our

volumes increased business improved call, basis despite in comprised and segment delivered earnings business QX the optimization income. the segments. $X.X $X.X strong PES resulting restructuring to recognized and QX significantly and million and ACS we GAAP product increased In XXXX insurance the gross net less points our and efficiency, is proceeds. communicated former fire in was operating earnings communicated for As other higher our higher costs. favorable quarter we mix the than at the increased our our through and In QX, results XX revenues, We that AES of of expected delivered cost third gross through freight footprint UTIS commodity margin related million margins call in from activities loss facility, a

effective was QX Our for tax rate XX.X%.

RF XG to variable power first revenues. reflective as applications the and of frequency industrial increase approximately applications, to the all while solutions, to XX% gain wireless be revenues revenues Defense to-date the the comprised that the drive believe EV/HEV tempered sequentially, the solid industrial X% grew ADAS to was is lines, manufacturing markets. order and grew accounted revenues nearly from applications, increase general business, power business due the of aerospace quarter strength been of inside in $XXX.X semiconductor favorably and as The revenues. X.X% increases by to exchange several continue by all million. of three automotive China. drive a energy a to XX% to in the Wireless quarter semiconductor XX, product business, a commenced and in and the We accelerated sequentially. million, not business recovery. and accounted the revenues highlighted power sequentially Rogers, Currency increased segment $XX.X in XX% applications, QX. to XX% consistent first and by rates primarily a for X% general continue as fourth AES EV/HEV power EMS business and broad $XX.X million power Record and XX% both business which substrate business in the for XX% this in renewable uneven substrates revenues of revenues, EMS infrastructure revenues Within variable due segment demands EV/HEV XX% which which the the increase chip semiconductor in The as ceramic grew that sequential million, energy in impacted significant of accounted XX%. applications trend accounted nice programs semiconductor the XX% continues renewable installations the the opportunities frequency slide our quarter, in revenues mirrors short-term for to increased defense revenues project experienced $XXX.X the AES for the for will product momentum energy accounted in have and impacted revenues general solutions, the Clean interconnect general in sequentially increase of RF economic EV/HEV to and the quarters, grew business due sequentially, is to well were benefit outside in the both area XX% customer reflecting interconnects. long-term increase the fourth growth and for compared business XX% sequential grew QX for for our the our accounted economic demand QX revenues in revenues continue shortage. increased market infrastructure have across of recovery. segment revenues segment compared accounted meaningful recovery by will demand strong Turning and rebound revenues of the is with revenues XX% of ramp. of grew XX% the to as revenues the be application ADAS continue of and and comprised timing the adversely and XX% momentum. increase the

decline portable As to strong mid-February. factory XXXX. experienced UTIS a revenues XX% expected, second in the our very the seasonal for fire segment occurred compared just accounted slightly revenues of for down that XX% half sequential despite from which electronics, of the a off were Revenues QX,

than margin product basis XX, increase or primarily XX points and higher $XX.X The gross volume the improved slide to XX% our margin than was material of and was the execution, quarter offsetting and for million to in increased Turning gross higher due revenues, unfavorable mix first costs. QX. more manufacturing raw freight

the had even AES The all the AES overcome was both EMS gross increased EMS While to manufacturing aforementioned to business produce sequentially declined headwinds, and margin able businesses the execution improved. gross in though lines. three margin product

into income To by Although, percentage gross copper and the the of our contracts our contracts. copper profit costs the in other our percentage in quarter. we The operating gross sequentially, margin significant increase points cost dampened these margin on meaningfully increased mitigate on profitability, hedging in results. higher expense our enter below copper XX losses recorded are basis gains

actions gross compared for adjusted QX was income in to adjusted as cost higher the we which of higher operating XX of included and and mitigate million, QX QX The other points our commercial revenues in to than costs. of we revenues taken the impact XX% realized hedging income XX expenses of as XX.X% adjusted Included points basis income expense of of for $XX.X on than first have adjusted copper the QX. The to expenses or Adjusted compensation QX offset the due to $XX.X on $XX $X.X QX. expense costs operating higher for raw for million basis of margin performance detail $XX to QX net million. QX was of operating materials. commodity to Also, compared other hedging the benefit purchases, Other slide were higher expenses. based quarter. in well changes higher XX income copper addition In higher were in copper are income favorable the net our increased million contracts, gains million costs,

As to our be to income. higher to effective XX.X%, XXXX of rate first than of for expect effective for due discussed forecasted tax XX% XX% XX% rate XX%. earlier, geographic now mix rate will tax the was pretax We the quarter Rogers’ our

and first Turning $XX.X $XX on of quarter opportunities balance the both a first cash pleasure expenditures of the I we the the excellent Directors and forward. of my Again, choice the my the for XX% at In and outstanding Despite level which the expect to a first the XX, significant at the cash the the accelerating over would Rogers’ support We company closely my in a million. we slide quarter quarter, it expenditures their million over first to position on of position of like I increase $XX credit expenditures. restore rest in $XX.X million of Bruce Ram during $X.X our free ended million is as million operation, EMS facility. growth time opportunity discuss to in segments. to during the and serve from million with XXXX, Rogers. by and the we of an proceeds. -- business capital UTIS community to advanced the with million now been generated continue Rogers. for credit the had capital of has investment the flow company’s will $XXX.X to privilege thank to repaid quarter He an driving of million. and The profitability call I’ve ended CFO Board In to tenure strong exclude capture of quarter, $XX $X the $XXX.X of the operating mobility net company on activities, market working net generated an guide insurance necessary the AES and capital Ram expenditures in million facility be the with our portion, QX million with QX, spent expenditures $XX cash to outlook. continue low the of to in turn guided working to reimbursed and capital

to I have this time like extremely a opportunity I am named for have It to we excited closely Thank together. pivotal and Mike his CFO would and work you, as at Mike. the thank for company. a the leadership be the is in at Rogers such capacity to appreciated privilege to about opportunity had serve

investment with our acquainted to Lastly, better community. of members I look forward becoming the

Turning now slide quarter XX. guidance to on the second

to strength in advanced earlier, of Based the the discussed industrial, and our range general infrastructure. materials in particularly second-quarter growth. mobility, be will factory see and strong certain $XXX our Bruce in million of this As of lack guiding of million. we we our markets UTIS on $XXX to our of many second revenues continued availability offline quarter being Effect raw defense wireless impact are outlook,

further several resources XXXX. in of Following in before sequentially to to expect related from quarter, second quarters increases To our business will and the margin cost Also the up see Gulf improvements, the be significant our constraints continue improving prepare will quarter. challenges gross interruptions strong we second the half, half stepping in supply raw material we mix, for QX we mentioned earlier. second flat of to across the Coast be

costs. mitigate raw impact a second These the taken have full on of increase benefiting impacts actions half will XXXX. second the commercial gross with in quarter material actions the have positive margins We our to in

from the volume the the expenses higher guide second better overcome with our increase expenses first operations We certain to company gross also the range in supply to growth the and second quarter of XX.X% the and margins compensation. of expenses consistent end expect in see be half to the mix half. higher from favorable by quarter. based UTIS will in will We to and constraints our XX.X% incurred second to recognize operating impact including the performance support in of operating restore anticipated quarter. The in timing Costs second quarter

Operator now and $X.XX of $X.XX second earnings per I the turn guiding guide for $X.XX range per range will GAAP share are fully the to the in fully the diluted quarter. We questions. back for call to we share QX of diluted earnings to adjusted $X.XX in the

Thank Riley first question Please you. our from Instructions] take B. [Operator Ellis We’ll with go ahead. Securities. Craig

or taking the execution. the Welcome to for role. aboard, on Thanks Yeah. first question. quarter Ram welcome Congratulations the

again onboard and for a been You’ve long Mike, your all time for thanks help.

a supply those second the help understand those with on in clarification play issues I’ll both of on for gross what us revenues comments are question that the just Can the and are margin, So, you start line quarter Ram, your guide. can two chain at items? magnitude you quantify

you -- a supply the our gross So, are chain comparison about price in if about to the constraints increases QX, to million XX% and supply the about net $X so of of margin $X material raw impact, Both from may. mostly price constraints million raw shortages contributed materials.

Okay.

that’s… So

Okay.

it. yeah. -- Got but small, pretty …

it Okay. And then question and to flip I’ll second for to couple. then the I’m Bruce over a your going and in court keep

a in from You second had half benefit the talked mix on enjoying about favorable higher margin. gross and volume

the business is pieces, volume parts and with whether participation cetera? electronics do its that that fourth seeing is, point it potentially -- things have higher extent of is Advanced business, second et that’s what Mobility driving or be So quarter other the it UTIS to half? you And on the the you’re return the the in of volume the portable visibility better better really where the it question in demand

Craig. a you combination of mentioned, both It’s Yeah. reasons the

markets, to be, lift business continue industrial, That’s and our you making half as second for our QX know, in why even many Second electronics EV tends particularly we general portable we’re in generally through in prepare an that. our of are investments the and some QX, to for exceed overall stronger seeing of half.

committing really longer come capital to and is certainly extent like million aligned to what the question. is XXXX array it I’ll The company will in and Got spending more beneficial an team’s drivers the $XX particularly to an benefit growth start capacity got to you’ve seems this And business it. for to broadly strong the provide what It capacity segments to well and a or on portfolio the is you is, that engineered any it Bruce, to very it of applicable the the question of the portfolio? for million extent term the intermediate to more then, $XX flip that or of growth. and year sub-segments does for be to

it and this kind we the of then move year end towards course So as into of the over in XXXX. channels

So the side we capacity see certainly on ceramic in onstream. coming some increases

recovery Of of also back back more onstream course, brings the business some into the we’ve investments the already PORON on will UTIS come capacity announced that and effect in XXXX.

So of lot certainly we -- -- of we’ve in of the end a and -- year it the some towards move it end as XXXX. comes this then into

the Got has $XX it. where much that give $XX how quantify capacity beyond And some you could can current degree you would are If million magnitude add to of where above that’s beyond you you million are currently? today? revenue capacity what that business levels,

way couple growth years It’s capacity the the over at this very -- we as that’s an that in with next us look good interesting question. of we see. that trajectories gets it, The out we shape look

So, in as both on PORON the side the as the XX%, house, EV/HEV XX% in the sides of the well. ceramic Elastomeric well side, as -- growth on both in

So we with growth rates. the in we’re pace think keeping

we indicated, beyond. I as move think into we’ve and XXXX also

continue analytical We the with the the -- high we’re we have. and growth. tranche needs happen next These to at growth very when carefully and been trajectory understanding will that of the market investment needs of looking very monitor markets to in are

say, CapEx through as XXXX, into is going that would I to similar this in So be that the next and year, given year go growth outlooks have. probably we we

to keeping these we’re growths. pace with in So well-tuned here high

That’s very much, helpful. Thanks so Bruce.

Sure. Thanks, Craig.

you. Thank

to talk to you. Good

hear much. Daniel We’ll next so CJS Securities. with Moore Instructions] from [Operator Thanks

Mike, all for Thanks and the you. and meeting help, to very echo, thank working forward much questions your I’ll for afternoon. look Ram, taking and you Good with

Thanks, Dan.

we that’s thank the wanted what we million to is impact chain expect QX that Just that $X -- The saw in QX for supply the from or impact clarify challenges? QX you. -- that’s

for That’s the impact QX.

Okay.

Okay.

broad talk or recovery the is end Is momentum particular industrial. then about just geographies gaining That’s and maybe in are over you’re it year months faster? four perspective your And the recover of it So markets that there sequentially the kind seeing helpful. modest. of from first pretty

industrial saw quarter-on-quarter business. the we on side, So, our in broad-based so a EMS recovery

So it to power also and there. modules also the there’s just controls, the -- as investment And the also in manufacturing prepared manufacturing for laser, lasers capital in rebound. in equipment. in with forth, we But resurgence on, mentioned the is motor side on motor base systems mentioned so in also continue broad the saw driving as and the again, the laser notes, house systems we’re we of it’s that -- factories so control we ceramic chip and but certainly

So this we rest into continuing strong the was this we’ve and year. quarter-on-quarter first industrial -- the that as see real we rebound this side in we see seen move through the of the

your just any the really And areas you’re about talk of are these seeing facets but business? HX days, outlook there? more versus about there offset of about HX talk your that strength where that business less we it Excellent. would of thinking most the we little be And across wireless, lower maybe volumes then a should generally, any

take I’ll of part your question second Yeah. first. the

XX% see that the markets we’ve impact in of many about. we think talked recovery laying to that’s numbers. of those economic I kind sort of broad-based XX% propelling dynamic that, across on the the And high many, we of EV/HEV top have then growth of

of is globally of part too In But of But terms there’s bit don’t that’s outside and this growth I’d But slowed overall, uptick see as is not slightly see of takes was we mentioned, China. we’ve there, we really China. say, a wireless us, flatness XG real the a the rollout for as it a again, as because But business. China, puts side, the market this of, this and But the in we’ve quarter-on-quarter a good growth demand. a XG about inside sort continued the for and infrastructure. nice bulk, in relatively meaningful, it a as flat between maybe been given wireless talked driver. always

Thank follow-ups. any Perfect. Very back with helpful. you. I’ll jump

Dan. Thanks,

queue over conference you. have additional additional [Operator the or like to this Thank time. questions remarks. the Hoechner It to Instructions] closing in turn I’d no Mr. Bruce back we appears at any for

want thank pleasure, been forward ahead with, forward. today we as Ram I this it’s and listening move as I for take with attending and to to and more Mike, look everyone country -- working company a said, and I working

you. a everyone. good evening thank Have So

We conference. Thank you. you That does conclude your participation. all for today’s thank do

You may disconnect. now