Rogers (ROG) 3 Aug 232023 Q2 Earnings call transcript

Good afternoon. My name is Dina, and I will be your conference operator today. At this time, I would like to welcome everyone to the Rogers Corporation Q2 2023 Earnings Conference Call.

I will now turn the call over to your host, Mr. Steve Haymore, Director of Investor Relations. Mr. begin. may you Haymore,

website, and conference the today’s call. on today. of be everyone, that news quarter issued was call Corporation XXXX found earlier our section Investors earnings The the with welcome afternoon, the Rogers release to second can along Good slides for

Please turn Slide X. to

the in those to from conditions, Rogers’ and Reform environment. like actual factors. and note of many and Such statements cause materially demands strictly statements differ be in the economic meaning include in are we subject any operations historical results uncertainties conference call Before that to forward-looking XXXX to could begin, this factors forward-looking Private Act Securities exist considered These statements as Litigation the market competitive I’d should today. not that of that are within uncertainties made

principles. during the Please conference generally that not The for can prepared this in financial in GAAP be financial financial directly call today’s measures comparable deck will accounting of turn X. with measures to reference certain measures, the were Reconciliations found Slide accordance call. most slide those non-GAAP discussions also accepted

Turning to Gouveia, Mayampurath, and Colin Vice today Slide me Ram CFO. and With President and is Senior CEO; President X.

now the will to over Colin. I turn call

year. exceeded which XX% last gross and QX, range improvement targets Good that afternoon towards end margin was us XX.X% in Steve. the our QX, profitability and year. to you a In in set QX we goal for the this the achieved today. and we Thanks, continued to thank everyone, cost at guidance joining for for progress We make of the we quarter of high good outlined

to with QX performance exceeded of solid our our pleased performance expense challenges. execution are despite Overall, non-GAAP the management our earnings QX. guidance that Rogers market greater-than-expected operating and in delivered we and midpoint due

we results related detail, outlined an our key in the I’ll are which making update priorities, on Before March I’ll Slide Investor to progress Day. the more we quarter begin provide in discussing our second on X.

to we Day, several be of levels executing and plan In announced profitability to achieve As to we and the to continues next the on breakthrough improve Restore a returning profitability. focus structure historical we of three-phase cost quarters, are on years. Investor contain in at shared a growth operating and phase, In recent our improvements our actions driving our series margins expenses. over

We are the now of these seeing initiatives. results

Our XX.X% of XXX gross fourth in compared quarter basis year. margin to of last improvement is the QX an points

developing are organization the we for the addition, In closely capabilities operating while still to expenses growth. scale managing

bolstering of vital the certain phase Another skill Restore is aspect critical the sets. organization with

we discussed experienced our announce As executive added earnings a is to quarter’s latest and the position Chief we have later be month. role, CTO are to call, talent excited we significant joining Rogers to we filled Officer The team. on Technology very this last have

In areas as Rogers. addition, development and hires we supply that new bring to of the organization such with recent are strengthening targeted other procurement experience will and tremendous business chain,

drive faster In on include growth. EV particularly to top-line tailwinds, the capitalizing Accelerate secular the in priorities space key strong phase,

A our anticipate add We on to focus discuss both even to excellence place moment ensure capitalize the about to design recently ramping of years growth in plans announced more more the capacity our in secure business. have which commercial capabilities a to volume Accelerate phase two expect in to wins, over is manufacturing I’ll an on greater also this curamik we growth. we new next from existing component and come from wins. up vital

processes needed organization to In developing to addition, and for also we’re by the next scale. this the capabilities stage preparing of growth enable business

sales the phase, to of achieve and Restore the of Accelerate and Elevate the Lastly, in higher anticipate of efforts levels benefits reaping phases we profitability. the

our about exciting Turning to details Slide expansion. curamik provide capacity X. I’ll more

Our that substrates, energy. our as technologies fast-growing EVs and advanced for conversion renewable markets such highly curamik energy efficient provide solutions market-leading

enabling in critical power Our the for modules growth to silicon technology these carbide is markets.

devices Our effectively. unique efficiently, significant substrate for and This cooling more semiconductor lower these and to expensive the a cost which our of provides of and total reliably EV operate also heat extract solutions benefits form more customers enables in range ownership. improved

the participants. benefits agreements the key not it offers silicon Given long-term to by significant carbide multibillion-dollar manufacturers, that to industry announced see of surprising recently is EV number

growth, May and the curamik power capabilities we support our of supply Germany, the which that global further in to ensure be customers we in capacity expansion for To addition market in will to substrate in increase and adding anticipated customers. plans investments new ongoing our This both will is of significant announced capacity China. our

expansion this this in phase manufacturing and first of enable XXXX. planned shorten is completed lead collaborations to to will new times technical us be state-of-the-art The factory with deepen customers. And

China production local-for-local flagship our also The be modeled strategy our will for The will and location Asia. of in operating reinforces facility to Germany, in which continue in off to [ph] China Western instrumental domestic be success. factory OEMs in our both

continue power partner currently decades, curamik capacity for as EV evaluate sufficient the a position. products to business have market, been has expansion and move module strengthens this needs targeted We for Our to that capacity suppliers we and forward. we leading to trusted expansion our further will other

our sales executing we were X% some on then of and highlight initiatives. on an quarter and wins. recent From the the quarter million perspective, earnings impact Slide expense the $XXX.X I’ll able below offset from to results QX our guidance touch design of prior improvement forecast. decreased and of were sales of Next, X, cost the our on the by by lower

range, high adjusted margin was our of above and the of $X.XX also guidance. guidance gross the midpoint XX.X% of was our EPS end at Our

which global particularly and points, highlight these data revenue markets were consumer spending. The in activity recent markets QX and to a decline product The downturn current lines in consumer and industrial span the regions. was in declines broad challenging in with market environment, due sales. was Weakness and in multiple consistent these economic general manufacturing

officially interest make market many in are a recovery were of growth COVID limited higher factors areas. a business and in following combining recession, the to year’s slightly in conditions there now inflation of lockdowns rates, as muted impacts in last With Europe other by second parts China our challenges, the EV growth some market in rapid OEM quarter which sales offset segments production decreased of challenging. and

meet factory factory Germany our line and the achieved China. in In much sales, market. growth increasing a record has overall we are our EV line, with our possible as we moving forward been consecutive capacity product curamik continue strong in quarter of to To second new unlock demand, from in on and the the quickly as

power lower by production customers supply from have QX, ROLINX interconnect sales to challenges. Similar ramp who due tempered were and chain to schedules manufacturing demand out pushed

similar large that our technology our use in EMS a seeing at multinational vehicles. battery We will were moderated pads challenges in business, growth our in are sales OEM ramp where cell a by dynamic of their production

We market in the expect as the challenges the resolved. increase EMS demand EV of to are second half year

several driven signals a see the in defense further see following declines. portable we in sales did in QX, growth by QX. to are return and aerospace In electronics both markets and a pointing We of to growth electronics, towards demand Customer were patterns. quarters increase seasonal portable encouraged

in improvement how it is the are uncertain see Although these encouraging, will we much given QX challenging indications environment. economic

driven are aerospace prior The growth quickly to the also production primarily aircraft sales strong rates. EMS from who customers by quarter, business. versus was from our A&D demand commercial boost moving increased

smartphones. I’ll wins OEMs our secured the for of quarter. design we foldable Asian past Next, with with review upcoming multiple some wins from EMS, Beginning design

and provide the will materials advanced to materials needed these high wins stay urethane Our These new-generation us for reliability leading-edge on technology collaboration the customer enable phones. highlight of our solutions developments.

our to Korea, which beginning factory in materials of resumed design this happy year. will that are utilize operations at report South polyurethane the We win UTIS from the

with In our in prime unit, business the major market A&D design a we win a AES contractor. secured

used meet a help that program for we be defense to will advanced model, begin critical of in to to one engagement closely in their enables potential expected cost worked with systems, our life will materials ramp Using circuit most on is Volume many performance XXXX radar proven laminate customers and to air with world’s OEM tracking of the this precision our come. which program threats. Our years targets. extend

curamik a dollar in we of technology auto in Lastly, be used to these design in X with power wins than silicon is our span design several The the Tier five largest wins expected space. next-generation was This their business EV our multimillion carbide had years. supplier platform. substrate to new more who selected module win

and issued. enabling ESG report in renewable electric this in recent markets strive the that and we both end operate as vehicles such commitment responsibility by highlight supplement deeply and embedded briefly sustainability to I’ll commitment we to demonstrate is sustainable We our corporate Rogers’ culture. energy. way X, the Slide On

third-party Some gas of metrics. extended report quality supplement inventories emission the safety verification improved greenhouse and of highlights reporting of of reporting include and our employee health with

is one Rogers. Safety cultural core behaviors our of at

We our continuous sustainability building made full we a XXXX on and report good area. the focused in on in have recent our accomplishments first half progress on years, to our improvement publishing results remain look safety of We ESG we forward continue journey. improving this as in and

over financial it to turn detail. performance to discuss QX our Ram I’ll Now, in

QX, a and you, volatility Thank compared to continued lower demand. afternoon, in Colin, we good revenue This In saw resulted everyone. and market slowing global QX.

EPS. enabled that good margin However, us we gross operational performance had improve and to

remaining while enable on actions to to execute key focused will committed which to strategic our performance come. the near-term in Rogers to are We success priorities, the years on improve

by XXXX were review of margin QX QX and guidance and now million XXX declined basis sales XX.X% versus results points prior in by Slide to X% of the our guidance second end range. on beginning high reached quarter versus the range. $XXX will Gross X. quarter our I improved below our detail

were basis, of our share, adjusted the of over and we XX% QX. basis, exceeded range. high midpoint which GAAP of from our surpassed guidance guidance quarter, per On per $X.XX QX a earnings increased $X.XX end share earnings the range the On which had for an

margins QX improvement. recent EPS our continued and Our pattern results of

to profitability. and We with progress driving are committed thus pleased further far the remain

to Turning XX. Slide

a and earlier, lower in sales business although higher AES to by sales was conditions. and in due sales X.X% EMS EV/HEV million. QX net Aerospace were mentioned both were offset QX, segment sales. sales we and basis, were this industrial challenging decreased lower mostly units lower. market As ADAS to by On defense and AES reportable $XXX.X

million, in market sale lower consumer primarily the $XX.X natural rubber decreased Revenue from to sales general of by sales. from the and industrial also X.X% decreased QX. EMS business

global markets, which earlier, of the by partially these higher portable in electronics sales, was discussed been ongoing from A&D levels. particular, improved have impacted our QX slowdown economic activity. and This As by offset

This lines. product at path battery earlier, QX by impacted stated cell our in power specific customers. challenges moderated were EV/HEV As production interconnect and sales

substrate ceramic strong our continued demonstrate business However, to QX. in growth

for demand focused on evolving We are the manufacturing strategy plans. long-term investment challenges supply our and impact products. and watching We and these remain closely chain the on

Turning to Slide XX.

quarter prior commitment for margin improvement gross our communicated Our end basis XX.X% margin the and end of to was at the of versus XXXX. the XXXX, XXX points our of gross of second quarter to QX XX% and million range. or the get guidance our top point basis by sales. At improve by was XXX we This $XX.X QX

we to are that exceeded target. report We that have happy

fixed The manufacturing from cost QX reduction improvements resulted increase in overall productivity XXXX and gross and and QX taken ongoing margin actions XXXX, in since year factory last logistics reductions. cost

and million margin profit charges by was improved and to quarter. adjusted income points as margin costs, recoveries. from operating lower expenses operating and expenses, variable and higher improvement was the improvement lower compensation from basis professional other lower insurance restructuring The QX. gross in result costs. sales. operating impairment Adjusted versus the other The in XXX operating increased due decreased prior or resulted $XX a fees of operating XX.X% OpEx margin administrative service XX.X%, to from increase lower QX of

balance of XX. primarily million Slide of debt capital XXXX. year, this flexibility in invest long-term to We total $XX the repayment XXXX prior lower XX related million have allocation was million from management revolver. of focused remain a and QX priorities. decrease our paid Continuing of $XXX of a down top quarter the facility. $XX a on to approximately will cash at million, decrease the Ending our our from we of remain end and strength initiatives cash Continuing to was of and The on June credit million a on revolving beginning Since end our at the $XX of discretionary maintaining the sheet. debt strategic the our $XX versus

approximately for quarter Capital $XX expenditures $XX and were million year-to-date. million second the

to half $XX capital the million weighted the guide expect to $XX We and expenditures of range continue year be towards in the of for second million year. to the

guidance our discuss will I the XX, for third Slide on Next, quarter.

persist market First, the and We anticipate million challenging net results. range QX will third conditions QX to sales experienced slightly are between in that the we our million, expected $XXX $XXX quarter. above into

to reason Portable electronics seasonal patterns QX. projected in QX are for is normal in higher sales the based and on improve sales the primary

guiding We the with consistent range XX% the change product – mix. the to margin We On a gross guidance results to are in volume at in QX. be of midpoint of to our be our for XX% by sales range. higher offset QX anticipate

range Earnings share per and from to from $X.XX. adjusted expected is to $X.XX to $X.XX EPS $X.XX

tax Our is gains we be range in two EPS actions locations our to from Both of GAAP adjusted the manufacturing in sale to third restructuring announced XX%. higher that quarter. the net facilities We previously. full EPS around should year were range than our project rate the expected due closed included

improve quarters plan. and to focused near- executing and remain margins commitment We on our gross in again mention ahead. profitability me long-term the overall our Let

will now the turn call back to the questions. for operator I

question Daniel comes sir. [Operator we Instructions] you, Thank from The Securities. go Moore that ahead. CJS Please first have from

Thank you, taking afternoon. for Colin, Ram. the questions. Good Thanks

Hi, Dan. afternoon. Good

quite gross in – addition some about expense of revenue may an some Start the does Or in with temporary, to even expenses in on expense Or the during that more of up perhaps Are when leverage flow returns? operating there impressive, the margins? quarter some light revenue when margin took them words, we operating and softness. those back line? ramp for that are to in we other potentially of place improvements, When the particularly reductions performance In of snap faster think there tightening permanent? revenue back? start is set are some margin especially the

some call, will majority When Hey that we you’re say that. will that Dan, our what saw of in this we did seeing in is kick it now. improvements QX. the We in QX made majority we Ram. more QX, but that’s QX, take in of improvements said I’ll kick we and did

the regard major made but permanent. related, spending that sales is With There to most things certain some permanent. your of reductions be in have are variability with expense question, we might are the reductions

Ram. Very Great. helpful,

some in the and China capacity color appreciate the the curamik. space, expansion opportunities the Within I EV of of of on

it pads within lead Given that potentially? kind you core comes your you followed XXXX the lines interconnects? acceleration discussion, product see expect equal XXXX, kind growth kind across technologies in EV, power of within of should do curamik we do maybe or of three to expect or substrates and and when Or acceleration compression three by all

Hi Dan, Colin.

has and across that look that EV/HEV. ahead, we’re curamik all we strong with rapidly, product growing that records. very As I strong pleased our But quarters say positions would last in we’ve been two position have is certainly, I say the would lines and a of very got

look And there with ahead So program and as those. we the wins, program for are about wins gasketing wins have good ROLINX. pads strong some we we compression other feel also and

contributor we like each have we curamik lines, product our have, to that to And that will forward across our go to contributed design feel – be growth. decision to this in the think expansion wins China. I our So really a strong

like et see up and to Great additional cetera? business, and piece in running How obviously, growth think win proliferation pipeline facility into back UTIS business look and flip the XXXX phones, we new there? the capacity back opportunity your potential up. filling in about the given of should of for that Great. What’s

Korea, months we’ve on So running. I is that thrilled would say, stream visit ago, several UTIS first of we’re beginning had it within which of world our fortune that the since our good is been up a the footprint of and strategy back I all, in to the critical so is of part us the it facility OEMs. for fits well in reason and gives specific And the year. terms South that

terms of So with we we’re happy our in UTIS actually where are growth.

is the of our the newer technology. polyurethane well of even some of work our very than in technologies. have program facilities, mostly materials brand we in And eSorba wins UTIS thought. come the around it’s phones flip eSorba Some and that produce had in faster we our

there, on how program look the back feet and we gotten to our electronics they’ll forward. contributing portable wins a good. we’ve do And factor very in be going So

back We’re up to and running. them happy have and really

Okay. QX I profitability. And like year. your back for a what has bit out seasonality. expectations Last is revenue between portable on Maybe of little you a mainly talk the and and back QX terms half Historically, in of going typically the electronics. look question QX been sort perspective expected from Ram, seasonal in the to a maybe the pointing just me delta appreciate of being in ramp seasonal lighter

Dan, But portable the the been into that don’t to changed you normal Year know. too, COVID with for of sometimes situation, we in guide Chinese So the build. has particular, see quite big QX we QX, stretches seasonality in building the and pattern electronics, a ramp-up as bit some New and QX up

So and bit. operational historic beyond to patterns works, changed we we in other raw continuing improvement those which material And have QX. savings initiatives will profitability and outside procurement that, are improve a continue the hope

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

Thanks, Dan.

Thank comes you. Please question Riley The Securities. next we ahead. Ellis Craig B. go from from have

China. Hi. revenue hoping your provide for in you Ethan additional your a To This color expect this capacity Ellis. ramp? little in I how and terms time calling was revs and could increasing Thanks taking my What Widell, Craig for of start, can capacity is question. expansion to we in on influences

here. and help start maybe I’ll out Yes, could Ram

capacity, what added market expansion we would sell and a we’ve mention EV/HEV good So growth, the capture we the is space first lot of for a substrate that for areas, we’re particularly and I’ll see in about back growth. in capacity position other and other the China. But step in already to technologies into say what ceramic our is I curamik technology

would for our worked coming capture doing ground locally to for in made in very it’s of model complete for like. and sense have our next for we’re our local facility China terms to need what we we us we’ve China, as So And factory on see of design curamik and teams still won’t from downstream our in lot flagship wins said. but which That’s very growth And what important China, have, it. in profile and Germany. closely local, be technology for in we the customers away a or China looks demand our with take be to with I the there us, the

In the terms be timing, and we’ll by of running up of end XXXX.

We’re going phased have approach. a to

So will we different but as phases Phase put can expand X capital we’ll XXXX, our continues to the so several it be demand in in increase. right that

So we out miss won’t growth. on the

That’s you any you’re are comfortable? speak do particular cyclical near details, If helpful. Thanks. you. subsegment in in bottom? where risk? broadly? particular? really or think at see you we’re strength segment that your segment-wise, And more continue segments can you of any are to seeing What Thank you what And And to do

So macroeconomic the maybe question risk, start overall level. just of say I’d on I would the

heard we We’ve there a companies perspective. data. of And macro from customers. in We’ve lot just talked to other had the reporting. out So read challenges a you general, environmental

PMI the are the U.S. indices China contraction. and below XX, both So indicating have that

as such of You’ve in countries got recession. pieces Europe, Germany

inflation, there’s some We I consumer and think there caution out in terms have of spending. high

about think, third, in global pretty third, of sales the with our are third where Asia roughly economy, and the are macro Europe. perspective, from impacting U.S., I and global terms So much we’re that we’re headwinds our

may that to very OEMs from that. there while market things have about segment, need feel a to a And little to and choppy be patient wait get good because EV/HEV. the some in we we’ve and for So they We downstream in end can’t happen. cases, great got ramp, position bit materials be specific

and renewable in there. phones portable our for good case, Same energy, say in which higher-end get we reviews us. electronics, is for would to But in you shape I where us mixed the participate be customer for market. continues strength And then for mix from a our

would I are we the those So strong. areas where of say quite some feel

And general industrial a we’ve some by would see would spending in soft market had say, bit different down high where products, softness in consumer quarter, inflation. business, general end say, the, do a our I several segments We is of consumer there. tamped I

diversification segments, one feel about we many is have in when keep down. areas thing portfolio But area different is moving we got that one we different in many can end us participate We’ve like like so geographies, other our help we enough forward.

Thank very you much. Absolutely.

No problem.

Moore Thank from you. a Instructions] have [Operator We follow-up Securities. from Daniel question CJS

Nope.

for just Sorry, off let up. follow Thanks there. hop me mute the

Just in the $XXX flow allocation chunk balance question. and solid paid sheet quarter you later nice to million, Obviously, the a a cash period. during imply debt on your million of remains and rock reach $XXX down targets long-term for capital the

those sort XXXX primary Are And lines, really What over like? M&A does right two, three of plan expected what of still the sort about sort to of are the acquisition of pipeline look your are thinking you years, mainly phase attractive the along targets? identify your now? capital next if [indiscernible] you don’t of uses

Dan, and that, sure Colin add. can will points have to start I I’m

the maintaining credit right, in been facility reason and key you goes sheet know, year. We balance maturity and as the a that, this flexibility on by the with five you’re earlier of organic have that our extended our is priority debt of So paying is expansion. along investing years, our down we more focused why management strength

that is flexibility very So maintaining important.

growth certainly focused us, key our strategy. of that. to it’s And part Inorganic on is very are important a we and

expect and profitability ourselves, organic growth we sheet priorities both organic capabilities, also strength then growth, with in be the investing the With the to in returning building the that generation continue and cash the balance cash shareholders. CapEx improvements, to maintaining back and in

we as cash expand So all generation here. be our will at those looked

ahead, Thanks Colin. Really go lastly helpful. And please.

was have moment. a ideas. strategy four key excellence, us. of at going And in been this a I strategy: operational market-facing, the Rogers’ pipeline. M&A we key Nothing remains a M&A that our reconstituting add pillar M&A say, I innovation, Colin. fourth some to job to around the have, of But of And past. good very piece just I It’s M&A done, prongs interesting we our for has really share think, would

look a record and integrating for track good the to in don’t businesses, that change have We we future. of and acquiring

And had if and end Phase for coming meant say facility on XXXX. one talked to can and just quick one in I about end up running XXXX. of XXXX then our make I comment. curamik I of

So I everybody. clarify that just wanted to for

Terrific. new And cost you’re what Phase would CapEx of while least at look ballpark, the it, from just at perspective? facility the like X a

that So we that’s the included in have shared, projections Dan.

we that, to our projections be in including X% expect So – our CapEx investment forward. the going to X%

So for it’s $XX I first would think range. phase, in the million million to the $XX

Thank Perfect. again. All you right.

[Operator Thank you no stage, you. Corporation, Instructions] for behalf there At Rogers On today. questions. this of joining are us thank further

lines. your disconnect now may You