Rogers Corporation

Good afternoon. My name is Joe, and I will be your conference operator today. At this time, I would like to welcome everyone to the Rogers Corporation Q1 2023 earnings conference call. I will now turn the call over to your host, Mr. Steve Haymore, Director of Investor Relations. Mr. Haymore, you may begin.

Good afternoon, everyone, and welcome to the Rogers Corporation first quarter 2023 earnings conference call. The slides for today's call can be found on the investor section of our website along with the news release that was issued earlier today. Please turn to slide two. Before we begin, I would like to note that statements in this conference call that are not strictly historical are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and should be considered as subject to many uncertainties that exist in Roger's operations and environment. These uncertainties include economic conditions, market demands, and competitive factors. Such factors could cause actual results to differ materially from those in any forward-looking statement made today. Please turn to slide three. The discussions during this conference call will also reference certain financial measures that were not prepared in accordance with generally accepted accounting principles. A reconciliation of those non-GAAP financial measures to the most directly comparable GAAP financial measures can be found in the slide deck for today's call. Turning to slide four, with me today is Colin Gavea, President and CEO, and Ram Mayampouris, Senior Vice President and CFO. I will now turn the call over to Colin. Thanks, Steve.

Good afternoon, everyone, and thank you for joining us. Before I discuss the results for the quarter, I'll touch on the progress we are making related to our key priorities, which we outlined at our recent Analyst and Investor Day. I'll begin on slide five. As highlighted last month, our plan is to achieve breakthrough growth and profitability as we restore, accelerate, and elevate our performance. This includes driving immediate improvements in our near-term profitability, taking actions to strengthen the organization, and maximizing the opportunities in our sales funnel and innovation pipeline to drive growth. We continue to make good progress in all of these areas. Specific to our restore efforts, as we discussed on the Q4 conference call in February, we've taken a number of actions to improve our cost structure, including implementing a 7% reduction in Rogers' global workforce, divesting a non-core natural rubber product line, driving manufacturing and yield improvements, and optimizing our laminate circuit materials manufacturing footprint. As part of our continuing footprint optimization efforts, we have decided to exit a smaller manufacturing location in Asia. This decision is expected to improve utilization levels and further reduce operating costs. This action is in addition to the decision to sell the Price Road facility which we communicated previously. We are beginning to see the results of these recent actions in our P&L. Ram will provide detail around the one-time charges associated with these decisions when he reviews our Q1 results. Additionally, we continue to bolster the organization with new talent. As announced, we recently hired Mike Webb as Senior Vice President and Chief Administrative Officer, and Jessica Morton as Vice President, General Counsel, and Corporate Secretary. we are delighted to have Mike and Jessica join Rogers and both bring significant experience and expertise to the company. We also expect to soon announce the hiring of a new chief technology officer and we'll share more information on this topic at a later date. Turning to the accelerate phase, as we emphasized at our investor day last month, we see compelling growth opportunities across our markets driven by secular trends in EVs, ADAS, aerospace and defense, 5G smartphones, and renewable energy. We have strong positions in these markets, and with our differentiated technology, are intently focused on capitalizing on these market tailwinds to reach the 7% to 10% top-line CAGR included in our 2025 targets. Also supporting this growth outlook are some significant program wins, which will ramp up over the next three years, particularly in the EV space. We continue to gain traction with our customers. and I'll discuss some notable design wins in a moment. Third, in the elevate phase, our goal is to sustain a double digit revenue growth rate and a 40% gross margin. To maintain faster top line growth in this period beyond 2025, we are focusing on growing our sales opportunity funnel and converting more opportunities into design wins. In addition, commercializing the new technology in our innovation pipeline is a top priority to support our growth in the future. We are excited about the path ahead, and we are taking the necessary actions today to be able to achieve these longer-term targets. Turning to slide six, I'll next provide some highlights from the quarter, beginning with several recent design wins. First, in the ADAS market, We leveraged our trusted reputation and applications expertise to secure a win with a strategic OEM in Asia. Our advanced circuit materials will be utilized in a front facing radar system that enables adaptive cruise control for level two and above autonomous driving. Production of the unit began this quarter and sales associated with this multimillion dollar design win are expected to extend over the next five years. Also, in the AES business, we secured multiple new design wins for our advanced ceramic substrates in Q1. In the EV market, our technology was selected to enable efficient energy conversion in an EV OEM's charging network. Our solutions were also selected in the renewable energy market to be utilized in solar inverters to help maximize energy conversion. Sales associated with both design wins are expected to extend over the next three years. In our EMS business, we also had a notable design win in the EV market. In Europe, our silicone technology was selected by a major OEM as a battery-packed environmental sealing solution. The duration of this project is expected to extend more than five years with multimillion-dollar annual sales potential. We are encouraged by our continued progress in securing new design wins, resulting from leveraging our innovation capabilities and applications expertise. Turning to Q1 financials, sales increased by 9% to $244 million, led by improved results in the ADAS, renewable energy, and general industrial markets. ADAS market sales continued to improve following challenges in 2022, where COVID-related restrictions in China disrupted our customers' operations. We are encouraged by the improvement and continue to see high growth potential over the next several years driven by the increased penetration rate of ADAS systems and increasing levels of vehicle autonomy. Sales in the renewable energy market increased rapidly in the first quarter based on strong demand for our power conversion and power interconnect solutions. This market also has strong long-term potential with new installations as solar and wind power continue to grow rapidly. In the general industrial market, Q1 sales improved after declining in the fourth quarter. We are encouraged by the improvement, although we remain cautious on the outlook for general industrial sales given the uncertain macroeconomic environment. Our general industrial revenues are diversified across many markets, but in some cases can be impacted by the overall economic landscape. Sales in the portable electronics market declined further in the first quarter. The disruptions that we saw to our customers' operations in the fourth quarter were resolved by Q1. However, end consumer demand remained weak. We expect sales in the second half of the year to improve based on consumer seasonal buying patterns and the assumption that the supply disruptions and COVID lockdowns in China that impacted portable electronics in 2022 will not repeat in 2023. Sales in the EV market were lower in the first quarter. The decline was due to both very strong Q4 sales and timing, and the fact that some of our Rowlings Power Interconnect customers' production ramp schedules have pushed out. The overall outlook for the EV market remains robust, and we continue to work on maximizing plant output across several of our product lines to meet the demand. Turning to gross margin, we made progress in Q1, reaching 32.7%, an increase of approximately 90 basis points from the prior quarter, and above the high end of our guidance range. This is a step forward as we continue to drive our profitability improvement actions. As we've stated, we are targeting 34% gross margin in the second quarter, with further improvement in the second half of the year. Ron will cover our first quarter results in more detail. In summary, our first quarter results were a good first step in the right direction. There is uncertainty in some of our markets, and the macroeconomic environment continues to be very dynamic. However, we are executing aggressively on the things we can control and are making progress getting back to historic levels of profitability. Next, I'll reiterate our compelling investment thesis, which I introduced at our investor day. Please turn to slide seven. So, why Rogers? First, we are focused on growth. As highlighted earlier, We have exposure to strong secular trends in the EV and other high growth market segments. In addition, we have a solid base with our core business, which generates strong cash flows to fund faster growing opportunities. Second, we have a history of innovation leadership. We have a proven track record of developing and commercializing our unique materials solutions. We have leveraged decades of experience in power electronics, RF materials and advanced elastomerics to solve today's challenges in electric vehicles, renewable energy, automotive radar, advanced defense communications, and 5G smartphones. Third, we have a repeatable customer engagement model that provides a strong competitive advantage. Over the years and decades, we have built trusted relationships with key OEMs and engaged with them at an engineer-to-engineer level to understand the complex challenges they're trying to overcome. We then leverage our innovation capabilities and deep applications expertise to provide unique solutions to solve their unmet needs. Lastly, we believe that as we execute on our strategy, this will provide a significant value generating opportunity for all our shareholders. Based on the 2025 targets we introduced in March, we are anticipating sales of 1.2 to 1.3 billion, gross margins of 38 to 40%, and adjusted earnings in the range of $8.50 to $9.50 per share. We have outlined a path to achieve these compelling goals, and we remain focused on executing our strategy. With that, I'll turn it over to Ram to discuss our Q1 financial performance in detail.