Rogers Corporation

Good afternoon. My name is Kevin, and I'll be your conference operator today. At this time, I'd like to welcome everyone to Rogers Corporation fourth quarter 2023 earnings conference call. I'll 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 fourth 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 the 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 US 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, Ram Mayampurath, Senior Vice President and CFO, and Larry Schmid, Senior Vice President of Global Operations and Supply Chain. I will now turn the call over to Colin. Thanks, Steve.

Good afternoon to everyone, and thank you for joining us today. I'll begin with the headlines of our quarter, year, and outlook on slide five. Overall, the macroeconomic headwinds we faced throughout the fiscal year persisted through the fourth quarter, prompting more pronounced destocking at our customers and contributing to broad market softness across our end markets. In particular, our sales in the general industrial and portable electronics segments significantly declined compared to the third quarter. Lower sales volumes more than offset the procurement cost savings we achieved in Q4, and as a result, gross margins and adjusted earnings fell below our expectations. The ongoing contraction in global manufacturing activity, which has persisted for more than a year in many countries, continues to have a meaningful impact on the general industrial market, which comprises much of our core business. We are not yet seeing sustainable signs of improvement in this market, but we believe we are near the bottom of this cycle and may begin to see some recovery mid-year. While we anticipate the macro environment will remain challenging, Rogers continues to focus on variables within our control to position us to respond once demand improves. Our commitment to aggressively manage costs while simultaneously advancing our growth strategy is reflected in our full year 2023 results, which include gross margin improvement and solid free cash flow generation. We also secured significant design wins and brought on new team members three accomplishments and near-term priorities later in the call. We also announced today that due to persistent challenges in the global manufacturing economy and a lack of near-term visibility in the EV market, the timeline to reach our March 2023 Investor Day targets is being extended beyond 2025. We have not changed our view about what we can achieve, just the timing of when we achieve it. The longer timeframe for recovery does not change our strategic objectives or confidence in the future. Rogers is grounded in leading industry positions and relationships with our customers. As we manage this business for growth, profitability, and success over the long and short term, we continue to invest so we are positioned to capture opportunities when the market recovers. We believe the strength of our team, significant opportunities in our end markets, and our differentiated technology will position us to achieve our goals. Before providing more detail on our quarterly performance, I'd like to touch on some of our restore accomplishments in 2023. Please turn to slide six. Our recent actions have helped fortify our business against the weaker macroeconomic environment, while at the same time positioning us for long-term success. The first key objective we outlined was cost improvement. We took a series of actions in 2023 to adjust our cost structure to meet demand, strengthen our product portfolio, and optimize our capacity footprint. We also executed on operational excellence initiatives, which lowered costs and helped us better serve customers. Larry Smith, our SVP of operations and supply chain, will speak more about our progress in these areas shortly. Executing on our cost improvement objectives and carefully managing adjusted operating expenses helped us make progress in our margin improvement journey in 2023. Our objective was to achieve 35% gross margins in the second half of 2023, which we hit in Q3, demonstrating what Rogers can achieve despite a tough environment. Lower sales volumes did lead to a decline in our gross margin in Q4. However, we saw meaningful full-year 2023 gross margin improvement. These actions to improve our cost structure are sustainable and will help drive an increase in gross margin as sales return to more normalized levels. Next, we bolstered the organization with new leadership in R&D, operations, supply chain, legal, human resources, and business development. We now have the right skill sets in place to execute on our short and long-term goals as we move forward. Lastly, we secured important design wins in our key end markets, we selectively invested in new capacity, and we paid down $185 million on our revolving debt facility. With an even stronger balance sheet entering 2024, we will be able to continue to fund both organic and inorganic growth. I'll now turn it over to Larry to discuss our progress on operations.