ROG - Earnings call transcript Q3 2017

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Operator

Good afternoon. My name is Cristina, and I will be your conference operator today. At this time, I would like to welcome everyone to the 2017 Third Quarter Conference Call. [Operator Instructions] Jack Monti, Director of Investor Relations, you may begin your conference.

Jack Monti

Thanks, Cristina. everyone Rogers' much earnings quarter so call. thanks for third joining XXXX And with see presentation, of follow the To along please our the website. section Investors

forward-looking Turning Slide X, have disclosure to we on a statements.

risks certain call, the subject number may materially to we'll actual making versus and During forward-looking today's which uncertainties, outlook. be to statements a results differ cause of

performance better will non-GAAP basis, a addition, of reflects underlying In the on some business. our be financial of core operating management metrics believes the discussed which

it’s to pleasure X, Management Roger's CEO, Hoechner, and joined Bruce turn will Slide Bob Vice Stipp, CTO. team. to Turning and now President the my is introduce and Senior CFO, President President Vice call and I Bruce. Daigle, over by Senior Janice to

Bruce Hoechner

and afternoon points, on with Notably, EBITDA earnings. led and were commitment joining achieved to QX contributions acquisitions. over results and fourth combined Rogers' quarter EPS growth to adjusted was million double-digit achieved everyone gross an the quarter. adjusted very pleased evenly all we XX% for QX XXXX, of up organic you gains and sales XXXX. basis Net of increase today's Revenue quarter operational from XX% marked of of Net improvements during profit XXX to growth. to $X.XX substantial sales that net I'm consecutive between up recent the our our Compared record good up of XX%. margins $XX sales in XXXX organic us report split our thank third time sales Thanks QX Rogers million, QX call. Jack, $XXX XX% record

Rogers' play identified or our performance connectivity vital new innovation, role and advanced Systems many product portfolio diversified advanced past operational Assistance us HEV turn position geographic our EV several the exciting in capitalize years Over Rogers X, increased strategy. acquisitions, networks. or I Advanced a through Slide a electric like expanded, take products putting strengths markets high ADAS, Driver and hybrid and to has Today electric to Please and of on greatly growth execution. performance wireless review business such emerging well-integrated minutes great mobility enhanced the in few growth to applications penetration, opportunity. a to rapidly and as well the These generation vehicles improved of Rogers significant latest the would to thoughtfully play

confirm execution. implemented results solid a we approach clearly have that we winning and are from benefiting Our our

results, four this substantial have will We generating confidence the our as record strong shareholder help returns. of to and commitment as sustainable roadmap pillars of maintain well our that us

focus continued seeing in helping These for Semiconductor's. EV Our of HEV on number reliability high advance position adoption silicon business and us Bandgap where our which are of we One market rapidly applications. is nitride Wide driven substrates is growing offer thermal example for innovation areas. our connectivity PES products our a are essential

making significant that are the silicone We to identify to Rogers's of with gone XXXX. The both pursue and in EMS contributions to products run integrations ability them sales to to Rogers. have extremely approach and teams businesses integration disciplined DeWAL The opportunities have incorporate and successfully synergistic M&A taken proud operations diversified into well ensure a of integration continue smoothly. net our

and pyramid. an play applications, and offerings, engineered with focused synergistic remain that will we top market companies ahead, the with businesses our financial technology profile. at These Looking on highly are leadership, through growth the augmenting M&A organic attractive of differentiated

costs flow the to Our our enabling topline and capacity operational to line. commitment enabling are to quality. to through our bottom Improvements increase operations is controlling to manufacturing results us excellence maintaining while

growth our our vision. XXXX profit as top work to when peers, target towards quartile continue compared to We we operating

of X% per from growth On to the year. range is goal our businesses our to the organic XX% deliver side, in revenue current

of addition, continued year. year for X% and topline of In strategy revenue add growth to M&A our X% overall growth per expect per we XX% the execution to

of we expect revenue at to profit Some the smooth billion Rogers sales XX%. roughly deliver least increments the $X.X operating in XXXX, acquired of may with in but end margin by not of come

XG models. gaining plan to XG come Turning EV EV new as we to to a space than priorities, major intend on fixed portfolio, our build-out seeing significant. greater initiatives. HEV mobility operators projected are stations today connectivity. this in includes end Norway. deploy to consumer expect market developments The Slide we growth. we're drivers the by highly these advanced outlook equipment recent the infrastructure XXXX. with announcement by telecom by out From introduce well-positioned is XG our capitalize traditional categories new with includes growth future with from beginning products cite XG base has already in ban to remarkable the industry implementing decades. and U.K., numerous of perspective that home. view In markets coming on X, These highly is driven cable growth the and in Chinese and we growth growth for their advanced horizon. LTE China with regulations well applications This in content making as combustion sources prompting two ADAS. is innovation systems regulatory governments the Rogers competing material a mobility applications where HEV differentiated to in a Rogers These investments advanced connectivity, market, been aligned mission-critical these to demand In is offerings XXX,XXX and advanced are several the the are plans for in the technology traditional operator wireless with sophisticated key the in This and OEMs they China, market to to announce momentum India along has HEV France, EV accelerate the engines marketing

tailwinds key accelerate our drivers, our meet capacity investments across these to With growth will we and demand.

by sales net QX third applications XG LTE of ADAS, quarter and achieved XX% infrastructure. for $XX defense ACS aerospace and driven X. million Growth Slide increase over was and to Turning XXXX.

LTE QX demand applications. rebound both for saw During wireless we amps for station a power XG and in base antennas

have these leadership accelerated we Rogers bodes we this deployments mentioned, rollout to position XXXX. Demand optimistic as the scheduled XG a market. providers XX% and and where in service for another increased area well ACS. about I reporting solid late growth This in for for X.XG moving ADAS originally are are last high over XXXX As Rogers timeframe is for early that applications exciting year. XXXX are markets of

job requirements into many these these like cruise an the adaptive as now benefits years supports of we getting applications portfolio features for Our are short spot full control. in detection and specified and go over into blind production. and has sensors done outstanding for spectrum long-term programs made reaping ACS

focus time net new million, demand. of customer XXXX. innovative to continue delivered record of Please We sales over Slide X, to EMS introducing technologies meet $XX an will and quarterly XXXX to turn all in QX on XX% market increase QX

an EMS industrial XX% saw market Our QX recent sales general in acquisitions contributed to over XXXX $XX strength demand increased EMS. higher across due million organic portable electronics of We applications. applications. to in basis, end sales particular net On revenue all

cable broaden our harness applications in with portfolio We flat as continue wins flexible the such to manufacturing new equipment. for design clean room solutions

and This focus on is several many significantly sealing electronics design regional has by growth wide from designs improved polyurethane headwinds. a In wins addition new one at our portable applications. of years OEMs global a PORON after in variety to return has revenue where of new driven been

in We are Asia. Europe on accelerating general pursuing with growth also aggressively opportunities industrial EMS and by focus increased

newly from benefits in Looking penetration EMS, our geographic we expect added capabilities. ongoing ahead and innovation businesses, our

renewable to quarter the diode growth of increase expand customers. PES that turn will energy, of We X. seek solutions the third capabilities our $XX top a over net reach continue Slide set at by XX% Please our broader of to XXXX. actively market to applications of extend an driven pyramid These e-mobility operate acquisitions provide achieved technical our and laser in double-digit results sales coolers. to QX were million, for and

we braking e-mobility power from look - on applications focus EV and focus HEV. will our in PES, we As to regenerative ranging maintain electric steering ahead

in looking are improving and demand growth broader including like operational improvement use The initiatives through significant these continuous PES of us PES applications at on ahead. team capitalize and leading profitability also opportunities lie technologies methodologies mentioned, previously to for Lean. excellence the is As have well focused positioned Six we and our that Sigma

to global and its team operations, optimize yields improve through footprint addition In and is working productivity manufacturing the automation.

recent macroeconomic in monitor markets. shifts conditions Turning growth agility we're respond to at very confidence will Based our business looking is to key conditions, reports, encouraged Slide continue XX, occur. and should market gaining we positive the on many the with by of globally to outlook

is QX in results markets are global significantly reinforce that growth right in GDP. Our the where outpacing we

key With ability in these We the earlier, will capacity over results extremely will to I as summary, across our well our call we're we and we shareholder highlights. now strategic demand our markets to who accelerating as and to performance. on continue deliver impressive In report well positions that strong many QX. in Janice? that of in robust greater the in increase investments market expand with pleased powerful our consistently mentioned confident is of many detail QX key are tailwinds to financial our customer to increased performance us diversification our capabilities. seeing are believe As returns. markets, deliver additional turn Janice

Janice Stipp

good and Thank you Bruce, afternoon everyone.

throughout a units XXXX reflect while strategy, business results double margin the strategic positive continued of all expansion by experienced including to QX solid digit growth leading we initiative. invest in driven growth our have trends our Our technologies, acquisition in momentum continuing

half the third presentation today, first XXXX. As in momentum in you'll the into we quarter continues the experienced see of the

was detail our guidance Now XX, review XXXX. $XXX revenue noted let in in by previously fourth I’ll me results as third million, our XXXX QX guidance more QX turn which forecast. quarter quarter to our both Slide exceeded followed

the timing margin due income XX% QX $XX.X EBITDA million higher XXXX up Our acquisition. from our QX year. to of marketing million higher quarter volumes XXXX. XXXX, to points units to significant was basis strong primarily versus XXXX and as or acquired increase improved of third in the points in recent million volume, approximately percent growth XXXX third XX.X% of QX of offset compensation, Adjusted by prior a acquisitions performance in million million million all or professional expense XX.X% last business partially services. SG&A, revenue. $XX.X primarily due was Net Adjusted in sales quarter of a operating basis the XXX related incentive of to Adjusted $XX.X year primarily result operating sales XXX higher compared $XX.X million versus XX.X and the a $X.X to was up $XX.X SG&A and our across of improving income was

review a above earnings was revenue. Please for XX.X%. exceeded Third share now of $X.XX XXXX quarterly our QX per of our Slide quarter XXXX to or XX% guidance by adjusted turn XX

revenue Our -year was XX.X% up basis. year-over on

rate acquisition up organic primarily Third a $X.X XX.X%. impacted effective euro by renminbi. the currency revenue quarter favorably offset FX revenues $XX.X exchange XX.X% Adjustment the was revenue by million our due $XX.X were million or for to

incentive our timing operational were income operating to an increase is enhancements adjusted quarter increase a recent income Looking at the to primarily adjusted due primarily points Slide to by third our possible in of by increase acquisition. of sales favorable the SG&A income higher and basis operating margin variable due volume conversion performance of $XX.X an offset XXXX XX, the process reflects and quarter utilization mix from million cost was increase an services. and adjusted of sales This million partially XXX QX operating recent higher million acquisitions, the or past automation, marketing of $X.X XX.X%, related compared The to third $XX.X professional driven on fixed was of XXXX. compensation, SG&A and

percent in to is This at increase look noted XXXX XXXX, the adjusted $X income partially in XX. as EBITDA as many let's increase XX.X%. same a stable by primarily by $XX.X offsetting improved operating at reasons million $XX.X compared revenue of on of during SG&A. million driven the volume, just this such our discussion adjusted and performance to this Now was EBITDA million Adjusted and as increased Slide QX QX of

we in exceeded per adjusted our guidance in per earnings XX, $X.XX Slide as for by XXXX adjusted well or share, for QX per XX.X% share exceeded to share $X.XX QX earnings QX earnings adjusted Turning range XXXX. XXXX as resulting

partially investment offset to allowance in professional and $X.XX $X.XX As and services. by an mix in primarily R&D deferred favorable primarily primarily based changes income an due SG&A and slide was $X.XX miscellaneous compensation. effective of $X.XX performance, in the tax acquired income other, $X.XX tax of offset to unfavorable to bonus the increase due the favorable expense rate, SG&A tax the due to incentives, unfavorable volume change stock and related asset deductions our valuation unfavorable depicts $X.XX and timing

see and XX%, turn XX.X%, segment and sales segment XX.X% higher increased XXXX XX.X% primarily in Slide XX, EMS, or million to $X.X our electronics, you’ll specifically, demand increased aerospace/defense segment XG/LTE PES EV transit you and Organic revenue. If application. and stronger XX.X%, ACS revenue due $XX.X The mass by to infrastructure. revenues portable million, to QX and respectively. by wireless revenue ADAS, increased More industrial, XXXX. our million, general increased XXXX, QX $X.X segment ACS, due demand of in QX million EMS for $X.X in HEV or

contributed recent $XX.X the million. revenues addition, acquisition In

EV in frequency revenues, HEVs to organically segment principally PES energy, due drives. diode transit, was variable and coolers, laser our Finally, the fastest mass segment, renewable XX.X% motor with growing growth

you’ll adjusted segment see XX, our Slide at operating income. Looking

was higher cost due process containment $XX.X a volume revenue. from SG&A percent up due $X.X capacity efforts, operating material million improvements basis R&D to impact primarily partially primarily raw XXXX First, productivity points enhancement increased ACS compensation This and prices, to as supply slightly impact to price of due to and QX constraints, of focused have incentive mix, These offset and million, been XXX performance investments. favorable automation. due commodity adjusted volume, operational income on favorable was or

Next, general and EMS to increase positives $X.X excellence due the fixed structure converting was up and cost operational of in adjusted favorable these was increased to primarily higher transit utilization favorable incentive primarily EV operating and result in initiatives, a portable as $XX.X the and impact capacity acquisitions electronics, variable offsetting increases HEV million, to mass QX of million This volume performance or industrial, Favorable corporate XXXX. income partially compensation. SG&A applications. allocation acquisition due

this adjusted cost, This to was as are improved from due a European leveraging incentive offsetting up productivity commodity compensation. QX $X.X Eastern favorable market $X.X partially due XXXX. copper excellence operating Lastly, initiatives, across result items was of well favorable SG&A income and footprint million, as to mainly million increase operational and these as PES volume our higher our

generate receivable cash use Turning $XX.X entered versus to Slide XXXX continues offset working of we can is partially a by largely year. the with third see two increase with cash in quarter first to of solid of accounts sales last million. to Rogers growth, our The million quarters the have position $XXX capital you XX, the inventories cash working operating $X.X which a represents the increase our period flow same flow income driven driven higher net by improved. although by the higher capital metrics million

million. XX% is well adjusted the million of DSP and help in priorities our working which including cash conversion taxes cash of year-to-date, paydown is capital Year-to-date quarter the acquisition have are We year. strong our Year-to-date and fund the $XXX.X paid conversion growth cash as to approximately as EBITDA $XX approximately due strategic funded XX%. debt third requirements

an million On looking The in last $X.XX estimated increase XX% mid-point, share $XXX revenue of our $XX.X X.X% for the to million on the revenue increase full a $X.XX of of million in share of QX $XXX our compare per or range per expenditures is Slide at performance, to revenues in year-over-year adjusted guidance and commodity $X.XX per $X.X the translates QX $X.XX per of higher This of in SG&A. guidance to range guided QX share. and increase prices to from versus a by increase an to guidance full or X% reflects revenue $XXX XX.X% which adjusted or At includes XXXX in million the offset a has increase the mid-point acquisition, per we of to XX% year XXXX. is adjusted to XXXX per year. nine revenue. year XXXX. share. had This to in expected XX, $X.XX QX midpoint or earnings months volume, improved into capital first an earnings diluted of of share $X.XX to diluted earnings diluted year-over-year earnings of revenue fourth revenue diluted $X.XX share The primarily Guidance guidance to range $X.XX earnings quarter guidance due basis Lastly Taking has basis On per be invested of $XXX total range fluctuations higher represents operational $X.XX share anticipated compared diluted of million, currency $X are share. we $X.XX QX XX.X% with earnings a share XXXX. in million. during the $X.XX per per of QX favorable range partially

capital the previously which range expects of full anticipated million is in expenditure lower Rogers $XX For a to million year the the to expenditures. due capital timing $XX to be XXXX, of than

discussed In headlines benefit in recent growth from is well eMobility with these Rogers and addition positioned the market trends. and from eConnectivity in that technologies our market the accelerated focus

meet to next growth competitive spending, year product rate for accelerated guided summary, business growth full Rogers XX% effective revenue, structures to earnings base portfolio seeking year. to capital the a we the call now approximately and is these and will that Although turn The be over In increase carryover expertise diversified has see trends accelerate the tax lean challenges customer across other cash a Roger’s and drives I'll in Bruce. growth. flow serve model customer to and

Bruce Hoechner

now concludes now This prepared Q&A. open remarks. line Janice. the you, We’ll for our Thank

Operator

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

Your line open. is

Craig Ellis

Riley FBR. B It's

do strong Bruce grow execution Our references plant capacity were were room demand environment team on once where follow-up capacity investment be your you you comments think prepared good where about to I very have again needs what do very quarter. you're congratulations in million and to into two good the investments further like and seeing the in I feel have? there the to capital to but execution on a that expenditures clearly do you I equipment $XX.X and think year-to-date wanted

Bruce Hoechner

that of on couple lines tight a up point product are where to are There capacity we're bit getting uncomfortable.

on capital So already there for expansion. investments moved we've ahead approving

full broadly much able the we’re strategic seen pretty so be will doing we evaluating in across capacity. of clear lines We guidance investments that the given are year XXXX QX now much have the the in that more our additional to CapEx. in outlook now for we've tailwinds appropriate we And that give all ensure on product to call midst for

Craig Ellis

wanted mentioned communication infrastructure, segments one investment on that announcement the about And the you out base in then XXX,XXX to of I for talking China the XG. follow-up was on stations

look look activity bit infrastructure XG we and it hand matter seems sweet we As the with into to at ready could the pull to signs as are more a in no the where seeing quarter, we growth that a or performance lumpy what’s still that the XG segment in are in like of point move where you're ahead spot of happening investment? in off look you the in good you before a term near a it there be in we’re but business sustained that

Bruce Hoechner

essentially going to towards you seeing XXXX and XXXX the base referenced see Internet-of-Things is through. of when plus starts What the certainly more roles across out and as rolling XG IoT stations timeframe is we'll of the then completion basically X.XG in the as that we’re in growing of China the rollout beginning narrowband places XG end XXX,XXX XXXX bridging really NB like specifically between also China

timeframe a we outlook see quarter. similar a we’re of seeing QX and we were that of space we're this sort did bit bridging anticipating overall but in a growth is strength by telecom the encouraged the this in in So

end at mentioned XG point really XXXX bridging next XXXX. So and towards a into this as moving the I year of with a of bit

Craig Ellis

queue. growth the balance from their jump are one and two the inorganic with the before in importing U.S. and yet Nice taking revenue again franchises? international acquisition helpful based there with me we company revenue two with from where terms execution DeWAL and That's back and business those from I DSP organic that mentioned driving and the those that internationally of good growth was in last in quarter

Bruce Hoechner

of through. part three our I continued through into As we in year reflects sales seen had the as for success acquisition DeWAL that through XX% on think just over focus in and quarters just and mention Asia that our approximately Asia for to earlier strategically anticipate and the mentioned we strategy expanding that was first of growth we've business the we that move year this

Operator

Instructions] Your question Moore from next [Operator from CJS. comes Daniel

Your line open. is

Daniel Moore

sounds So LTE like resurgence, end and in correctly about that that also the XG Bruce embedded had XG some QX the reading we’ll a little of so it gears a you the talked is X.X switch markets. I obviously, it other traditional then am of bit guide G to

Bruce Hoechner

XG in its look China. driven look that investment seeing build primarily up anticipate When get the and that I build and over XG the say a the seeing is we so now to out that closer next would driving - XG year and and probably so bit we’re We’re out in will when at of close or we XX% we XX%, what that right that that’s really XX% you're China to the XG. growth seeing

Daniel Moore

of sense renewable what switching end update going with you And are now PES, And I we for forward. you trying how seeing what get on there? sounds into of terms to I’m your markets will just maybe But over talked about meaningful be growth diodes your percentage and gang mean continued it busters. that going expectations XXXX of energy like are then where revenue an in are laser all to

Bruce Hoechner

the a diode rate quarter, in for at laser well. corporation. have moving for that in industrial this the this forward of low accounts corporation It as high of X% the the diodes a base. only XX% But can So side relatively laser part outlook see about of as it’s all medical continued now the far high we and is very to total the growth side, again the coolers as we see automation grew

So on that. we're bullish very

We’ve primarily was news EV both growth course solar in that project which I’ll very EV propelled the energy And ebb well China a renewable last that much I as that was HEV as we In of a the eMobility seen or it's X-By-Wires flow area forwarded. over growth should think the combustion in big that overall very across I years of of But board the and couple curamik also say draw renewable I and think attention terms energy engine. HEV, particular call saw it PES traditional strong we mobility the growth. pretty in is advanced electrification internal to related.

a materials mentioned that focus prepared So remarks my there very of a suited the a moves are lot lot of in as curamik technology well direction. growth and our as in

Daniel Moore

just let what a for then And headwind portable to your of growth is tailwind. time nice Talk a from XXXX? me content expectations continued throw for at period in more electronics about one gone was

Bruce Hoechner

pass next the really understanding customer fourth in outlook outstanding more we've strategic done really as team job that in need an don’t a done we again project business getting but we has the the the that much we’re think wins needs good quarter generation and job Well deserve. that our very and and we

areas. next challenges there are continue and two the in technology next to generation And suited that’s look flexible OLED is out so those Some is bendable to coming thin. well, very application a pad the on so. us tough well be because in for years But or those we OLED our And challenge very a continues at screens. OLED it's the back

Operator

comes Riley, Ellis B. question from FBR. next Your from Craig Instructions] [Operator

open. Your line is

Craig Ellis

admittedly variances you a look regards quarter that. are typically classic the are and special coming expenses happened up done when was initiatives the I expense bit Janice I I year-on-year, the the to operating nicely with operating was at is revenues actually few, third wanted trends in with anything that in efficiency but business quarter-on-quarter just play? into there a sequentially, that surprised declined Was Rogers' little ask

Janice Stipp

little also was coming efficiencies that in that quarter. cost of we so do indexing have growing really to was that was the have in we derivatives copper, utilization things various bit but fall the place mismatch in offsetting it is copper and a offset the other the into Yes,

had So we the getting one supplier. to the freight on supply we’re this the have really quarter thing premium we operational is that’s an material, could raw with constraints handle for that some

in a issues we on quarter production so second working are the any in source have the has us next won't is given really We product allocation which for that addition copper more supplier that foil.

Craig Ellis

those comments OpEx though, items. the items or Just and the were those derivatives COGs copper freight clarifying premium

Janice Stipp

your – growth cost freight is derivatives, income Premium accounting, have be of goods hedge and so that don't sold we would volume in expense. other

Craig Ellis

billion and Bruce, then Janice can as achieving on perhaps well, importance for was the growth you, inorganic the company the of Analyst in and the Day And clear real you just give landscape for at target, update DSP progress readiness now far the thus $X.X and integration. DeWAL the looking company us an the on you're how of at in with made the given

Bruce Hoechner

strategy very identifying M&A to continue we core now work Sure, of opportunities we and have our a have seasoned strategy out those. - of is core we as part you and mentioned part our this is through - team

we time. to an out quite we organization are as and pull still see opportunities in front at appropriate us the trigger ready the So of and able

Craig Ellis

reasonable of fairly one since meaningfully a had the as last that abundant inflated reasonable counterparties would the in of like? as in things or changed the position that is are for still and market. things you that broad-based Day year we've and significant And where evaluation as has targets fairly multiples at are Analyst can has things a market move put in sense the as that the that transact still do you have seen expectations some that expectations sense you Do we are you really

Bruce Hoechner

still we of over the perspective last they’ve seeing from our there. couple what are the in multiples value been and out are reasonable of good so there's We’re think sense that - years we

Operator

questions [Operator Instructions] over to call there presenters. time. I’ll the this back turn are And the at no further

Bruce Hoechner

our joining call everyone finish with you. everyone, pleased Thank you forward a looking for performance a thank Have today. And to QX good in very day and we’re you thank the much. We're strong in XXXX.

Operator

today's conference concludes This call.

disconnect. now may You

Rogers (ROG) 2 Nov 172017 Q3 Earnings call transcript