ROG - Earnings call transcript Q2 2019

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Operator

Good day. My name is Jason and I will be your conference operator today. At this time, I would like to welcome everyone to the Rogers Corporation Second Quarter 2019 Earnings Call. After the speakers’ remarks, there will be a question-and-answer session. [Operator Instructions] Thank you.

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

Steve Haymore

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

X. Please Slide turn to

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

measures Also directly on the which in not financial deck financial this may slide accordance conference to prepared those call discussions can be posted certain measures call during GAAP the for Generally the most Accounting website. the is of Investors Principles. that of section our measures today’s in non-GAAP Reconciliation were comparable with Accepted found financial include

Daigle, over Turning call and Senior the Bob is President Vice to I CEO; and now today CFO; Bruce. Slide turn President and President X, Bruce Mike and Hoechner, with me Vice Ludwig, Senior to will CTO.

Bruce Hoechner

million the of for share quarterly the net XG of demand turn applications. range. Good results record strong Slide of our delivered for by driven for exceeded us quarter $XXX X. QX results Steve. joining on today’s Thanks, everyone primarily to which and call. $X.XX infrastructure Please and The wireless afternoon top you earnings were thank achieving guidance per adjusted sales Rogers

call, As QX. QX emerged orders we last on in XG our accelerated indicated meaningful earnings and into

quarter strong electronics in XG the contributed applications. infrastructure also and to for for wireless advanced growth demand portable connectivity Solid

applications drive mobility specifically Systems Advanced or helped EV/HEV Assistance QX to ADAS our Driver and also Advanced performance. battery pads

QX, strong demand consecutive remained Following return QX quarter. to grew growth in a a and ADAS second for market in

The sales short ensure some the resuming We to on compliance quarter. restrictions had U.S. direct follow uncertainty to the shipments on a interruption rules impact fabricator with had our that to customers. the before faraway

ongoing However, year. later, uncertainty the as our affects I’ll the discuss are collateral for these trade creating the and of restrictions outlook tensions half the second in of

Europe, to number later in markets, in discuss In addition, reports recent and conventional pointing our which as I’ll QX of weakness our by results tempered declines business industrial PES tariff shortly. detail more other in with correlates these general in margins and sectors will were which operational a challenges automotive Mike regions. which discuss in High gross costs and affected China

that these Despite the and past markets. aggressively we near Rogers to QX through influencing work execute leading opportunities outlook. for we the mobility years poised challenges, over cultivated dynamics in the confident our remain the advanced term as are advanced position connectivity We’ve very these term short are areas market in and several a and cautious

the we I we’re advanced of advanced over growth expected mentioned, see connectivity In growth the strong with Slide that the and XG in mobility. we to associated in as years. to opportunities saw the by QX for Turning build-out opportunity long X, connectivity, several Rogers areas significant demand XG the next advanced term continue encouraged and

moving points forward. that A long XG number the global of rollout recent data is validate term

by the the more XG. full plan that operators one XG launch they cities commercial June, in deployment Subsequently, China spectrum of in announced licenses allow of example, leading telecom major country’s to early end step granted this that will services XG the operators, in important to of telecom For an China year. than XX for

industry Recently the been FCC stations behind deployments base spectrum strong initial projections. deployments XG that spread the in band. in exceed is the could their primarily that addition, rollout. important been There China Taking XXX,XXX approved critical This prior in an U.S. project up the combined step In deployments XG also will additional global and gigahertz to more spectrum limited. total towards XG reinforcing of momentum an Until the build-out of the X.X clarity portion XXXX now to auction wide signals have accelerate. of the availability and the is together, XG band mid XXXX experts U.S. free there move XG unused is an which has

share uncertainties, the to clouded Near-term deployment demand the be the XG wins these market to major Huawei all in whether telecom move visibility and of able uncertain of critical to is China. Despite design not access we on to and its may deployments be Rogers are positioned QX. XG what Huawei suppliers. as restrictions extent infrastructure well the yet, Huawei will to on needed continue effects of how from is with deployment components It the encouraged XG utilize rate our we Chinese is China to wireless to impacted. orders might with clear into equipment by collateral try Also benefit the by providers. ongoing XG impact is they due

and double EV/HEV substantial we mobility, to remains a at market remains XXXX a as the digit strong EV/HEV demand compared see than substrate opportunity. and to grow term semiconductor continue continued to power automotive has advanced long stronger business this Year-to-date, to the much Turning rate market. growth outlook for our conventional

plans production shifting EV miles. increasingly also and are more Automakers future HEV to encompass their

the market than also produced by of The in is expected automakers, recent based on of Europe by found that For will XXXX to XXXX example, all EV/HEV IHS EV/HEVs number comprise in than plans Europe. more by triple available concluded more XXX. models XX% announced that vehicles analysis to a study

the to continues the near-term automotive radar to five With number grow. next sales. increases. The will be HEVs markets continues vehicle sensors units and that in the in penetration global IHS consumer global ADAS as demand new rate for despite driving of the down per outlook EVs forecasts ADAS momentum XX% grows growth years transition at longer as market nearly robust vehicles behind over sales conventional compounded automotive slow and term demand grow of growth and annual to

to million Slide XX%. sequential Turning results of sales quarter, achieved X, I a $XX units. the business discuss ACS each record of second increase of the will for net in

our achieved As strength XG mentioned, is innovative the applications. strategic strong the and This support infrastructure part which performance results meet increase demand consecutive solutions has and driven in requirements demand. quarterly revenue. and second in by these This in to have due XG customers’ great ACS XG on wireless our quarter record emphasis us that investments to ADAS enabled developing rapid to a is were

excellence with combined operational margin. have Our utilization also improved helped initiatives operating in drive to improvements significant

improvements move product position of further additions capacity order rollout. operational in ahead with to to new Rogers take advantage and innovations, continue We to the XG

For XG and uncertainties QX, we due XG demand expect softer discussed. to

we weaker impact auto believe have on some the that In market ADAS will addition, sales.

ADAS single For the expect grow to relative digits full year we at high XXXX. to

growth increase conventional by automotive applications. which higher $XX EMS revenue In net was result in EV/HEV demand Slide offset applications of to for portable slight was transit a million, were X. mass to The electronics, and compared industrial mostly turn and weaker QX, QX. sales a Please general

for year-to-date sealing the are EV/HEV battery We over with performance XXXX up systems. battery in are to this applications pads of pleased XX% and XXXX. pack sales relative This especially segment EV driven PORON of products our material, extend been such new lithium-ion life. wins has applications enhances innovative growth and by significant as battery battery our in pad design the performance which

in meaningfully QX. addition, performance In operating improved EMS

to gross of Our result. optimize margins improving acquired companies efforts the is progressing as well operations are a and

normal in market. lower due weak sales relates it see our increase portable as expect to to seasonal outlook, Lastly, we electronics QX the a than

PES substrates developed. industrial Operational recovery to top PES and a for Turning semiconductor second revenue we previously PES improvements QX. automobiles. decrease end X, are that electrification due The XX% sales weak remain and million, to decline we quarter market power net was demand were power primarily of the vehicle executing from Slide plan priority in for $XX a detailed in and applications conventional

we did expected the not reasons. for in make two primary However, progress QX

a plan organizational and key implementing of First, as several made the we our pace recovery result changes. was disappointing

operational Second, than make. more cost lower we structure minimize to impacts compounded margin the of To production flexing challenges the did mitigate the offset and the the progress the volume impact. demand, our lower we are

advantage As opportunity capacity of making I and take EV/HEV to opportunity. this is in are mentioned, market the extremely and committed improvements compelling the to in order PES operational we adding necessary

objectives. growth Slide X. We as of elements long-term on Please a our to our strategy which turn remain strategic the four roadmap to serves financial focused

XX% of additional to We drive in $X.X an towards adjusted operating net of subject to run rate sales margin rate continue run acquisitions and XXXX. achieving billion

in have advanced We and growth are connectivity. strong advanced about and QX achieved the mobility optimistic results opportunities

will our continue future. to disciplined strategy execute the We to for position best Rogers

over call report the detail. to turn I'll greater to results QX Mike? Now in on Mike our

Mike Ludwig

Thank review good everyone. third by guidance. quarter In XXXX the second slides you, I'll Bruce our our ahead, afternoon and results followed quarter

review Slide for will to we Turning XXXX. XX, results financial the QX,

revenue revenues were market quarter strong XXXX. portable and slightly to our XG applications but within were transit electronics revenues with noted sequential infrastructure and sequential previously guidance the both on QX markets second increased over quarter basis, as increased to increase. along the The a million XX% QX million. Second million $XXX range XG $XXX.X contributors for $XXX of wireless ADAS, mass

experienced electrification company as weaker vehicle power demand semiconductor industrial for conventional substrates and applications The applications. from primarily as revenues lower well general

XX%, were exacerbated PES to gross quarter our PES in escalation guidance was and from impacted also significant our to improvement the XX% the margin ACS margin performance trade China. margin challenges in offset able by of margin our While tensions lower range volumes resulting measurably within gross XX.X% The the of improved an continued between execution segment. in gross increased we the U.S. in EMS company's and and of the business gross tariffs by achieve a

GAAP of $X.X primarily first GAAP and operating range to diluted operating diluted $XX.X of million but QX of in of compared XX.X% our quarter. revenues per rate levels. share income resulted strong of upper and performance for than a $X.XX $XX Adjusted from for forecasted an control good above XXXX compared XXXX. for by the lower both QX, fully on adjusted QX, EPS XXXX were below decreased basis and a share adjusted QX, was per tax for or for fully the respectively at million second effective expense million to guidance XX.X% expenses revenues QX, slightly EPS or the Adjusted earnings and second $X.XX The the quarter. end quarter

The Slide XX% primarily segment first saw business EMS PES and by business XX% The from segments increased $X.X ACS the wireless both in X%. was than and XX, our growing XG XX% infrastructure strong to to EMS as Turning XG increase our quarter led our XXXX strong demand. with applications the its versus decrease grew revenues revenues of application greater resulted sequential The revenues ACS both XXXX. sequentially. revenues and significantly revenues experienced million QX, revenues our quarter QX, in in growing compared growing increase by antenna ACS demand

The China driven our XG strong installations XG were in previously the previous conference announced highlighted Unicom XXX,XXX by we call. revenues LTE

months the fact, to XXXX XXXX. six In first of flat XG compared basically it same through as the was has held period steady of

Bruce able impact the slight the resulting and sales quickly XG approximately the of in from over second in to a and but restrictions to Huawei. negative the both As XG second revenues accelerated quarter act we showed the strength to in second to XXXX. from orders noted, quarter quarterly growing quarter XG quarter with mitigate XX% on ADAS continued the sequential Revenues were increase,

of technical and The difficult challenges. capabilities almost and is compared electronics segment QX, pads and customers’ from in of the to technical pack sequentially The slightly application growth to growth due example EMS systems was due of sealing slightly application increase revenues tablet The General QX, increase X% were to our designs. both first in increase the and and QX electronics’ down automotive industrial have to solving increased up portable our handset XXXX. compared amplified where the EV/HEV customers strong revenues XX% by our to battery compared our commercialization another demand in compared quarter. to battery in sequentially timing application in Rogers’ Revenues applications. XX% which resulted grew portable automotive XXXX in revenues new

QX, as revenues XX% experienced remarks, as for revenues lower electrification and As noted power industrial for demand applications prepared applications by respectively primarily semiconductor each PES Bruce's to conventional from these and vehicle and substrates by in compared X% XXXX. as weaker declined decreased general well XX% sequentially applications,

in these issues strong quarter, production to compared For the decline being substrates applications, demand that power were These remain from for due in QX EV/HEV yield revenues second but separate challenges. applications. were resolved the for resulted sequentially ongoing quarter, semiconductor X% in but revenues to down challenges

for production of Even up XXXX. XXXX substrate and semiconductor XX% ahead year-to-date the and with XX% yield compared were applications to EV/HEV than challenges, are revenues QX, power greater

Despite expect for our vehicle business demand a the multi-year to power general semiconductor slowdown increasing and in industrial gap wide-band substrate see over we period our continue electrification business EV/HEV serving semiconductor applications, demand increased significantly for current to see substrate applications. and

increasing As we continue $X.X impacted demand. XXXX. additional QX, a capacity the million XXXX will Currency compared on quarter to negatively second exchange revenues result, bring rates to to address by

decrease the our in tariffs The in first was in XX.X% to $XX.X meaningful margin XX, gross offset Turning million a the revenues. or percentage basis of business from of than U.S. due gross points was decline tensions, margin XX businesses. margin gross margin China the significant to in Slide the our QX, and XX.X%. trade lower increases of quarter to EMS of for margin and the gross both resulting XXXX and gross PES combining increases ACS

efficiency We invested percentage a excellent which QX in gross demand for increased were were midst business from ACS of and increased significant in resulting beginning from delivered product was favorable The with the the XXXX. and the utilization. a planned results improved in margin increase factory pleased mix,

discussed factory on increased margin and EMS second increased on issues gross the also efficiency, calls. quarter, In performance improve due EMS past the progress percentage to utilization

to expect and gross QX margin consolidation the further improvement QX in EMS optimization issues. from and see We resolving

Consistent productivity gap Nitride continued and from gross the our wide-band the in the we Silicon issues calls, PES new due challenges semiconductor with yield anticipated prior comments our in decline generation of to with margin with product. QX

was from general margin by the in resulting significantly gross reduced and the PES the applications. demand reduced addition, impacted conventional electrification In QX volumes in industrial negatively vehicle

commercial to recovery yield our and productivity follow continue We plans.

recovery we As address XXXX. pace Bruce our the into remarks, margin execution his the and half seeing to anticipate the plan half discussed XXXX of the organizational changes made in first in second gross of progress of of PES

we our are semiconductor for addressing in our maintaining PES lower while cost increasing compensate to support in wide-band to addition, power gap demand the structure volume ability In the still applications.

points total, in impacted our tension margin the XX and margin tariffs The escalation during primarily both second the increase XX due compared first increase impacted over ACS to by tariffs trade margin gross tariff basis in quarter over by to due gross shipment quarter in the rate the basis points. inventory. of to the tariffs to In the increased inventory subject second

We chain footprint optimize mitigate are supply working factory our our tariffs. to leverage aggressively to and the effective to

tariffs the benefit percent see first the to expect as revenues in a of of of actions lower of these the half XXXX. We in form

in EMS business approximately points business QX discussed semiconductor our margin gross points of company greater basis PES on discussed to basis due and primarily lower volume XXX to approximately inefficiencies the power from the headwinds issues The substrate segments earlier. from from XXX performance from increased call

actions points our XX achievement than which of favorably contribute described basis resolved points plus target is operating the incremental financial in profit mitigating can is all particularly trade an to points improved basis XX%. tensions XXX if are gross EMS, the higher we tariffs in contribute points above businesses volumes revenues. execution of impact path the gross XX which predicated XXXX PES from to basis from XXX with on basis adjusted XX% XG increased of to and The margin margin The a through greater operational in expect and of

future. in into the discussed improvements believe remain the markets with them more the plans timely tariffs PES, and impacts and EMS grow to of are ADAS the enhanced mitigate continue management we to XG We the executing changes an opportunities. the we second EV/HEV quarter to path saw performance on on and in confident in We in to and our expect

result, path operating a the profit XX% a of than greater XX% and XXXX. margin As an to remain in we of our half achieve back adjusted margin of gross confident in

net the XXXX QX, of for changes adjusted income of details QX, to compared income XXXX adjusted $XX.X Slide $XX.X million for net million. to XX

higher QX, and or revenues SG&A earlier, million QX $XX.X of on costs. adjusted from XX.X% The expenses slightly $XX.X XX.X% of QX expenses of lower Adjusted a As the for was $X.X or percent resulted of basis. discussed than operating XXXX a million operating adjusted for than reduced both of revenue operating expenses dollar income million operating income adjusted or revenues. lower QX's

to result expenses Other commodity a activities. currency and was income as QX increased XXXX for and hedging of compared unfavorable from expense QX,

tax effective XXXX rate our effective rate for compared XX.X%. QX, XX.X% tax was our of Lastly, XXXX to QX,

The benefits excluding quarter. that In be were tax the tax to rate XXXX repeat did half second of of not expect impact XX% quarter incorporated between second XXXX, the effective effective tax first not discrete the in we items. to expected and XX% discrete and tax the rate

position XX, $XX to a expenditures. $X.X XX, from an and million spent the of December $XX.X XXXX million increase of $XXX.X the spent Turning an year-to-date. of on million XX, ended We XXXX we second cash company March quarter million In million, XXXX. Slide increase capital $XX with QX, from

for guide continue $XX range products capacity XG year million spending as for to EV/HEV $XX serving continue the We we million and the for in to applications. of to add increasing capital demand

has of The XX. company in paid of paid debt $XX down down June in through the debt quarter million $XX and million XXXX

primarily of increase As from second revenues in accounts in an both in receivable QX working strong the quarter. company million. to position the the decrease we of a of June, of from timing revenues working net capital generated operating $XX.X million activities $XX.X net are generated capital million company of in due in $XX.X and Through including debt $XX.X million. XX, increase million a operating The June in from the activities, of $XX.X

half at XXXX are decline a a semiconductor of electrification the materials our the be revenues have will on into the XXXX. the those look regarding the second of extend we that will in QX, and guidance in Huawei demand how we seeing uncertainty Taking for infrastructure to half our application wireless effects XX, against And continues vehicle industrial discussed, and impact our there applications XXXX. power general collateral second as sanctions Slide for of U.S.

$XXX range to of be QX for the million. are in revenues Therefore, million estimated $XXX to

We expect volumes tariffs and offset to lower ACS the segments and in reduced reduced PES utilization our volumes. be performance by slightly EMS from lower improvements made factory from

result, are of diluted a in we for $X.XX QX. fully to We As range the per range for we to EPS the share. margin adjusted guiding diluted XX% to share. in the diluted range of gross of a per $X.XX in an basis, $X.XX guide QX On $X.XX guide XX% GAAP earnings

I will back now Bruce. turn the to call over

Bruce Hoechner

despite summary, and related Thanks well-positioned achieved advanced and Mike. the trade operational these results is opportunity growth The quarter market we In take we market, and to challenges of second are strong focused we on connectivity mobility uncertainties, areas. in which advantage strong improving. for are headwinds advanced outlook

remarks prepared line we and Q&A. our will concludes This now open the for

Operator

[Operator comes Stifel. from first Instructions] question of the Ho line Your Patrick from

line Your is open.

Patrick Ho

terms comment Thank ACS Maybe the today. off, first very XG about you we both deployment much. and and seeing are that business of XG the you made the your in

you Huawei the ban that there, secondly, You’re does impact business? is given is? how Two-part some that U.S. with have good do still in side the the in thing. sustainable And to believe issues of XG question of seeing XG related any the strength the

Bruce Hoechner

we OEMs look I to towards base less components We I turns operators they of some that side. station the have had with get regard up less to would Bruce. And XG, is perhaps build-out say, that the to as we seeing are towards XG. XG hi focus be is, ability Huawei, unknowns. that outlined think in that Huawei with the and XG a all will area, build-out it's the with XG sales we I the air. XG The reason we the still situation as the as the need into With move Patrick, as to the half believe So, first good what regard the forward,

that second we through of Now will as inventory talk the there we plays how time, is obviously out the but part build move they over year. that see

As beginning remarks, I mentioned in prepared certainly continued we demand the year material. also in of saw, strength in for my XG QX, our

into Huawei cloudiness and just move it's again, quarter a to of question that us. So regard with we to as for the through the QX continue ability that's

Patrick Ho

question on you helpful. vehicle a side really then little I perspective, guess needed picture that's you demand And business, what PES still you from somewhat the spark soft talked the about of segment and to turn that's follow-up the big drive things. Great electrification inflection maybe guess, the on your color or being as PES can on market that give catalyst business? a believe I in the obviously my

Bruce Hoechner

yes, thanks for the question. So

the this to the to particularly the vehicle or higher to being models. going going and On and x-by-wire again and is as related numbers stop/start conditioning so forth, is internal so vehicles forth combustion end the electrical electrification, other motors. engine really situation air produced of systems, The automobiles as well

so, really what that automotive there and there when believe been, end that's and at look the it's is x-by-wire capability produced what you the units on output internal China, number decline Europe, models we this are the you of of being generally volume we the there to side. look is engines that's from the related seeing a of when in stuffer the with at production data higher data has combustion And

back when at a growth this return pick of end, the terms internal see So engines higher should we up. we of in sales there combustion see

Patrick Ho

color the help boost term? over some to to area, of from a help up give manufacturing you. gross for the me but that's final little margins themselves gross it's terms long strong facilities in I initiative manufacturing the maybe on weaker chain the businesses changes And different been within one in the of, your also of key you different Can another, on you in adjust and how of profile the can both the just, margin capacity, the supply kind question you adjust where businesses management guess, how

Bruce Hoechner

of there So a initiatives underway. is number

we all, of the of performance First are ACS. really with pleased

QX you if quarters EMS improved very business focused you saw If substantially where operating there. business also issues them. or into good some performance that in to continue model we as we’ve where back had also on the the to acquisitions last carried on in probably business the so, the saw on years. side go forward side couple the in in integrate we very recall, performance operating the QX quarter over some that six the EMS We into operating quarter, the we We’ve some in we and good made continue we integrate as that of we

plans would the is from I businesses, we've our of say perspective has EMS, which we're and results. as seeing couple have executed seeing The processing more So, quarters. had PES ACS, well been some those struggles two we're the over complex business a last outlined

us see good with end go and well. a leadership from bringing year some come there should of through believe it'll the as outside operations good the we to plans and have some think in experienced people we'll decided that but change the out, to and of execution take make should some results to provision in see we the go place some we We pointed there's Mike

Mike Ludwig

couple a think I Patrick, of we focus to that side, are there thing continue supply the on. On

materials of reformulation we use that within So, products. our

the and made think progress good cost I are we've We in that lower some early look to continuing year. reformulations our here for

better have throughout year. we as we'll the move progress think I

and in that but we're continue again say be And one. can of we terms of then, tensions utilize of tariffs and ethical again let's in to chains tariffs, different themselves chain mitigate favorably. in and certainly trying terms those that's that address, supply geographies trade impacts significant supply should trying So, resolve to will at looking the addressing not not on

Patrick Ho

lot Great, thanks a guys.

Mike Ludwig

Patrick. Thanks,

Operator

next line B. comes of from from Riley Ellis Craig question the Your FBR.

open. is line Your

Craig Ellis

Yes, the revenue thanks in questions taking congratulations strong quarter. performance and for guys ACS the in the on

comments is you understand I you when least the had to about first The guidance; at really was once some think a of clarification. talked wanted that I twice. maybe do question Bruce What

taken impact question and potential quarter outlook Mike said The trends because is an noted are based you're factoring talked for at based guidance book book an You you the you on and on seeing order you issues. to in the be have some the the in of about order cautious allowance were whatever's going yourself you cause third made with things you being macro for or that you macro on that extra based on level, the or the concerns from would have conservative. trade the have

a trying Just looking get particular to this the of how quarter. outlook at sense you're better

Bruce Hoechner

Yes.

of in I one the little right. bit think there's same,

things some period cautious in continue and impact for a certainly think in and will least book we're time. the being trends some I the again that short some of think as somewhat seeing that we're the of macro in have terms of order our result that I at of those believe of

we'll out of of the end quarter third Certainly and through how the quarter, shape third quarter. see end the they fourth

what I it map the picture. seeing Craig, order in seeing or we're think book we're what think what of again we're in it's I general it So, the and and and hearing reflective

Mike Ludwig

lot variable a about relatively electronics, flat hands portable say to is look would equipment as of macro to so I right. it's situation, industrial general there, the also down. down Craig, you right frequency We even related it's talked capital at if But particularly related Yes. drive it to being substrates. our

We've some boost models had that had QX some in new in area. area. that very that their good introduction sales helped EMS wins we in

for side the strength the macroeconomic flip we're continuing orders there and XG some seeing us. for saying at looking of is good. EV/HEV just looked as we're it, mentioned another Where quarter I the here I'll comment. it macro headwinds is side and So, really over early make in though

markets a seeing we're focus hoped for. we our in that had strength So,

Craig Ellis

that's helpful. Great,

for potentially the there. OEMs was that question. stations out demand is that and is, moving noted China XXXX a in XXX,XXX you So, identified speak base customers that to on with My XXXX. Bruce, and in consultancy are that your first you there question there do

approaching team their in planning XXXX XG your back as base capacity station year working customer next the your What's demand various year for consistencies you're half and on XXXX plans? this of with the and is sense how and for build

Bruce Hoechner

and XXXX, the going we're So, a stations OEMs, we forward in obviously XXX base as we're approximately this with in XXX,XXX shape ramps. consultants capacity think looking good contact at perspective, XXXX. in From

For additional added the the primarily the capacity we've and about between the years, ACS between last presses couple of XX% business of treaters. debottlenecking into

We're price gets the the bringing of as coming year XXXX factory our next of end acquisition real in part converted. another that at out on the of year saw in early deal. treater as the I

we think shape, the we're data the stations. side up marketplace on certainly base things So, capacity getting from with good good and it that we're very on position in matches very the of

Mike Ludwig

add about I think talked of impact though half to they the again of we've to even these of year. how the uncertainties as back some in is terms that, Craig,

again year. next are for the between two XXX,XXX We XXX,XXX+ still planning a the years

our we back And had adds down slowed in half uncertainly relates not capacity XXXX. not acquired so we despite we particularly of the that the plant down have slowed the have solar say let's to

Craig Ellis

is at you because do steep have any Mike, have there visibility XXX,XXX the that is into year. clearly yet? expect that hit when you quarterly do that ramp basis coming you on some very there point, visibility next on And a inflection per to

Mike Ludwig

visibility, No, Craig. I think have that we don’t

Craig Ellis

Okay.

PES yield so is executing Next improvements question have too. you be address issues on both it's although relate challenges can that proven resolved confidence you the there and elusive gives in are that some operational to that gross what margins. will exhausting recap but just Bruce, you this, been the and PES My next we've those quarter and in of the in question some been occurring far thus

XX% XX% and operating that is linear think gross from margin the path about here are or it to backend that margin bigger some of between mentioned, path that you Mike. as Is the a here you fairly And now. what loaded dependencies

Mike Ludwig

Yes.

believe of think I So, success too that is are and again increase observation, made far. again Bruce some right had have that your pace initial increase which moving changes and success the the around Craig, We have elusive probability speed as would plan develop by the so respects frustrated we we you're of in improvements that say mentioned in we on right, of though organizational right, the last plan. will quarter we the the recovery so been

as gives I that So, to those started perspective making maybe we and confidence us think more than the that quarter prior changes. significantly from

to want we of there. the impact underestimate that don’t I So, changes the made

I significant. think they're fairly

as in at EMS then, and I the I to happen laid ES basis on to points performance think again plan. from EMS we and the point what needs basis out in last think I improvement, that get to And we talked the they're about that are XX we improvement both XX about talked improvements XX%, seeing the call

things. is going to have a of PES couple

PES depends get up we of it think as how I out. the important visibility XXX,XXX the to an on will really volumes' have then, units into And part. acceleration we necessarily that great again we said is back The PES So, don’t to back XG because and talked is play and have have play will to pick track, that. volume well just going to I on about think going

believe me continues to XXXX pick don’t it's So, the think that here, becomes linear from in half that. and first of say of back the again up probably it in accelerated still half I let XXXX. I

Craig Ellis

That's or it combustion I'm is Bruce, think that the most hearing investors. sort some seeing in the globally the different that of just by think markets exposure. headwinds It's segments. exposure well unit got we're and very and your have helpful. been I the summarizing just automotive there situation from reporting three recognized engine It sounds I across lastly, And you with you then internal like

But those that be be to Is on out on there? sounds exposure, track. solved your underneath that breakdown like going a fair got trends you've of what's it EV/HEV where seem

Bruce Hoechner

seeing the absolutely both the EMS. as PES well in we're share as really way battery it business some very on and the business in the EMS Yes, EV/HEV side that's the have nice

we're with we're on So EV/HEV uptake that yes, the the seeing very pleased side.

Craig Ellis

guys. you Great, thank

Operator

Securities. Daniel Your next line comes from question the of from Moore CJS

Your line is open.

Daniel Moore

talk early to Auto gentlemen. the where the meaning into of afternoon, A of exit ground just most we QX then and between May lot if we the covered and Good the the look three the obviously, Wireless, X) about of cadence, July inflexions. Thanks for June buckets maybe you're X) demand X) orders questions. and cadence seeing to three as those wanted part Industrial, kind and of it taking at I and

Bruce Hoechner

the is So, the seen industrial. seeing areas Both I automotive let's we've say with we're those as automotive impact that the talked conventional are about where or think say along probably we bigger would when I of weakness headwinds.

On quarter strength. the the we've wireless seen side, certainly part through of early the here

pleased So, that aspect with we're it. of

Daniel Moore

relates alluded that that XXXX to time. mentioned the this in you but you as it Helpful. And HX, the first was think goals the I think Mike, commentary to I

operating So, is kind should we the at think of rate way XX% point. it run a half XXXX, this about back is to margin gross exiting right XX% that of the or the of think margin, XX% XX%

Mike Ludwig

Yes.

Daniel Moore

bit. up, a shot a understand Just that

Mike Ludwig

is. it Yes,

Daniel Moore

Okay.

Mike Ludwig

We got. at look we'd Right, it.

Daniel Moore

but it's sheet that cash stronger given about Bruce one single as comes that know you've continues are you're for I had we those what things year what's focused XXXX? it lastly, the to a into quarter comes half get at lot of and just of the pipeline the every but look of likelihood balance on when stuff in And M&A internal the generation. talk the back maybe seeing M&A you

Bruce Hoechner

more certainly would we're about on public very we had opportunities. this a been say this, this year we've going at maybe working ago. teams than and into I looking probably bit Well, a cautiously we have as

of the forward we of we're we're project seeing sectors valuations want Given that weakness that we sectors, of fully to the might the at in the some what sure given discussed. on how in some just we and understand weakness looking some make that

but say I more and enter would here. at the it still half a as hard we're away bit we cautious So, looking second hammering

Daniel Moore

Understood, for color. fair enough. Thanks the

Bruce Hoechner

Okay, thanks Dan.

Operator

to this call at I further time. questions There Hoechner turn are closing Bruce back the no remarks. for over

Bruce Hoechner

everyone to call. a Have Thanks us on for want lot. evening. the I day joining today thank a good and

Operator

you That now conference concludes disconnect. may today's call,

Rogers (ROG) 31 Jul 192019 Q2 Earnings call transcript