Rogers Corporation (NYSE:ROG) Q1 2018 Earnings Conference Call - Final Transcript

Apr 26, 2018 • 05:00 pm ET


Rogers Corporation (NYSE:ROG) Q1 2018 Earnings Conference Call - Final Transcript


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Good afternoon. My name is Mike, and I will be your conference operator today. At this time, I would like to welcome everyone to the 2018 First Quarter Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers remarks, there will be a question-and-answer session. [Operator Instructions].

I will now turn the call over to Jack Monti, Director of Investor Relations. You may begin your conference.

Jack Monti

Thank you, Mike, and thanks so much everyone for joining Rogers' First Quarter 2018 Earnings Call.

To follow along with the slide presentation, please see the Investors section of our website.

Turning to Slide 2, we have a disclosure on forward-looking statements. During the call, we will be making certain forward-looking statements subject to a number of risks and uncertainties, which may cause actual results to differ materially versus today's outlook. In addition, some of the financial metrics discussed will be on a non-GAAP basis, which management believes better reflects the underlying core operating performance of the business.

Turning to Slide 3, it's my pleasure to introduce Roger's management team. Bruce Hoechner, President and CEO, is joined by Janice Stipp, SVP and CFO; and Bob Daigle, SVP and CTO.

I will now turn it over to Bruce.

Bruce Hoechner

Thanks, Jack. Good afternoon, everyone, and thank you for joining us on today's call.

Please turn to Slide 4. Rogers' Q1 2018 net sales of $215 million were relatively flat for the quarter, in line with our previously announced guidance. Strong revenue growth and applications for EV/HEV and Advanced Driver Assistance Systems was offset by weaker demand for wireless infrastructure applications.

Although we achieved our adjusted EPS guidance, we were disappointed in our margin performance due to operational issues that I will explain in more detail in a moment. Q1 gross margin was 35.7%, a decline of 373 basis points from Q1 2017. Adjusted EPS was $1.48, down 12% from Q1 2017.

At this point, I think it would be helpful to provide some context on where we are on our strategic road map, and our outlook as we move forward. Looking at the top line, we have significant growth opportunities in our existing markets, particularly in advanced mobility and advanced connectivity, where the global outlook is strongly positive. We have seen substantial growth in advanced mobility, while more recently advanced connectivity demand has slowed somewhat due to a lull in the market as it transitions to 5G in the coming year.

As I'll discuss later, we'll see 5G as a much -- we see 5G as a much larger opportunity than past generations of wireless telecom technologies, due to the complexity of these advanced systems, and the greater material content they require.

With respect to margin performance, there are two key contributors to our recent results.

One is the temporary shift in corporate margin mix due to higher revenue from the EPS business, where margins are improving, but are currently lower than our corporate targets, in combination with revenue headwinds