Rogers Corporation Reports Third Quarter 2023 Results

Operating Performance Drives Further Gross Margin and Earnings Improvement

Rogers Corporation (NYSE:ROG) today announced financial results for the third quarter of 2023.

"We continued our strong operating performance in the third quarter as we increased gross margin to over 35%, which drove stronger earnings and operating cash flow," stated Colin Gouveia, Rogers' President and CEO. "This marks the third consecutive quarter of gross margin improvement and delivers on the margin commitments we made previously. We are pleased with our progress thus far and remain committed to further improving our cost structure with our operational excellence initiatives. Third quarter sales were nearly flat compared to the prior quarter as global economic conditions remained challenging and customer inventory destocking continued. We are pleased with the strong progress we have made so far this year. We have significantly improved our margin and cost structure, bolstered the organization with new talent, secured important design wins, and are moving forward with targeted investments in fast growing markets."

Financial Overview

Q3 2023 Summary of Results

Net sales of $229.1 million decreased 0.7% versus the prior quarter resulting from lower sales in the AES business unit, partially offset by higher EMS business unit sales. AES net sales decreased by 2.9% primarily related to lower EV/HEV, aerospace and defense (A&D) and ADAS sales. EMS net sales increased by 2.8% primarily from higher portable electronics and A&D sales, partially offset by lower general industrial sales. Currency exchange rates unfavorably impacted total company net sales in the third quarter of 2023 by $0.7 million compared to the prior quarter.

Gross margin improved to 35.1% compared to 34.5% in the prior quarter due to procurement cost savings and favorable product mix, partially offset by the decline in sales volume.

Selling, general and administrative (SG&A) expenses decreased by $1.8 million from the prior quarter to $44.3 million. The lower SG&A expense was due primarily to a decrease in variable compensation costs, partially offset by higher professional service fees.

GAAP operating margin of 11.8% decreased from 12.1% in the prior quarter. The lower operating margin was due to a decrease in other operating income, partially offset by the improvement in gross margin and lower SG&A and restructuring and impairment charges. Adjusted operating margin of 14.3% increased by 90 basis points versus the prior quarter.

GAAP earnings per diluted share were $1.02 compared to earnings per diluted share of $0.96 in the previous quarter. The increase in GAAP earnings per diluted share was due to an increase in other income and lower interest expense. On an adjusted basis, earnings were $1.24 per diluted share compared to adjusted earnings of $1.07 per diluted share in the prior quarter.

Ending cash and cash equivalents were $126.5 million, a decrease of $15.0 million versus the prior quarter. Net cash provided by operating activities in the third quarter was $42.0 million, capital expenditures were $6.7 million and a principal payment of $50 million was made on the outstanding borrowings under the Company’s revolving credit facility.

Financial Outlook

Conference call and additional Information

A conference call to discuss the results for the third quarter will take place today, Thursday, October 26, 2023 at 5:00 pm ET. A live webcast of the event and the accompanying presentation can be accessed on the Rogers Corporation website at https://www.rogerscorp.com/investors.

About Rogers Corporation

Rogers Corporation (NYSE:ROG) is a global leader in engineered materials to power, protect and connect our world. Rogers delivers innovative solutions to help our customers solve their toughest material challenges. Rogers’ advanced electronic and elastomeric materials are used in applications for EV/HEV, automotive safety and radar systems, mobile devices, renewable energy, wireless infrastructure, energy-efficient motor drives, industrial equipment and more. Headquartered in Chandler, Arizona, Rogers operates manufacturing facilities in the United States, Asia and Europe, with sales offices worldwide.

Safe Harbor Statement

Statements included in this release that are not a description of historical facts are forward-looking statements. Words or phrases such as “believe,” “may,” “could,” “will,” “estimate,” “continue,” “anticipate,” “intend,” “seek,” “plan,” “expect,” “should,” “would” or similar expressions are intended to identify forward-looking statements, and are based on Rogers’ current beliefs and expectations. This release contains forward-looking statements regarding our plans, objectives, outlook, goals, strategies, future events, future net sales or performance, capital expenditures, future restructuring, plans or intentions relating to expansions, business trends and other information that is not historical information. All forward-looking statements are based upon information available to us on the date of this release and are subject to risks, uncertainties and other factors, many of which are outside of our control, which could cause actual results to differ materially from those indicated by the forward-looking statements. Other risks and uncertainties that could cause such results to differ include: the duration and impacts of the coronavirus global pandemic and efforts to contain its transmission and distribute vaccines, including the effect of these factors on our business, suppliers, customers, end users and economic conditions generally; continuing disruptions to global supply chains and our ability, or the ability of our suppliers, to obtain necessary product components; failure to capitalize on, volatility within, or other adverse changes with respect to the Company's growth drivers, including advanced mobility and advanced connectivity, such as delays in adoption or implementation of new technologies; uncertain business, economic and political conditions in the United States (U.S.) and abroad, particularly in China, South Korea, Germany, the United Kingdom, Hungary and Belgium, where we maintain significant manufacturing, sales or administrative operations; the trade policy dynamics between the U.S. and China reflected in trade agreement negotiations and the imposition of tariffs and other trade restrictions, including trade restrictions on Huawei Technologies Co., Ltd. (Huawei); fluctuations in foreign currency exchange rates; our ability to develop innovative products and the extent to which our products are incorporated into end-user products and systems and the extent to which end-user products and systems incorporating our products achieve commercial success; the ability and willingness of our sole or limited source suppliers to deliver certain key raw materials, including commodities, to us in a timely and cost-effective manner; intense global competition affecting both our existing products and products currently under development; business interruptions due to catastrophes or other similar events, such as natural disasters, war, including the ongoing conflict between Russia and Ukraine, terrorism or public health crises; the impact of sanctions, export controls and other foreign asset or investment restrictions; failure to realize, or delays in the realization of anticipated benefits of acquisitions and divestitures due to, among other things, the existence of unknown liabilities or difficulty integrating acquired businesses; our ability to attract and retain management and skilled technical personnel; our ability to protect our proprietary technology from infringement by third parties and/or allegations that our technology infringes third party rights; changes in effective tax rates or tax laws and regulations in the jurisdictions in which we operate; failure to comply with financial and restrictive covenants in our credit agreement or restrictions on our operational and financial flexibility due to such covenants; the outcome of ongoing and future litigation, including our asbestos-related product liability litigation or risks arising from the terminated DuPont Merger; changes in environmental laws and regulations applicable to our business; and disruptions in, or breaches of, our information technology systems. Should any risks and uncertainties develop into actual events, these developments could have a material adverse effect on the Company. For additional information about the risks, uncertainties and other factors that may affect our business, please see our most recent annual report on Form 10-K and any subsequent reports filed with the Securities and Exchange Commission, including quarterly reports on Form 10-Q. Rogers Corporation assumes no responsibility to update any forward-looking statements contained herein except as required by law.

(Financial statements follow)

Reconciliation of non-GAAP financial measures to the comparable GAAP measures

Non-GAAP financial measures:

This earnings release includes the following financial measures that are not presented in accordance with generally accepted accounting principles in the United States of America (“GAAP”):

(1) Adjusted operating margin, which the Company defines as operating margin excluding acquisition-related amortization of intangible assets and discrete items, which are acquisition and related integration costs, dispositions, gains or losses on the sale or disposal of property, plant and equipment, restructuring, severance, impairment and other related costs, non-routine shareholder advisory costs, (income) costs associated with terminated merger, UTIS fire (recovery) charges and the related income tax effect on these items (collectively, “discrete items”);

(2) Adjusted net income, which the Company defines as net income (loss) excluding amortization of acquisition intangible assets, pension settlement charges and discrete items;

(3) Adjusted earnings per diluted share, which the Company defines as earnings per diluted share excluding amortization of acquisition intangible assets, pension settlement charges and discrete items, divided by adjusted weighted average shares outstanding - diluted;

(4) Adjusted EBITDA, which the Company defines as net income (loss) excluding interest expense, net, income tax expense (benefit), depreciation and amortization, stock-based compensation expense, pension settlement charges and discrete items;

(5) Adjusted EBITDA Margin, which the Company defines as the percentage that results from dividing Adjusted EBITDA by total net sales;

(6) Free cash flow, which the Company defines as net cash provided by (used in) operating activities less non-acquisition capital expenditures.

Management believes adjusted operating margin, adjusted net income, adjusted earnings per diluted share, adjusted EBITDA and adjusted EBITDA margin are useful to investors because they allow for comparison to the Company’s performance in prior periods without the effect of items that, by their nature, tend to obscure the Company’s core operating results due to potential variability across periods based on the timing, frequency and magnitude of such items. As a result, management believes that these measures enhance the ability of investors to analyze trends in the Company’s business and evaluate the Company’s performance relative to peer companies. Management also believes free cash flow is useful to investors as an additional way of viewing the Company's liquidity and provides a more complete understanding of factors and trends affecting the Company's cash flows. However, non-GAAP financial measures have limitations as analytical tools and should not be considered in isolation from, or as alternatives to, financial measures prepared in accordance with GAAP. In addition, these non-GAAP financial measures may differ from, and should not be compared to, similarly named measures used by other companies. Reconciliations of the differences between these non-GAAP financial measures and their most directly comparable financial measures calculated in accordance with GAAP are set forth below.

Reconciliation of GAAP operating margin to adjusted operating margin*:

Reconciliation of GAAP net income to adjusted net income*:

Reconciliation of GAAP earnings per diluted share to adjusted earnings per diluted share*:

Reconciliation of GAAP net income to adjusted EBITDA*:

Calculation of adjusted EBITDA margin*:

Reconciliation of net cash provided by (used in) operating activities to free cash flow*:

Reconciliation of GAAP earnings per diluted share to adjusted earnings per diluted share guidance for the 2023 fourth quarter:

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