Rogers (US:ROG)2020-08-02 11:45Financial Data and Key Metrics Changes - Q2 net sales were $191 million, down 4% from the prior quarter, within guidance range [12][35] - Gross margin for Q2 was 36.6%, an increase of 360 basis points compared to Q1 [36][48] - Adjusted EPS for Q2 was $1.13 per share, a 23% increase from the prior quarter [12][40] - Free cash flow generated in Q2 was $39 million, with a strong balance sheet [14][55] Business Line Data and Key Metrics Changes - ACS net sales for Q2 were $71 million, a 10% sequential increase driven by defense and 5G wireless deployments [26][41] - PES net sales decreased by 3% to $45 million due to lower traditional automotive market demand [29][46] - EMS net sales were $72 million, a 14% sequential decrease primarily due to COVID-19 impacts [31][41] Market Data and Key Metrics Changes - Strong demand in defense and wireless infrastructure markets, particularly from 5G deployments in China [14][41] - Aerospace and defense sales grew over 25% sequentially due to recent design wins [15][26] - General industrial and automotive markets faced significant declines due to COVID-19 [14][46] Company Strategy and Development Direction - Company is focusing on advanced mobility and connectivity markets, particularly in EV/HEV and ADAS applications [16][22] - Plans to prioritize capital investments in advanced mobility, expecting a 35% CAGR over the next five years [17][22] - Continued investment in R&D for wireless infrastructure and advanced antenna materials despite current headwinds [85][88] Management's Comments on Operating Environment and Future Outlook - Management acknowledged challenges due to COVID-19 but emphasized strong execution and operational improvements [8][33] - Anticipated continued strength in defense and portable electronics markets, while traditional automotive applications may decline [57][60] - Management remains optimistic about long-term growth opportunities in advanced mobility and 5G technologies [34][57] Other Important Information - The company generated a tariff refund of $3.3 million, which offset COVID-19-related expenses [37][49] - Effective tax rate for Q2 was 30.6%, higher than the previous quarter due to increased reserves for uncertain tax positions [40][54] - The company ended Q2 with a cash position of $298.7 million and a net cash position of $75.7 million [55][56] Q&A Session Summary Question: Opportunity for silicon nitride substrates and expected revenue ramp - Management highlighted significant design activity with European OEMs and a broad industry opportunity driven by electric vehicle proliferation [65][66] Question: EMS pouch cells and content per vehicle growth - Management discussed the advantages of their pouch cell technology and the expected content growth in higher-end EVs [71][75] Question: Wireless infrastructure content trends and OEMs - Management noted ongoing de-contenting trends among OEMs and the impact of Huawei's situation on market dynamics [79][80] Question: Resource allocation in wireless infrastructure - Management confirmed continued investment in R&D for wireless infrastructure despite headwinds, focusing on advanced antenna materials and satellite receivers [85][88] Question: Economic differences across regions post-COVID - Management observed a return to normalcy in China, slower recovery in Europe, and uncertainty in the US due to rising infection rates [90][90] Question: Inventory headwinds and recovery timeline - Management indicated significant inventory headwinds in the ADAS and automotive sectors, expecting recovery to begin late Q3 [93][94]