Rogers Corporation Q4 FY2025 earnings call

2025 Q4 sales $202 million, adjusted EPS $0.89, adjusted EBITDA margins 17.1%, both exceeding guidance. 2026 priority on improving multiyear growth outlook, driving profitability initiatives. Structural and organizational changes led to enhanced customer relationships and improved service levels. Realized $25 million in cost and operating expenses improvement in 2025, with $20 million annualized savings expected by end of 2026. 2026 focus on top line growth, leveraging global footprint, securing design wins, including data centers as new market. Restructuring of ceramic Germany operations on track.

Industrial sales remain the largest segment, ending the year at 27% of total revenue. Q4 industrial sales increased at a high single-digit rate year-over-year. Aerospace and defense sales were 16% of revenue, with full-year growth at a high single-digit rate. EV/HEV sales remained at 14% of revenue, with Q4 sales lower year-over-year due to EMS sales decline. ADAS sales grew double-digit for the full year. Portable electronics sales were lower in Q4 and full year due to a product in AES business reaching end of life.

Q1 2026 sales expected $193 million - $208 million (5% growth y-o-y). Gross margin 30.5% - 32.5%. Adjusted EBITDA $27 million - $35 million. 2026 capital expenditures comparable to 2025, M&A emphasis, share repurchase subject to investment priorities.

Uncertainties include economic conditions, market demands and competitive factors. Tariff-related announcements and their impact on business with key OEM customers, though Rogers' global presence helps neutralize some issues.

Q: Congrats on a solid end to the year. Maybe start with the guidance, Q1 pointing to mid-single-digit growth. I think you said that's kind of more of the same versus trends in Q4, improvement in industrial. Just your outlook near term for ADAS, any improvement in renewables and/or defense. And I know you don't give full year guide, but mid-single-digit growth kind of the reasonable thought process kind of for the near to midterm?

A: Yes. Thanks for the question. Again, our expectation for Q1, we still see a stronger and continued growth in the industrial sector -- the industrial sector of the business. However, we see some softness still remain and uncertainty on the automotive side, on the EV side. And as you know, portable electronics tend to be a little softer in Q1 than we experienced in the last 2 quarters. So that's probably what's keeping the guidance the way it is for now. And as I mentioned prior to this, Q1, Q2 and '26, we expected to see some uncertainty here due to macroeconomics in general in those 2 sectors, the auto sector, specifically the EV and the portable electronics. But other than that, everything else, we really see some growth from high single digits to mid-single digits in Q1.

Q: You talked about data centers. Just elaborate on key applications there, presumably managing heat. And you mentioned, I think, one new opportunity potentially in 2026. Can you give a little bit more color there? That would be really helpful.

A: Yes. As mentioned in the earlier remarks, this became our focus over the last, I would say, 2 to 3 quarters, and we're going to continue this effort. We believe we have a very strong opportunity coming up in the thermal management side. Also on the signal integrity technology, we're working on some opportunities there. Both of these, we really see strong momentum. We're working with brand name OEMs. We cannot, unfortunately, give you more details on this, except to say larger brand name OEMs actively qualifying these technologies. And we anticipate to be able to share more information and more details, hopefully later on in 2026 with revenue impact sometimes in '27, maybe even late '26.

Q: Congratulations on getting nice COGS and cost and working capital execution in the business. Nice to see. I wanted to follow up with some of Daniel's questions regarding your #1 priority for this year, Ali, improving multiyear growth. So data center makes a lot of sense given the capabilities the company has and the way voltages are rocketing higher there. And so it would seem that you'd have a lot you could do. My question is broader than data center and looking at what your ambitions are beyond that sleeve of industrial with the portfolio this year. Could you just talk about any specific initiatives that have been in play the last few quarters that you would expect to convert either to new design wins this year, new opportunities this year? And beyond data center, when would we see the revenue benefit of those initiatives?

A: That's a lot of questions. We'll try to answer it as much as we can to the extent of our ability here. I think the growth target is really across the board for all business segments. It's not just data center or one technology versus the other. we have initiated here certain targets, identified certain opportunities in certain end markets where we're going after, both in the EMS and the ADAS side of the businesses. We've realized some wins in -- with existing customers. So we're expanding some market share there, especially on the EMS side. Some of the businesses with the current technologies will grow as the end markets continue to grow, whether it's automotive in the ADAS sector, for example, the adoption of some of those applications will continue to grow that business. But we also started sometime last year development in the newer technologies that's really not a me-too type product for applications like the newer battery technology for EV and renewables, which will help us generate not just additional revenue, but really penetrating the market in applications we're not there today that will help us grow that business in the double-digit rate type. So on the automotive side, we're also trying to go directly engage with the OEMs. So we're designing ourselves in with some of these products directly with the OEMs. Obviously, working with our partners, the PCs, the converters and some of the module makers to make sure we're designed in, in conjunction with them. We think this type of approach to the market is going to help us expand and grow the top line a lot faster rate than we have done in the past.

Q: This is kind of a question related to tariffs, I guess, but more second or third order effects. So in other words, last April, your company had to respond in short order to one wave of tariff announcements. This time, it's seemingly from our administration here, it's more targeted. But on the other hand, we're also hearing stories about offshore partners deciding to trade with each other as opposed to maybe a U.S.-based supplier that might encounter some incremental difficulties. From your perspective, has there been any signs that your key OEM customers in offshore locations or headquartered in offshore locations? Is there any change in the way you're doing business with them? Or are they diversifying away or adding non-U.S.-based suppliers in certain cases? In other words, how is the environment for doing business now with the lingering or more targeted tariff-related announcements? How does that affect your day-to-day strategies and your ability to pursue new business?

A: I think that the fact that Rogers is a global company and having manufacturing facilities globally really kind of neutralize that issue completely. So we're able to respond to our customers, whether they're in Asia or North America or Europe because we're local manufacturing -- we're locally manufacturing all their needs or in most cases, all their needs. We have seen some OEMs who are trying to shift again to buy locally. And that for us actually has been a benefit, and we anticipate that to continue to be beneficial for us because we'll be able to respond to these needs, again, just because of the way we are today, we've got the global capabilities, local capabilities on a global basis. So we can supply Asia from Asia. We can supply North America from North America. And in Europe, we can supply most of the products from within Europe. And we're looking to enhance our capability in additional manufacturing in the European continent within the next 12 months or so.