Rogers (ROG) Q3 2024 earnings summary

Executive summary

• Q3 2024 earnings exceeded guidance, driven by operational improvements and favorable product mix, but net sales of $210.3M fell below expectations, down 1.8% sequentially and 8.2% year-over-year, mainly due to softer EV/HEV, industrial, and portable electronics demand.

• Gross margin improved to 35.2%, while operating expenses declined compared to Q2 2024.

• Persistent macroeconomic headwinds, including global manufacturing contraction and slower automotive production, continue to impact top-line growth, especially in general industrial and EV/HEV markets.

• Ongoing strategy execution includes opening a new ceramic power substrate factory in Suzhou, China, to support regional growth and customer proximity, with first customer samples expected in Q4 2024 and mass production in late 1H 2025.

• Restructuring activities, including the wind-down of AES operations in Belgium and a facility exit in Massachusetts, resulted in $5.9M and $0.4M in charges, respectively.

Financial highlights

• Q3 2024 net sales were $210.3M, down 1.8% sequentially and 8.2% year-over-year; AES sales were $112.2M (down 11.2% YoY), EMS sales were $94.2M (down 3.9% YoY).

• Gross margin rose to 35.2% from 34.1% in Q2 2024; operating margin was 6.9%, down from 11.8% in Q3 2023.

• Adjusted net income was $18.2M, up from $12.8M in Q2 2024; adjusted EPS was $0.98, up from $0.69 in Q2 2024 but down from $1.24 in Q3 2023.

• Free cash flow was $25.2M in Q3 2024, with cash and equivalents increasing to $146.4M as of September 30, 2024.

• No outstanding borrowings under the revolving credit facility as of September 30, 2024.

Outlook and guidance

• Q4 2024 net sales are expected between $185M and $200M, reflecting seasonality, deferred customer orders, and lower wireless infrastructure.

• Q4 gross margin is guided at 31.5%–33.0%, with adjusted EPS expected between $0.30 and $0.60, including restructuring charges.

• Full-year 2024 capital expenditures are expected to be $50M–$60M, funded by operations and cash on hand.

• Management anticipates meaningful growth in 2025, driven by demand recovery in power modules, EV/HEV battery ramp, and improved global manufacturing activity.

• Manufacturing consolidation in Belgium and facility exit in Massachusetts are expected to reduce costs and improve operating income by $7M–$9M annually upon completion.