Rogers outlines $13M annualized savings target while advancing curamik China expansion

Earnings Call Insights: Rogers Corporation (ROG) Q3 2025

MANAGEMENT VIEW

* Interim President & Interim CEO Ali El-Haj reported, "Our sales, gross margins and adjusted EPS results were all at the upper end of the guidance and exceeded Street consensus. Sales increased by 6.5% from prior quarter, led by improvements in portable electronics, industrial, aerospace and defense end markets. Compared to the prior year, sales increased by 2.7%." El-Haj emphasized ongoing cost and expense reduction actions, expansion of production at the new curamik facility in China, and a focus on new product introductions in all business units for coming quarters. He also highlighted organizational changes designed to "increase the speed of execution, improve accountability and simplify how we operate," noting significant reductions in lead times and improvements in working capital.
* El-Haj stated, "We are making significant progress on the previously announced restructuring of curamik operations in Germany. Cost savings from this initiative will begin in the fourth quarter with $13 million of annualized savings targeted by late 2026."
* CFO Laura Russell said, "Q3 results improved meaningfully from the prior quarter with all financial metrics at the top end of guidance. Sales increased across most end markets with the largest increase in portable electronics and industrial. AES revenues increased by 5.2% and EMS revenues were 8.7% higher on a quarter-on-quarter basis. GAAP EPS of $0.48 improved significantly from the prior quarter, mainly due to lower restructuring-related expenses. Adjusted earnings per share in Q3 increased to $0.90 from $0.34 in Q2."
* Russell added, "Q3 adjusted EBITDA was $37.2 million or 17.2% of sales. The 540 basis point improvement from the prior quarter was driven by multiple factors. First, gross margin increased 190 basis points to 33.5% due to higher volumes, favorable product mix and reductions in manufacturing costs."

OUTLOOK

* Russell provided guidance for Q4 revenues to be between $190 million and $205 million, with the midpoint representing a 3% increase year-over-year and a 9% decline quarter-over-quarter, reflecting seasonal patterns in portable electronics and slower order activity in most end markets.
* Gross margin is expected in the range of 30% to 32%, with an 80 basis point headwind from the curamik China ramp, and margin guidance 250 basis points lower sequentially.
* EPS is projected to range from breakeven to earnings of $0.40, with adjusted EPS between $0.40 and $0.80. Adjusted EBITDA margin is guided between 13.5% and 16.5%, which Russell described as "a roughly 300 basis point improvement versus the prior year at the midpoint of the range."
* The company continues to forecast capital expenditures for the full year between $30 million and $40 million and expects share repurchases in Q4 to surpass Q3 levels.

FINANCIAL RESULTS

* Sales increased by 6.5% from the prior quarter and 2.7% year-over-year, led by portable electronics, industrial, aerospace, and defense.
* AES revenues were up 5.2% and EMS revenues up 8.7% quarter-over-quarter.
* GAAP EPS was $0.48, while adjusted EPS rose to $0.90 from $0.34 in Q2.
* Adjusted EBITDA reached $37.2 million, representing 17.2% of sales, a 540 basis point improvement from Q2. Gross margin improved to 33.5%.
* Cash at quarter-end was $168 million, up $10.6 million sequentially, with $20.9 million in cash provided by operations. Share repurchases reached $10 million, with $66 million remaining in the program.

Q&A

* Dan Moore, CJS Securities: Asked about Q4 revenue growth confidence and prospects for 2026. El-Haj responded, "We're confident in the range that we've given you based on what we see today... we expect the market to continue strong for us in all activities... The only one we're probably still hesitant is the EV market and how far can it recover for us... As for the first 6 months of 2026, we actually have high confidence in better performance and continued growth in all business segments."
* Moore questioned gross margin headwinds. Russell explained, "The 80 basis points headwind that we're going to face in the fourth quarter associated to the ramp of the curamik facility in China is pretty typical... as we reach the back end of next year to not be facing the same extent of headwind to the margin from that operation."
* Craig Ellis, B. Riley Securities, probed further on cost savings: Russell clarified, "If you look on a year-on-year basis, if you look at the OpEx in totality, we were roughly $210 million last year. And with our guidance, we're probably about $18 million to $20 million below that in our update for 2025... we will evaluate the business and the market opportunities as they present themselves and make appropriate investments or savings as is needed."
* Ellis asked about industrial market dynamics. El-Haj stated, "We're capturing more market share from products and customers that we already have and customers that we didn't have in the past... introduction of new products... will allow us to even penetrate markets that we have not participated in, in the past."
* David Silver, Freedom Capital Markets, asked about customer relationships and alignment. El-Haj said, "The relationship with our customers is very strong... This communication really improved our understanding of their expectations... We think now -- we expect by the end of 2026, hopefully to be the benchmark in the industry when it comes to the service level and quality."
* Silver also queried share buyback philosophy. Russell responded, "It's been somewhat opportunistic. It's an indication of our belief in our potential with the share repurchases that we had undertaken this year when our stock price was where it was."

SENTIMENT ANALYSIS

* Analysts were neutral to slightly positive, focusing on growth visibility, cost reductions, and the curamik China ramp. Questions were forward-looking, with some concern about margin headwinds and sustainability of cost cuts.
* Management maintained a confident tone during prepared remarks and Q&A. El-Haj repeatedly referenced confidence, while Russell provided detailed explanations of margin impacts and cost structure improvements. The tone was slightly more optimistic than the previous quarter, with management expressing "high confidence" in improved performance for 2026.

QUARTER-OVER-QUARTER COMPARISON

* Guidance language shifted to a more confident outlook for year-over-year growth in Q4 and higher 2026 expectations, whereas last quarter guidance was more measured and cautious.
* Strategic focus expanded with the ramp-up of the curamik China facility and a sharper emphasis on customer service, lead time reduction, and new product launches.
* Analysts continued to focus on margin recovery, cost savings execution, and market dynamics, but with more inquiries regarding long-term growth drivers and operational improvements.
* Key metrics such as adjusted EPS and EBITDA margin showed significant sequential improvement. Management's confidence in cost savings and operational initiatives increased versus the prior quarter.

RISKS AND CONCERNS

* Management noted lingering uncertainty in the EV market and the pace of its recovery.
* Ongoing headwinds from the curamik China ramp are expected to impact margins through at least the first half of 2026.
* The higher non-GAAP full year tax rate of approximately 35% was attributed to certain loss jurisdictions without tax benefits.
* Analysts raised concerns about the sustainability of cost reductions and the timeline for full realization of savings from restructuring initiatives.

FINAL TAKEAWAY

Rogers Corporation leadership underscored a renewed focus on operational discipline, accelerated new product introductions, and targeted expansion in China. With Q3 results at the high end of guidance and substantial progress in cost structure optimization, management expects continued margin improvements and year-over-year growth, despite seasonal and market-specific headwinds. The company remains committed to capital returns and believes its strategic initiatives will drive sustained performance and shareholder value through 2026.

Read the full Earnings Call Transcript [https://seekingalpha.com/symbol/rog/earnings/transcripts]

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