Rogers Corporation · NYSE:ROG
Rogers — Investor Presentation (November 2015)
52 slides from Rogers's investor presentation, November 2015
Slide 1: Investor Presentation Q3-2015
Investor Presentation Q3‐2015
Slide 2: Forward Looking & Cautionary Statements
Forward Looking & Cautionary Statements Safe Harbor Statement Statements in this presentation other than historical facts, including without limitation statements regarding the Company’s business strategy, future results of operations and financial position, and plans and objectives of management, a
Slide 3: Why Invest in Rogers?
Why Invest in Rogers? Growing with Leading in Leveraging Driving Delivering Discipline Technology Megatrends Excellence Results Multi‐pronged Leader in Attractive Operational Track record of strategy driving engineered markets with excellence growth in sustainable materials for global delivering val
Slide 4: Rogers at a Glance
Rogers at a Glance Global leaders in engineered materials helping power, protect, connect our world Ticker NYSE ROG Heritage Founded in 1832 2014 Sales $611M; up 14% YOY Employees ~2,900 employees Global Footprint HQ in Rogers, CT Manufacturing in 7 countries, 22 facilities Globally well‐positioned
Slide 5: Significant Global Presence
Significant Global Presence North America Europe Asia HQ: Rogers, CT Mfg. in Belgium, Mfg. in China, Mfg. in AZ, CA, CT, DE, IL Germany, Hungary Korea, Japan (JV) 2014 Sales by Region 2% Other 21% NA 53% 24% Europe Asia Serving customers worldwide 5
Slide 6: Our Transformation Journey
Our Transformation Journey 2015 and beyond Building Expanding a results global oriented Investing in operational culture capabilities excellence & people Streamlining & restructuring 2012 Building a foundation for sustainable growth 6
Slide 7: Transformation Is Driving Strong Results
Transformation Is Driving Strong Results 3‐Year Revenue CAGR 11 % Op. Margin +530 bps *14.4% 16% $1,000 14% *11.5% 12% $800 Operating Profit % *9.1% 10% Revenues ($000) $611 $600 $538 $499 8% $400 6% 4% $200 2% $0 0% 2012 2013 2014 *Reference reconciliation table on slide 51 7
Slide 8: Multi-Pronged Strategy for Sustainable Growth
Multi‐Pronged Strategy for Sustainable Growth Our Global leaders in engineered materials helping power, protect, connect our world Focus Our Market‐Driven Innovation Synergistic Operational Strategy Excellence Organization Leadership M&A A Winning Team: Top Talent, Engaged Employees, Performance Cul
Slide 9: 3 Strategic Business Segments
3 Strategic Business Segments Advanced Connectivity • High performance materials Solutions (ACS) • Mission‐critical applications Elastomeric Material Solutions • Technology innovation (EMS) leadership • Strong, collaborative customer Power Electronics relationships Solutions (PES) Focused on unique
Slide 10: Advanced Connectivity Solutions Overview
Advanced Advanced Connectivity Solutions Overview Connectivity Solutions Solutions Circuit materials enabling high‐ performance and high‐reliability Portfolio connectivity Global Mfg. China, Belgium, US 2014 Results $241M Revenue, up 30% YOY *Non‐GAAP $47M Operating Income, up 116% YOY 2015 YTD $204
Slide 11: Elastomeric Material Solutions Overview
Elastomeric Elastomeric Material Solutions Overview Material Solutions Solutions Elastomeric material solutions for critical cushioning, sealing, impact protection & Portfolio vibration management Global Mfg. US, China, Korea, Japan (JV) 2014 Results $174M Sales, up 3% YOY *Non‐GAAP $25M Operating I
Slide 12: Power Electronics Solutions Overview
Power Power Electronics Solutions Overview Electronics Solutions Solutions Ceramic substrates for power modules, laminated busbars for power inverters, and Portfolio micro‐channel coolers Global Mfg. Germany, Belgium, China, Hungary 2014 Results $172M Sales, up 7% YOY *Non‐GAAP $8M Operating Income,
Slide 13: Megatrends Accelerating Growth
Megatrends Accelerating Growth CLEAN SAFETY & INTERNET ENERGY PROTECTION CONNECTIVITY power protect connect 13
Slide 14: Well-Positioned to Capitalize on Megatrends
Well‐Positioned to Capitalize on Megatrends Clean Safety Internet Energy & Protection Connectivity *% of Total Sales 25% 10% 33% Advanced • Advanced Driver • Wireless & Wired Assistance Systems Infrastructure Connectivity • Antennas Solutions • Servers & Routers 39% • Portable Electronics Elastomeri
Slide 15: Clean Energy
CLEAN ENERGY EV/HEV Market growing at 28.2% CAGR • Market Growth Drivers: 9,000,000 8,000,000 CAGR 2015 – 2020 = 28.2% – Growing demand for energy‐ 7,000,000 efficient industrial power, Number of xEV car 6,000,000 produced globally 5,000,000 HEV/EV, X‐by‐Wire, solar, wind 4,000,000 and smart grid 3,
Slide 16: Safety & Protection
SAFETY & PROTECTION • Market Growth Drivers: Automotive Radar Sensor Forecast (M Units) – Rapid adoption of automotive radar‐ 120 based driver assistance systems 31% CAGR 2015‐2020 (ADAS) 100 – Global urbanization & growing middle 80 class driving demand for consumer safety 60 • Rogers’ Solutions: 4
Slide 17: Internet Connectivity
INTERNET CONNECTIVITY Market Growth Drivers: Mobile Data Traffic Forecast – Global wireless network infrastructure expansion; new and retrofits 30 57% CAGR 2014‐2019 – Global demand for mobile video, internet 24 25 speed and bandwidth – Network densification and coverage 20 improvements 16 Exabytes
Slide 18: Accelerating Speed of Innovation
Accelerating Speed of Innovation • Focused on customer‐centric collaboration • Partnering with global research universities • Optimizing new product development process • Increasing technology bench strength • Developing next‐generation solutions Long‐term R&D target 6% of sales to drive growth 18
Slide 19: Pursuing Disciplined M&A
Pursuing Disciplined M&A Recent Acquisition M&A Strategy 2015 ARLON Acquisition Strategic Fit • Strong strategic fit • Technology/portfolio expansion • Market position (e.g. niche) • Broadens portfolio for ACS and EMS • International expansion opportunity • 7.3x EBITDA multiple • Business model Fina
Slide 20: Operational Excellence Driving Execution & Performance
Operational Excellence Driving Execution & Performance 20
Slide 21: Summary: Positioned Well for Growth
Summary: Positioned Well for Growth • Strategy driving sustainable growth and profitability • Exciting growth opportunities aligned with global megatrends • Focused on long‐term sustainable growth while balancing near‐term market fluctuations • Investing for the future – innovation, strategic acquis
Slide 22: Financial Highlights
Financial Highlights Financial 2010 2011 2012 2013 2014 From Continuing Operations Sales $ (in millions) $373.2 $548.3 $498.8 $537.5 $610.9 Gross Margin % 36.7% 32.6% 31.8% 34.9% 38.3% Net Income % 10.3% 8.1% 13.9% 6.9% 8.6% Diluted EPS $2.41 $2.64 *$4.07 **$2.12 $2.83 Financial Position Inventory W
Slide 23: Financial Highlights
Financial Highlights 2014 Full Year Q3‐2015 Record net sales of $610.9 • Third quarter net sales of $160.4 million, down 1.6% million, up 13.7% – Organic sales decline of 14.1%, excludes unfavorable currency impact of 4.6% Gross margin of 38.3%, up 340 – Acquisition contribution of 17.1% sales g
Slide 24: Good Progress on 3-Year Goals
Good Progress on 3‐Year Goals 3‐Year 2011‐2013 Metric Goals Results 2014 2015 2016 Revenue Growth 10%+ 12.9% 14.4% ‐5.6% YTD Meet or Organic* CAGR CAGR Exceed 3‐Year 15%+ 12.9% 13.7% 5.5% YTD Goals With M&A CAGR CAGR Profitability >15% 11.5% 14.4% 14.5% YTD **Non‐GAAP Operating Margin >15% 9.0% 13.1
Slide 25: Significant Gross Margin Improvement
Significant Gross Margin Improvement 41% 39% 37.8% Trailing 12 months Gross Margin % 37% 35% 33% 31% 29% Margin up 520 bps due to 27% operational excellence & pricing 25% 25
Slide 26: Summary of Q3-2015 Results
Summary of Q3‐2015 Results 7/29/2015 Sales ($M) Actual Guidance Net Sales $160.4 $162‐$172 EPS Total GAAP EPS $0.67 $0.62‐$0.72 Discrete tax charge 0.10 ‐ Integration costs and restructuring severance 0.02 0.05 Non‐GAAP EPS $0.79 $0.67‐$0.77 26
Slide 27: Total Company Revenue Growth
Total Company Revenue Growth Revenue Bridge Q3‐2015 Commentary* Q3‐2014 Actuals vs. Q3‐2015 Actuals ($M) Revenue of $160.4M, a decrease of 1.6%: • Organic growth ‐14.1%: ‐4.9% ACS ‐20.3% EMS ‐10.5% PES ‐9.7% • Currency (Euro) ‐4.6% primarily impacting PES • Arlon acquisition +17.1% * All comments re
Slide 28: EPS
EPS EPS Bridge Q3‐2015 Commentary* Q3‐2014 Actuals vs. Q3‐2015 Actuals EPS before restructuring severance and discrete tax charge $0.79 ($0.67 GAAP) • Rogers organic ‐$0.49 • Arlon acquisition +$0.19 • Restructuring severance and discrete tax charge ‐ $0.12 * All comments reflect Q3‐2015 vs. Q3‐2014
Slide 29: Total Company Gross Margin
Total Company Gross Margin Gross Margin ($M) Q3‐2015 Commentary* $70.0 $64.5 Overall gross margin decline of $60.0 $59.5 250bps 39.6% 37.1% Organic GM declined 180 bps due $50.0 to lower organic sales partially $40.0 offset with operational excellence $30.0 initiatives The acquired Arlon busines
Slide 30: Total Company SG&A and R&D
Total Company SG&A and R&D SG&A ($M) Q3‐2015 Commentary* SG&A** • $28.7M includes $1.7 million of SG&A and $1.6 million of amortization related to the Arlon acquisition • Net decrease over the prior period is primarily due to lower incentive compensation R&D ($M) R&D • Increase of $1.3M due to the A
Slide 31: Total Company Operating Margin
Total Company Operating Margin Operating Margin Q3‐2015 Commentary* Operating Margin** Operating Margin down 270bps • Gross Margin ‐250bps due to organic decline and acquisition • Commercial expenses ‐20bps due to lower rate of SG&A spending partially offset by higher R&D * All comments reflect Q3‐2
Slide 32: Advanced Connectivity Solutions (ACS)
Advanced Connectivity Solutions (ACS) Circuit materials enabling high‐performance & high‐reliability connectivity Segment Revenue ($M) Q3‐2015 Revenue Performance* $67 $66 Sales: $66.2M, up 4.4% $66.2 $65 • Organic ‐20.3% $64 • Currency ‐1.5% $63 $63.4 • Acquisition +26.2% $62 Q3‐2014 Q3‐2015 Segmen
Slide 33: Elastomeric Material Solutions (EMS)
Elastomeric Material Solutions (EMS) Critical cushioning, sealing, impact protection & vibration management Segment Revenue ($M) Q3‐2015 Revenue Performance* $60 $50 $46.7 $46.8 Sales: $46.8M, up 0.2% $40 • Organic ‐10.5% $30 • Currency ‐2.1% $20 • Acquisition +12.8% $10 $0 Q3‐2014 Q3‐2015 Segment O
Slide 34: Power Electronics Solutions (PES)
Power Electronics Solutions (PES) Energy‐efficient substrates and components for power systems, modules and motor drives Segment Revenue ($M) Q3‐2015 Revenue Performance* $50 $46.5 $40 $36.6 Sales: $36.6M, down 21.3% $30 • Organic ‐9.7% $20 • Currency ‐11.6% $10 $0 Q3‐2014 Q3‐2015 Segment Operating
Slide 35: Liquidity
Liquidity Cash Generation ($M) Cash ($M) 9 Mos. ended 9 Mos. ended Sept. 30, 2014 Sept. 30, 2015 Cash at beginning of period $191.9 $237.4 Cash flow from operations 57.5 45.6 Capital expenditures (18.8) (21.6) Debt and lease repayments (12.7) (5.9) Proceeds from sale of capital 16.3 7.3 stock and is
Slide 36: Share Repurchase Program
Share Repurchase Program • $ 100.0 million share repurchase program previously announced • Executed as of 9/30/2015: – Number of Shares Purchased: 678,300* – Total Value Purchased: $37.5M – Average Share Price: $55.22 * Approximately 3.5% of outstanding shares as September 30, 2015 36
Slide 37: Balance Sheet & Leverage
Balance Sheet & Leverage Balance Sheet (9/30/2015) Capital Structure $M Gross Debt Gross Debt/Capital Net Debt/Capital $200 40% Cash $192.6 $180 30% Debt 179.3 $160 20% Gross Debt ($000) $140 Net Debt ‐13.3 $120 10% $100 0% Equity 576.1 $80 ‐10% Net Capital 562.8 $60 ‐20% $40 Leverage $20 ‐30% Gross
Slide 38: Capital Spending Driving Organic Growth & Margin Improvement
Capital Spending Driving Organic Growth & Margin Improvement Depreciation Expense Capital Spending Capital Expenditures $20.9 $21.0 CAPEX % of Revenue $20.4 $35 6% $20.1 $30 5% $25 2011 2012 2013 2014 4% $20 ($000) 3% Amortization Expense $15 $6.0 $6.1 $5.4 2% $4.4 $10 $5 1% $0 0% 2011 2012 2013 201
Slide 39: Free Cash Flow
Free Cash Flow Free Cash Flow* Cash from Ops Capital Expenditures • Increased cash $90 generated from $80 operations due to revenue growth, $70 $60.3 operational excellence $60 $56.4 initiatives and cost $50 reductions $40 $37.2 • Continuing to invest in $30 capital spending $20 $16.6 $10 $0.8 $‐ 20
Slide 40: Capital Allocation Philosophy
Capital Allocation Philosophy Total Market Capitalization Funding organic growth as of 12/31/2014 = $1.5B Debt 10% Funding M&A opportunities Equity Paying down debt 90% Disciplined approach to drive shareholder value 40
Slide 41: Well-Positioned for Sustainable Growth
Well‐Positioned for Sustainable Growth Market‐Driven Megatrend strategy sharpening our focus with Organization exciting growth applications Innovation Accelerating speed of innovation to increase Leadership responsiveness and drive faster growth Synergistic Disciplined M&A strategy with robust pipel
Slide 42: Why Invest in Rogers?
Why Invest in Rogers? Growing with Leading in Leveraging Driving Delivering Discipline Technology Megatrends Excellence Results Multi‐pronged Leader in Attractive Operational Track record of strategy driving engineered markets with excellence growth in sustainable materials for global delivering val
Slide 43: Additional Information
Additional Information a ae 7. 64 ec protect connect ROGERS CORPORATION Helping power, protect, connect our world
Slide 44: Non-GAAP Reconciliation
Non‐GAAP Reconciliation Rogers Corporation Reconciliation of GAAP to Non‐GAAP Financial Measures (In % of Sales and $ in M) (Unaudited) Q3‐15 (%) Q3‐15 ($) SG&A GAAP 18.2% $29.2 Restructuring severance charges (0.3) (0.5) Total Special Charges (0.3) (0.5) Non‐GAAP 17.9% $28.7 44
Slide 45: Non-GAAP Reconciliation
Non‐GAAP Reconciliation Rogers Corporation Reconciliation of GAAP to Non‐GAAP Financial Measures (In % of Sales and $ in M) (Unaudited) Q3‐15 (%) Q3‐15 ($) Operating Margin GAAP 14.4% $23.1 Restructuring severance charges 0.3 0.5 Total Special Charges 0.3 0.5 Non‐GAAP 14.7% $23.6 45
Slide 46: Non-GAAP Reconciliation
Non‐GAAP Reconciliation Rogers Corporation Reconciliation of GAAP to Non‐GAAP Financial Measures (Unaudited) Q3‐15 GAAP income per diluted share from $0.67 continuing operations Add back special adjustments, net of tax: Restructuring severance charges 0.02 Tax items 0.10 Total special charges 0.12 N
Slide 47: Non-GAAP Reconciliation
Non‐GAAP Reconciliation Rogers Corporation Reconciliation of GAAP to Non‐GAAP Financial Measures (In % of Sales and $ in M) (Unaudited) Full Year Full Year YTD Q3 2013 $ 2014 $ 2015 $ ACS Segment Operating Income GAAP $18.8 $43.7 $36.8 Integration costs related to Arlon ‐ 0.8 2.5 Inventory step up a
Slide 48: Non-GAAP Reconciliation
Non‐GAAP Reconciliation Rogers Corporation Reconciliation of GAAP to Non‐GAAP Financial Measures (In $ in M) (Unaudited) Full Year Full Year YTD Q3 2013 $ 2014 $ 2015 $ EMS Segment Operating Income GAAP $22.3 $23.1 $16.7 Integration costs related to Arlon ‐ 0.6 1.7 Inventory step up amortization for
Slide 49: Non-GAAP Reconciliation
Non‐GAAP Reconciliation Rogers Corporation Reconciliation of GAAP to Non‐GAAP Financial Measures (In $ in M) (Unaudited) Full Year Full Year YTD Q3 2013 $ 2014 $ 2015 $ PES Segment Operating Income GAAP $1.1 $5.4 $4.3 Integration costs related to Arlon ‐ 0.8 ‐ Pension settlement charge 0.2 1.9 ‐ All
Slide 50: Non-GAAP Reconciliation
Non‐GAAP Reconciliation Rogers Corporation Reconciliation of GAAP to Non‐GAAP Financial Measures (In % of Sales and $ in M) (Unaudited) Q3‐15 (%) Q3‐15 ($) PES Segment Operating Income GAAP 2.9% $1.1 Restructuring severance charges 1.5 0.5 Total Special Charges 1.5 0.5 Non‐GAAP 4.4% $1.6 50
Slide 51: Non-GAAP Reconciliation
Non‐GAAP Reconciliation Rogers Corporation Reconciliation of GAAP to Non‐GAAP Financial Measures (In % of Sales) (Unaudited) Full Year Full Year Full Year YTD Q3 2012 2013 2014 2015 Operating Margin GAAP 5.1% 9.2% 13.2% 13.0% Curamik relocation charges 0.9 0.3 ‐ ‐ Asbestos charge 0.6 ‐ ‐ ‐ Foreign c
Slide 52: Rogers Corporation: Helping power, protect, connect our world
protect connect ROGERS CORPORATION Helping power, protect, connect our world