Q3 2019 Earnings Call
[laughter] excuse me, ladies and gentlemen. This is your conference operator Your conference call is scheduled to begin momentarily until that time. Your line. So once again be placed kind of music called thank you for your patience simply cannot disconnect.
Good day, my name is Kathryn and I'll be your conference operator today.
This time I'd like to welcome everyone to the Rogers Corporation third quarter 2019 earnings call.
After the speakers presentation, there will be a question and answer session.
Good question during the fashion you wanting to press star one on your telephone.
I'd now like to turn the call over to your host Mr., Steve Hey, Mark Director of Investor Relations. Sir you May begin your conference.
Good afternoon, everyone and welcome to the Rogers Corporation third quarter 2019 earnings Conference call.
The slides for today's call can be found on the Investor section of our website along with the news release that was issued today.
Please turn to slide two.
Before we begin I would like to note that statements in this conference call that are not strictly historical are forward looking.
Great and then within the meaning of the private Securities Litigation Reform Act of 1995.
And should be considered as subjects that many uncertainties that exists and Rogers operations and environment.
These uncertainties include economic conditions market demand and competitive factors.
Such factors could cause actual results could differ materially from those in any forward looking statement.
Also the discussions during this conference call May include certain financial measures that were not prepared in accordance with generally accepted accounting principles.
Reconciliation of those non-GAAP financial measures the most directly comparable GAAP financial measures can be found in the slide deck for today's call, which is posted on the investor section of our website.
Turning to slide three with me today is Bruce Hoechner, President and CEO .
Mike Ludwig Senior Vice President and CFO , and Bob Daigle, Senior Vice President and CTO.
I'll now turn the call over to Bruce.
Thanks, Steve Good afternoon, everyone and thank you for joining US today, please turn to slide four.
Before discussing Rogers third quarter results I'd like to provide some context around the business environment in which we are operating and its effect on both our Q3 results and the outlook for the remainder of the year.
Similar to what many other companies have reported in recent weeks macroeconomic conditions are creating softness in the global economy. In addition, ongoing trade tensions are generating headwinds and in some cases limiting near term demand visibility.
From a market perspective, industrial unconventional automotive demand, which had begun to slow in late Q2 weaken further in the third quarter.
These challenges are continuing into Q4 with recent economic data pointing to declining factory activity lower industrial out could put and falling auto sales.
In addition, the geopolitical tensions between China, and the U.S., which are have resulted in trade restrictions on sales to walk away are impacting fiveg demand. While Rogers is able to continue sales to our direct fabricator customers. There is uncertainty regarding why ways.
Ability to maintain fiveg deployments.
Without certain U.S. components, and whether the performance of its alternative base station design will be acceptable.
It is also not clear what impact these factors will have on why we share of the market.
A byproduct of these trade restrictions has led walk away to consider local sources of supply for high frequency circuit materials, even though these alternative materials have performance limitations as compare to Rogers products.
Although these challenges are impacting our near term results. We continue to see very compelling market opportunities ahead, and we remain focused on the key pillars of our strategy to enable our success.
With this context in mind I'll now turn to our results for the quarter.
Rogers achieved Q3, net sales of $222 million and adjusted earnings of $1.51 per share.
Despite the market headwinds I mentioned, which tempered our topline performance our adjusted earnings exceeded the high end of our guidance as a result of favorable product mix progress on gross margin improvement efforts efficient management of operating expenses and a lower effective tax rate.
Demand for Rogers products remained strong in certain sectors. For example, portable electronics demand with seasonally favorable in Q3, and we achieved sequential revenue growth of approximately 5%.
Year to date growth has been particularly robust due to our leading product portfolio. Our results have meaningful meaningfully outperformed the overall handset market.
Also demand for Ada Es applications remains solid year to date, despite weakness in global auto sales the uniqueness of our material solutions combined with the increased market penetration of Ada Es is a key enabler of our success gross in the eight asked market is expected to.
Continued driven by an increasing number of new vehicles, adopting auto radar systems and as the average number of sensors per vehicle increases with higher levels of autonomy.
Finally, aerospace and defense sales were robust in Q3 and year to date revenue is up significantly relative to 2018.
Turning to areas, where we were impacted by the previously mentioned challenges Q3 wireless infrastructure sales declined versus Q2 due to lower fourg demand and the collateral effects of ongoing trade tensions already discussed.
Based upon customer and industry analyst inputs, we expect the recent cause in the five GE rollout to continue through the end of the year and believe that China Fiveg deployments will rebound in the first half of 2020.
We anticipate continued weakness in fourg deployments as a result of the Chinese telecoms prioritizing capex investments in Fiveg.
And soft demand for power semiconductor substrates used in industrial power and vehicle electrification applications for conventional automotive also impacted revenue for the quarter.
In summary, we saw solid Q3 results in certain market segments tempered by a number of headwinds that we anticipate will continue into Q4, we are optimistic about the opportunities we have in areas of advanced conductivity and advanced mobility and as I'll discuss next we are encouraged.
Bridged by a number of recent developments, which point towards significant opportunities for future growth.
Please turn to slide five.
Within advanced connectivity, we see fiveg as a multiyear growth opportunity for Rogers, where markets indications continue to point towards increased deployments in 2020 at a recent forum, China mobile increase their target for Fiveg coverage to 340 40.
Cities by the end of next year underscoring their expansion plans. This followed recent news from Chinese telecoms that advance subscriptions for Fiveg service, which has not yet available have already reached approximately 9 million.
Third party experts expect 2020 fiveg deployments to be in the range of 600000 base stations, which at that scale would provide an opportunity for substantial growth in our fiveg wireless infrastructure business next year.
Low Earth orbit or Leo is a significant emerging growth opportunity within advanced productivity. Several companies are competing to deployed large constellations of satellites that we provide high speed internet to underserved areas.
Rogers is well positioned to capitalize on this opportunity given our tremendous strength in the materials technologies needed to enable the complex antenna solutions that will be part of the receiver systems located on Earth.
We're also encouraged by the progress of some companies in this sector to launch commercial services. For example in recent months, one leading company announced plans for broadband internet coverage in targeted areas and 2020 with full global coverage by the end of 2021.
Looking to advanced mobility, we remain optimistic about the strong growth opportunities in E V and Hgvs a recent I Hs market report projects that through 2025 sales of E. These and Hgvs.
The increase at a compound annual growth rate of approximately 30%.
These expectations for ambitious growth are underpinned by the plans of leading automakers and reinforce that this is a growing sustainable market for Rogers power electronics solutions.
One example is VW, which recently unveiled the first model in its new all electric brand that will be delivered to customers early next year.
This is the first step and VW is planned to sell up to 3 million Eason hgvs annually by 2025.
Additionally, dimer recently announced that they will discontinue all future development of internal combustion engines further signaling the shift in focus to electric vehicles by 2022 dimer is scheduled to bring 10, all electric vehicles to market and plans to eventually electrify.
The entire Mercedes Benz portfolio.
Rogers is also targeting E V charging infrastructure, which is a related emerging growth opportunities for our power electronics solutions.
Please turn to slide six.
AC yes third quarter net sales were $79 million, a decrease of 15% from the prior quarter and an increase of 10% versus the prior year.
As discussed earlier. This decline is primarily attributed to lower Fourg and Fiveg sales eight asked demand remained strong in Q3 and year to date sales have grown 8% compared to 2018.
Aerospace and defense sales increased 17% versus Q2 and year to date results are up over 20% versus the prior year.
This market segment is highly program dependent and why we don't anticipate demand for these applications to grow at the same rate into the future. We do expect stable and consistent high single digit growth overtime.
As we look ahead, we anticipate that Fourg and Fiveg demand will continue to be solved through the ended the year. However, we expect fiveg demand to rebound in the first half of 2020 with the next wave of deployments.
Turning to slide seven.
In Q3, M.S. net sales were $95 million, a slight increase compared to Q2.
Seasonally strong portable electronic sales drove the sequential increase in revenue.
Decline in demand for general industrial NPV, AGV battery applications, partially offset the growth in portable electronics.
Year to date sales of applications for EPA, TV battery pads and battery pack sealing systems have increased 29% versus the prior year highlighting the excellent growth opportunity in this area.
The lower Q3 revenue is the result of the recent decline in the China TV market.
We are very pleased with the progress, we're making towards the new design wins with a number of European and other automakers for easy battery pets solutions. We expect this to continue to be a driver of growth over the next several years.
Looking ahead to the fourth quarter, we anticipate total MMS segment sales to decline sequentially in line with normal seasonal patterns.
Turning to slide eight P.S. third quarter net sales were $43 million a decrease of 17% from Q2.
As we anticipated at the outset or the quarter sales of power semiconductor substrates and industrial power and vehicle electrification applications for conventional automobiles declined due to weak market demand in Q3.
Sales of power substrates used in NPS and Hgvs also declined largely due to the previously mentioned soft China, Avi market, which primarily uses lower end solutions.
The outlook continues to be strong for our new generation Wideband gap semiconductor silicon nitride substrates, which are used in high end, DVS and where Rogers has a leading physician.
Operational improvements in PS remain a top priority with new leadership in place we are executing on our performance recovery plan, including yield improvements.
As we look to Q4, we expect industrial and automotive market demand to be stable as compared to Q3.
Looking ahead NPS the easy HCV market opportunity is extremely compelling and we firmly believe that we are well positioned to fully take advantage of this opportunity.
Please turn to slide nine.
As I indicated earlier, we like other global companies are facing macro headwinds in both the industrial and conventional automotive markets and feeling the impact of trade tensions. These challenges are having a near term impact as is the pause in fiveg deployments in China.
The achievement of our 2020 vision has always been closely tied to growth in the advanced mobility and advance connectivity markets supported by modest growth in the industrial and conventional automotive markets.
As I explained we remain confident in this growth and our ability to succeed in these areas. However, given the challenging market and global economic conditions. There is an increased uncertainty that we will attain these targets as a run rate as we exit 2020 .
Having said that I want to stress that we continue to believe that there's tremendous opportunity and the advance connectivity and advanced mobility markets supported by our broader portfolio. We are optimistic about the fiveg opportunity with a recovery expected in the first half of 2020 and.
Further multiyear growth horizon, the growth opportunity in HCV HCV is equally exciting when opportunities both in power semiconductor substrates and solutions for batteries.
All of this gives us confidence in our ability to grow our business and achieve these targets.
Now I'll turn it over to Mike to discuss our Q3 results in more detail.
Thank you Bruce and good afternoon, everyone in the slides ahead I'll review, our third quarter 2019 results followed by our fourth quarter guidance.
Turning to slide 11 will we will review the financial results for Q3 2019.
Third quarter revenues as previously noted were $221.8 million below our Q3 guidance range of 225 million to $235 million.
Q3 revenues decreased 9% on a sequential basis and 2% compared to the third quarter 2018.
As Bruce noted in his comments weak demand for products, serving the wireless infrastructure market for both Fourg and fiveg applications as well as soft demand for power semiconductor substrate used and industrial power and conventional automotive applications are responsible for the lower sequential revenues.
We achieved the gross margin of 35.6% for the third quarter 30 basis points higher than Q2, and within our guidance range of 35% to 36%.
Due primarily to a favorable product mix and reduced spending and all of our business segments to react to the softer market demand in Q3 and expected to continue through Q4.
Our gross margin was negatively impacted by lower production volumes and the ongoing pressure from terrorists, resulting from the continued trade tensions between the U.S. in China.
Adjusted operating income for Q3, 2019 was $36.2 million or 16.3% of revenues compared to $41.7 million or 17.2% of revenues for Q2.
Adjusted operating expenses decreased by $1.4 billion of the third quarter compared to the second quarter.
GAAP EPS of $1.25 cents per fully diluted share and adjusted EPS of $1.51 cents per fully diluted share for Q3 2019.
We are well were above the upper end of our guidance range for Q3, but below Q2 levels. The good earnings performance, both on a GAAP and adjusted basis resulted primarily from spending control at a lower than forecasted effective tax rate for the third quarter.
The company generated $33.4 million of free cash flow in the third quarter and $76.8 billion year to date.
The company has paid down $98 million of debt year to date and ended the third quarter at a net cash position of $10.3 million.
Turning to slide 12, our Q3 2019 revenues of $221.8 billion decreased $21.1 million or 9% compared to the second quarter of 2019.
The sequential decrease was experienced in our SCS business segment down 15% at our Pts segment down 17%.
Yeah best business segments odds revenues increased slightly over the second quarter.
Currency exchange rates negatively impacted 2018 third quarter revenues by $1.6 million compared to Q2.
The decrease at HCS revenues resulted primarily from a slowing fourg demand and a near term delay or the five you rollout in China.
As a result, our wireless infrastructure revenues declined 35% sequentially.
For GE revenues, which were basically flat year to date through June compared to the same period. In 2018 are now 10% lower year to date through September compared to 2018 at are expected to remain soft through Q4.
Revenues from Aerospace and defense programs were strong in Q3 growing 19% sequentially at our up 17% year to date compared to 2018.
Eight asked revenues were down 7% sequentially from a strong second quarter, but are up 8% year to date compared to 2018 in the face of a week auto market.
Revenues in our Dms segment increased sequentially due to strong demand for portable electronics applications.
Third quarter is typically the strongest quarter for portable electronics revenues, which grew 5% sequentially and 10% compared to Q3 2018 due to our customers commercialization of new headset and tablet designs.
General industrial application revenues, which comprise close to 40% of the business segments revenues were down slightly compared to the second quarter and down 5% compared to the third quarter 2018.
As noted in a bruce's remarks, CES experienced weaker demand in lower revenue in Q3, primarily from power semiconductor substrates for general industrial and conventional vehicle electrification applications.
Revenues for these applications decreased sequentially by 20% and 13% respectively.
<unk> decreased 27% and 26% respectively compared to Q3 2018.
For power semiconductor substrates for aviate TV applications demand weakened in the third quarter consistent with lower demand for low NVS, particularly in China.
As a result revenues for easy HCV applications declined 35% sequentially. However, revenues were up 16% year to date.
Turning to slide 13, our gross margin for Q3, 2000, Nike was $78.9 million for 35.6% of revenues 30 basis points higher than our second quarter gross margin of 35.3%.
The increase in gross margin percentage was due to a favorable product mix and reduce spending to adjust for the significantly reduced volume.
These benefits were mostly offset by the effects of lower manufacturing volume and the continued impact of terrorists, resulting from the ongoing trade tensions between the us in China.
As we expect to see increased demand for the next wave of the Fiveg rollout, we are intentionally carrying additional manufacturing costs to efficiently address the opportunity reflected as strategic investments.
We were pleased with the increased gross margin percentage from the MSS business in Q3, resulting from a favorable product mix a reduced manufacturing spending to offset lower volumes. We continue to see progress on SMS performance issues related to consolidation and optimization efforts reflected in the company gross margin.
He asked gross margins declined as the third quarter.
Due to significantly lower volumes mitigated by a favorable product mix compared to Q2.
While we reduced our manufacturing costs for the third quarter to reflect lower demand, we did not flex our cost proportionately with the lower manufacturing volumes in the quarter.
We carried additional resources in order to enable our factories to respond to the anticipated increase in fiveg demand in the first half of 2020.
In the third quarter. The PS gross margin continued to be negatively impacted by the significantly reduced demand for our power semiconductor substrates across all applications.
We continue to execute on our recovery plan and we are encouraged by sides of progress on yield in the third quarter.
As we have discussed previously the recovery plan will require multiple quarters to execute with contributions to overall gross margin beginning in Q4 and accelerating in the first half of 2020.
We continue to address our cost structure PS to compensate for the lower volume, while still maintaining our ability to support the increasing demand and the wideband gap semiconductor power applications.
Tariffs continued to be a headwind to gross margin of the third quarter impacting gross margin by approximately $2.3 million or 106 basis points and increase of 26 basis points compared to Q2.
We are working aggressively to leverage our factory footprint and to optimize our supply chain to mitigate the effect of tariffs.
We expect to see the benefits of these axis form a lower tariffs as a percent of revenues beginning in the first half of 2020.
Relative to our third quarter gross margin the path to the higher gross margin. This through improved operational execution, and PS and Dms contributing 200 to 250 basis points mitigating the impact of tariffs contributing 50 to 100 basis points and increased.
Volume and all our businesses, particularly Fiveg revenues contributing 100 to 200 basis points.
Slide 14 details of changes to adjusted net income for Q3, 2019 $28.2 million compared to adjusted net income for Q2 of $30.7 million.
As discussed earlier the adjusted operating income for Q3, 2019 was lower than Q2 s adjusted operating income both on a dollar at a percent of revenue basis.
Adjusted operating expenses for Q3 of $42.7 million or 19.2% of revenues were $1.4 billion lower than Q2, adjusted operating expenses of $44.1 billion or 18.2% of revenues.
The lower expenses resulted from reduced SGN, a cost from spending control measures.
Our effective tax rate for Q3, 2019 was 18.6% compared to our Q2 effective tax rate of 22.9%.
The lower effective rate for Q3 was primarily due to geographic profit mix and the reversal of reserves associated with uncertain tax position.
The company expects to 2019 effective tax rate to be 20% to 22% with the fourth quarter effective tax rate of 22% to 24%.
Turning to slide 15, we ended the third quarter 2019, with a cash position of $140.7 million a decrease of $32.4 million from June Thirtyth and a decrease of $27 billion from December 30 Onest.
In Q3, the company's spent $14.8 billion on capital expenditures, we have spent $38.8 billion year to date, we guide capital spending for the year and the range of $50 million to $55 million.
The company paid down $65 million or debt in the quarter and is paid down $98 million of debt in 2018.
As of September Thirtyth, we're in a net cash position of $10.3 million.
The company generated $48.2 million from operating activities in Q3, including a decrease in working capital of $9.9 million through September the company generated $115.7 million from operating activities net of an increase in working capital.
All of $4 million, primarily from the increase in inventory with long lead times.
Taking a look at our Q4 guidance on slide 16, we are facing near term macroeconomic headwinds as well as softness in certain of our markets from ongoing trade tensions that we expect to continue through Q4.
In addition, Q4 as a seasonably low quarter for portable electronics.
Therefore revenues for Q4 are estimated to be in the range of 200 million to $210 million.
Response to the market weakness, we will continue to adjust our spending for manufacturing infrastructure ESG today capital expenditures.
We will also continue our progress addressing yields at Pts and optimization that Dms as discussed earlier.
Even with these actions and unfavorable product mix, a meaningful reduction in volume and continue tariff headwinds will negatively impact our gross margins in Q4.
As a result, we're guiding gross margin in the range of 33% to 34% for Q4.
As highlighted in our earnings press release, the company terminated a pension plan in the fourth quarter.
The pension plan was adequately funded therefore, the company was not required to make additional cash contributions to fund the plan.
The company will however, take a 52 million to $56 million noncash charge to income for other accumulated losses for the players that were recorded as part of our equity.
As a result, we guided GAAP Q4 loss in the range of $1.43 cents to $1.28 cents per share.
On an adjusted basis, we guide the fully diluted earnings in the range of one dollar to $1.15 cents per share for the fourth quarter.
I'll now turn the call back over to the operator for questions.
Ladies and gentlemen, just as a reminder, if you'd like to ask a question at this time. Please press star and then the number one on your telephone keypad once again.
And then the number one.
Your first question comes from the line of Craig Ellis with B. Riley.
Thanks for taking the question then Bruce Thanks for all the help on different issues that are impacting the business.
Wanted to start just by following up on the prepared remarks from brown that communication infrastructure business and walk away.
One can you help us understand the degree to which you got interaction with them in and what they're saying about their desire to continue to use Rogers and if they were in a position where they found a solution that was.
That was domestic that they could switch to what would broadridge to with the capacity that would have otherwise gone to while by how do we think about your capacity flexibility where it goes in and the implement implement implications for gross margins in that situation.
Okay, well that's quite a question. So let me let me take us through that.
First with regard to far away and there.
Look there are seeking alternative.
Local supply.
Our view in talking with them is that while they're evaluating a an alternative.
Material performance certainly is is better.
And I think really from their perspective, they are forced to to look for that local supply now that being said, we have a high level of confidence that we will retain significant share at wawa.
The other thing that's happening in the marketplace in China with the Oems is the share shift among OEM telecom Oems in China. So we would anticipate some share.
Movement between.
While away and some others.
In China, particularly.
If.
The the system that while ways, putting together with local source materials.
As has some performance deficiency, so that's under testing as we understand it.
So we don't have very good visibility on that front.
How that how that's progressing.
So overall I think I think.
We are confident as we move forward in retaining significant share across all the Oems.
In telecom.
In terms of capacity.
I'm going to ask Mike to comment a bit more on the capacity plans that we have yeah. So Greg I think as a result of what Bruce was describing.
And where we are with respect to bringing preparing the additional capacity at price road.
Or solar plant that we acquired last last year.
We are going to continue we continue our plans to bring that to bring that up to speed.
In anticipation of the need for that capacity.
In.
2020 at some point in time, and we'll continue to continue to monitor the situation with respect to where do we actually bring the capacity online, but we are going to continue our efforts to be ready.
That's helpful. The next question is more of a near term question.
Mike I think that the variance between the third quarter's revenue in the midpoint of the fourth quarter guidance is about 17 million. It was helpful to get a lot of color on the sub segment performance the business, but can you just clarify as we look at.
Reconciling that 17 million gap quarter on quarter, what are the biggest contributors to the sequential decrease on a sub segment basis.
Well I would say the biggest contributor is first of all our volume right and so we think about the volume of minutes, particularly around the.
The wireless infrastructure that is going to be a big challenged as well as the another contributing piece of that is.
In the best business with the portable electronics being down.
Quarter on quarter, that's probably the second piece, that's pretty significant but again so the volumes impacting at the mix is impacting it those are the two primary areas that are impacting the gross margin declined quarter on quarter.
Thanks, and then if I could just sneak in one more it was helpful to get the reconciliation between I think where.
We are in the target model with respect to closing gaps from current gross margins.
It looks like one of the pad one of the three factors the volume factors really at the company's control the macro we'll do what the macro through and it's been tough for everybody as you recognized but.
Two items seems more in your control Pts CMS performance at 250 basis points in tariffs at 150 can you just give us some insight how much progress can you make in those two areas over the next two to four quarters and and.
And where do you have greater visibility and greater confidence in in making set progress yeah, I actually think we have Bob.
I would say.
Higher confidence today than we did in the last two quarters with respect to the progress that we make odd both CMS MPS and in fact I believe.
We've made the majority of the progress that we anticipated making on CMS PBF still has a ways to go and as we talked about that's a multi quarter.
Houston plan.
What we've seen some very good signs of progress in the third quarter. So I think we'll start seeing some contribution toward a gross margin in the fourth quarter and again as I said accelerating in the first two quarters of.
2020, so I feel very good about our ability to capture that fall 200 to 250 basis points. The other one that you had talked about that we that we've talked about was it was the impact of tariffs being.
Somewhere around 106 basis points in the third quarter and as we've talked about we're working hard to.
Leverage our global footprint as well as looking at changes in our supply chain in order to address that I think what we what we've said I think last quarter and we'll say this quarter I think we can address at least half of that who our actions to get the fall hundred point I think we would have to have some.
Benefit with respect to.
Freight tension discussions or trade discussions between us and China over the next several quarters, so that that one's a little bit like the market thats, a little bit out of our control, but I think we can at least get half of that.
Thanks, guys I'll jump back in the Q.
Yeah.
Your next question comes from the line of Daniel Moore with CJS Securities.
Good afternoon, thanks for taking the questions wanting to stick with wireless infrastructure, both mix of Fourg and Fiveg revenue in Q3 and year to date and clearly feel good about the prospect for recovery in Fiveg. What is your growth expectations for Fourg as we think about 2020.
So so the Fourg, you're absolutely right, we have first of all in Fiveg.
Looking into the first half a 2020 were confident that we'll see the rebound there things go according to what we've heard from customers from industry experts and so forth looking at Fourg.
We think.
On that front.
Certainly the.
This year were down probably about 15%, we think the industry will be down about 15% and moving into next year, probably high single digits decline. So.
Again, as we talked about in the in the prepared remarks. This is a bit of a reallocation in the capex by the by the carriers towards the Fiveg side of things.
And Mike you will yes, so on the breakdown so a year to date Fiveg. He is in the ballpark of 25 little less than 25%. So fourg is still 75% of the business year to date.
Very helpful.
And then auto and industrial maybe talk about the cadence.
The declines kind of late in Q3 and into the first.
Months, so far of Q4.
Have things stabilized.
Is that the guidance predicated on essentially a current run rate of what we saw in October and any color there would be helpful.
So so on the industrial side, we think it's kind of what it will be flat moving from Q3 to Q4.
Similar situation with automotive.
It's we think it's relatively stable.
As it as it stands today.
And so we're we're viewing Q4 to be similar to Q3 in terms of both of those market segments.
Very helpful. And then lastly from me just given in the soft environment, obviously cash continues to build back to a net cash position I know M&A as your first priority but.
Given you've got plenty of liquidity are you looking at.
Perhaps alternative.
Opportunities to deploy capital as well.
No I think our our thoughts on capital deployment are not different than what they than what they've been we are really using the cash for growth.
We will continue to build a stronger balance sheets and continue to look for opportunities that make sense for us in the M&A space, where we can where we can buy things that are strategically important at reasonable prices.
Understood. Okay, I look forward to I appreciate the color and look forward to catch up next week.
Thanks, Dan.
Can you do have a follow up question from the line of Craig Ellis with B. Riley.
Thanks for taking the follow ups. So it's really nice to see the strengthen the smartphone business and I understand the seasonal dynamics in the fourth quarter, but is the team looks ahead to 2020 and with such a significant.
Emphasis by industry with Fiveg unit volumes next year, which I think is going to tore if anything that we saw with three each year for energy.
Can you talk about the opportunity that Rogers has his industry moves from from Fourg phones to Fiveg, just as expand your Sam in that area and specifically what it too.
So again this is.
As we know the time horizon for these designs and and implementation of the designs for smartphones. It goes in cycles of from six to 18 months and so our team is working right now on those new designs and.
A number of wins are coming in but again, it's still a that's still out.
In early to mid 2020 that that we would get a much clearer understanding of where those design wins and up for us.
But like I said this is very typical of what we've seen historically in the smartphone world terms of timings.
That's helpful. Thanks, Bruce and then the follow up is related to the Ada Es business helped to helpful to get the color on.
30% longer term CAGR I think good side look at the ecosystem.
Model year 21, mid 2020 release vehicles, I think have always been seen as to.
You are we get more of an inflection in essence, certainly we have a lot of radar content as it relates to safety systems, but as you're working with your automotive customers in the automotive supply chain can you give us some insight as to what Youre seeing mid next year for a potential step function change and eight ask content.
Thanks.
Got it.
Yes, so Craig.
Yes, we're we're working with everybody and again I think what we're basically the dynamic that I think we all expect as you start to shift towards.
I think you're referring to the shift towards level two level three autonomy, where you've basically it's not it's mostly have content opportunity of that par point, where the numbers sensors per vehicle goes up.
And I think thats the expectation right now all the Oems are really driving towards a higher level autonomy and.
Most of what we're seeing out there would suggest that means more sensors per vehicle.
That dynamic I don't think that's translated into real projections at this stage.
I think.
While before we can actually.
Yes, good handle on the scope of the.
Increased opportunity.
Got it thanks guys.
Thanks, Craig.
And we have no further questions at this time I'd like to turn the call back over to price for any closing remarks or comment.
Thank you everyone for joining us on today's call and have a great afternoon.
Bye bye.
Ladies and gentlemen, this concludes today's conference call. Thank you for your participation you may now disconnect.