Q1 2020 Earnings Call

Good day My name is African and I will be your conference operator today at this time I would like to welcome everyone to the Rogers Corporation Q1 to 20 earnings call.

This time, all participants are under listen only mode. After the speakers presentation. There will be a question didn't answer session.

Good question. During this session you would need to press star one on your telephone please be advised that today's conference is being recorded.

You require any further assistance. Please press star Zero I would now like to turn the conference over to your host Mr., Steve Haymore Director of Investor Relations. Sir you May begin your conference.

Thank you Erica good afternoon, everyone and welcome to the Rogers Corporation first quarter 2020 earnings Conference call.

The slides for today's call can be found on the Investor section of our website along with the news release it 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 statements within the meaning of the private Securities Litigation Reform Act of 1995 and should be considered at subject to many uncertainties that exist and Rogers operations and environment.

These uncertainties could include economic conditions market demands and competitive factors.

Such factors could cause actual results to 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.

Reconciliations of those non-GAAP financial measures to 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 web site.

Turning to slide three with me today, as Bruce Hoechner, President and CEO, Mike Ludwig Senior Vice President and CFO, and Bob Daigle, Senior Vice President and CEO.

Ill 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 the results for the quarter I will provide first provide an update related to the impact of cobot 19 on Rogers I'm extremely proud of the Roger's team for their tremendous response, which allowed us to prioritize employee health maintain business continuity and deliver results at the top end of <unk>.

<unk> Rogers is a great company because of the extraordinary capabilities and dedication of our employees. Thank you change.

When the virus outbreak first emerged early in Q1, we reacted swiftly.

Site pandemic response teams implemented safety measures such as remote work arrangements, social dismissing policies, providing appropriate personal protective equipment and enhanced disinfection protocols to protect employee health.

Global operations and supply chain teams focused on site level measures to maintain business continuity for our customers and at all levels of the organization. Other teams who are empowered to make rapid decisions to protect employee safety and to meet customers' needs.

Caring for our employees at this time isn't a central priority and in addition to the robust safety measures implemented. We've also temporarily expanded certain benefits to provide employees additional support to care for themselves and their families.

As demonstrated in Q1, the strength of our global manufacturing network and effective supply chain management is enabling us to successfully respond to the current challenges.

For example, early in the quarter, our operations in China, along with other businesses in the country.

Were temporarily suspended by the government in response to this disruption our global operations and supply chain teams collaborated to ship some production to other factories and worked with our suppliers to maintain the appropriate levels of critical raw materials, our China leadership team worked closely with local authorities standpoint.

The proper actions to ramp up this who show campus as soon as the suspension was lifted.

Thanks to the work of these teams we were able to minimize disruptions to customers further our Europe and North America regions, we're able to leverage what we learn from our Suzhou factory, which has been a great benefit.

With the exception of the temporary shutdown of the Suzhou factory all of our manufacturing facilities maintain production in Q1 and continue to operate as a central businesses. We continue to work closely with suppliers and thus far have minimized any supply disruptions.

As the virus has spread we have faced varying levels of absenteeism at our global factory locations to date, we have effectively manage the situation and minimize disruptions to customers, but it continues to be a dynamic situation.

There was only a minimal impact to Q1 sales due to production availability, but we did see a greater effect from demand that was lost or delayed due to covert 19.

These impacts were primarily from disruptions in the business environment in China, which resulted in lower wireless infrastructure and portable electronics demand late in the quarter. We also began to see weaker automotive demand.

As we look ahead to Q2, we expect additional reductions to demand related to covert 19 challenges, although our revenue and EPS outlook is largely largely consistent with our Q1 results.

We anticipate the most significant impacts to Q2 demand will be in traditional automotive and portable electronics markets, where global factory shutdowns and stay at home orders have limited production capabilities and reduced consumer demand.

We also expect general industrial demand to be weekend by the broad nature of the current market challenges the primary offset to the weakness in these markets isn't expected increase in Fiveg wireless infrastructure demand, which was slowed in Q1 by cobot 19 related challenges in China.

Lastly, we are in a strong financial position to face. The current challenges we have over $300 million in cash on the balance sheet, a net cash position and additional liquidity available through our revolving credit facility.

While the duration and full range of consequences of the cobot pandemic are not easily predictable the resilience of the Roger's team, our diversified market strategy and our financial strength give us a solid foundation to respond to the challenging environment.

In addition to our actions to deal with the covert 19 crisis, we're taking a longer term view seeking to build upon our strategic position in strengths as we move through these near term challenges.

Turning to slide five all next discuss our Q1 results.

We delivered solid Q1 results with quarterly net sales of $199 million, an adjusted earnings of 92 cents per share which were at the top end of our guidance range. The Corona virus outbreak did affect our Q1 results, but the impact was in line with our guidance assumption.

Yes.

We continued to see the benefits of our diverse portfolio and market strategy in Q1.

Net sales for the quarter were driven by strength in advanced mobility, where both E V. A TV and a das grew at double digit rates sequentially.

TV, a TV demand was particularly strong for power semiconductor substrates and battery pad and battery pack sealing solutions relative strength in advance mobility countered the Q1 effect of the cobot nineteena outbreak on portable electronics and wireless infrastructure demand in China.

Given the current market challenges, we continue to be mindful of controlling spending from an operations standpoint, we have ongoing cost reduction programs in place and we're also prepared to flex manufacturing costs as necessary to match production levels. We are also carefully managing operating expenses.

With hiring and discretionary cost controls now in place.

Please turn to slide six.

[noise] AC us net sales for the first quarter were $65 million, which is which was essentially flat to the prior quarter.

Hey, Das demand grew sequentially at a double digit rate and wireless infrastructure demand increased modestly.

Offsetting these increases was a decline in aerospace and defense demand following a strong fourth quarter.

This was not unexpected specific programs come to completions and others begin to ramp up.

Looking ahead to Q2, we expect total AC us revenue to increase slightly versus Q1.

We are expecting significantly higher wireless infrastructure sales driven by stronger China Fiveg deployments.

Offsetting this growth isn't expected decline in Adas driven by the current challenges in the automotive industry.

Fiveg deployments in China are rebounding in Q2, and it is expected to continue into the second half of the year. As we noted last quarter. We are facing challenges in this market from both the effects of trade tensions, which continue to push Chinese Oems to diversify their supply chains and to drive by telecom.

Carriers and Oems to reduce the capital cost of Fiveg infrastructure.

These pressures have driven Chinese Oems to redesign their base station systems to reduce costs and to accommodate local Chinese manufactured components and materials based on recent indications, we will likely have limited market share with one of the major Chinese Oems as a result, while we expect Q2.

Wireless infrastructure revenue to grow sequentially, increasing competitive pressures and reductions to content are limiting the magnitude of this opportunity going forward.

Turning to aid us longer term, we continue to expect that this positive trend at the positive trends in adoption of automotive safety systems and the push by automakers to higher levels of autonomy, we'll continue to make this market a compelling opportunity.

In the near term there'll be a meaningful impact from the shutdown of auto factories and from lower sales due to shelter in place orders.

We expect Q2, Ada Es driven revenue to be significantly lower than Q1 and demand beyond Q2 at this point is highly uncertain.

Aerospace and defense demand is expected to increase relative to Q1 and remain solid for the balance of the year.

Lastly, while a smaller number of our smaller part of our HCS business. We expect sales of our high frequency circuit materials used in tablets to increase.

Driven by online education and result, working.

Please turn to slide seven.

PE us net sales in the first quarter were $47 million, an increase of 6% as compared to Q4.

We saw double digit growth and easy HCV and renewable energy market demand, partially offset by declines in rail and variable frequency drives.

You too PS revenue is expected to go to decline across most markets segments. As a result of the broad effect of cobot 19.

Overall automotive demand is expected to be lower due to factory shutdowns with applications for traditional automotive experiencing the greatest impact.

Given the current challenges the automotive industry is facing it is uncertain. When we may begin to see a return to growth and easy HCV demand. However, we continue to believe that this is a market with significant long term opportunity and we're in a strong position to be successful with our leading wide.

Bandgap semiconductor silicon nitride substrate technology, where we continue to gain design wins as more and more automakers move towards easy HGV technologies.

We remain committed to this opportunity and we will continue to invest to position the company for long term growth in this area.

We made further improvements in PS operations in the first quarter yields for our new Silicon nitride power semiconductor substrate process technology showed further improvement.

Which resulted in lower scrap and material usage, we remain on track to the yield recovery plan that was that we established last year, but realizing the target targeted growth gross margin improvements will be volume dependent.

Turning to slide eight.

Q1, E.M.S. net sales were $84 million, a sequential increase of 4%.

The higher Fms sales resulted from a rebound in general industrial and mass transit demand and stronger sales of applications for E V. HGV batteries. The demand in these markets was partially offset by lower portable electronics demand, which as mentioned was impacted by Corona virus related factory shutdowns in.

In Asia.

The increase in general industrial sales while positive.

Is primarily due to customers refilling inventory levels and does not necessarily point to an uptick in end user demand.

One way that Rogers is contributing to the fight against covert 19 is by supplying products for medical applications, such as ventilators and testing devices in order to meet demand for this critical equipment. The Roger's team has shown tremendous dedication to responsiveness in some cases, turning around orders in a matter of only a few days.

Sales of products for medical related applications is only a small portion of our SMS business, but we are committed to supporting the battle against this pandemic.

For Q2, we expect Fms sales to decline due to weaker automotive general industrial and portable electronics demand, new and innovative technologies, such as battery pad and battery packs sealing solutions used in the easy HCV market remain a top area.

Yes.

Like our power semiconductor substrates business in PE US we continue to see this as a long term growth opportunity and we are encouraged by the significant design progress we've made with a number of battery suppliers.

Lastly.

Turning to slide nine I'll summarize our key message messages before turning the call over to Mike first we are focused on protecting our employees health and wellbeing. While also continuing to meet our customers' needs. In addition, we're pleased with the solid first quarter results that we delivered despite.

Challenging market conditions. Our Q2 outlook is also project projected to be solid with results expected to be consistent with Q1.

Beyond Q2 visibility is extremely limited by the unfolding impacts of Cobot 19, and some of our markets such as traditional automotive general industrial and portable electronics, while there are uncertainties and challenges Rogers has a strong foundation that will help us navigate the current.

Environment, we continue to seek opportunities to build upon our strategic position and strengths as we move through these near term challenges Rogers has strong market positions a history of innovation and a solid balance sheet, we will prudently manage expenses and preserve cash through this downturn while.

Also maintaining a long term view of the market opportunities ahead.

Now I'll turn it over to Mike to discuss our Q1 results in more detail.

Thank you burst and good afternoon, everyone before I discuss the results I would also like expressed by banks and admiration to the employees of Rogers around the globe for an outstanding performance of delivering products to our customers in a challenging unprecedented business and social environment, while we experienced minor disruptions and increased cost.

The Rogers community demonstrated resilience and creativity in the face of uncertainty of anxiety to demonstrate their commitment to their jobs in our customers great results team.

It was lies ahead I'll review, our first quarter results, followed by our second quarter guidance.

Turning to slide 11 first quarter revenues as previously noted were $198.8 million, 3% higher than Q4 2019 and at the high end of our guidance range of 185 million to $200 million.

Strong demand for power semiconductor substrates and battery materials, serving TV HGV applications increased demand for products, serving Adas applications as well as an increase in general industrial revenues in the last of Eric materials were the primary drivers for the increased revenues.

Revenues decreased in portable electronics, immaterial, serving aerospace and defense applications.

Disruptions other business environment in China, resulting from the Corona virus pandemic negatively impacted our portable electronics wireless infrastructure demand of the first quarter.

The news and we incurred incremental costs associated with the Corona virus pandemic as we temporarily expanded certain benefits to provide employees additional support to care for their families.

Improved operations execution resulted in material cost reductions efficiencies than yield improvements in the first quarter mitigating the unfavorable product mix and the incremental pandemic related costs.

Adjusted operating income for a few 120 21 $22.6 million or 11.3% of revenues.

White decrease from Q4 of 11.6% of revenues.

Yeah net income for the first quarter, a $13.3 million represents 842.1.

One dollar improvement in compared to the board a quarter net loss.

The loss of the fourth quarter of $28.8 million included a 43.9 million dollar noncash after tax charge, which resulted from terminating them pension plan in the quarter.

On and adjusted basis, the company delivered E.P.S. of 92 cents per fully do this year at the upper end of our guidance range of 75 cents to 95 cents.

Yeah.

Turning dislike 12, R. Q1, 2020 revenues of $198.8 billion increase $5 million compared to the fourth quarter of 2019.

Sequential increase was driven by R.P.E.S. business segment up 6%.

And R.E.M.S. the the segment, 4%, while the A.C.S. because their segments revenues were flat compared to queue for.

Currency exchange rates favorably impacted first quarter revenues by $45 million compared to the fourth quarter.

The flat H.D.S. revenues compared to you for resulting primarily for the 3% increase in wireless infrastructure revenues, primarily in five gene power Amp applications and it 10% increase in eight ass revenues.

Negated by a decline of 80 per cent in aerospace and defense application revenues.

While the five g. ramp continue to be delayed in the first two months and if you want do part linked to the Corona virus pandemic impacts in China.

The second half of the quarter saw increased orders for by G. applications. That's trying to make some question to continue as aggressive roll out of five g.

Yeah. It's revenues were strong in the first order as a result of customers building inventory.

Late in the first quarter and continuing ended the second quarter, we experience a significant to slow down of eight ass orders consistent with several automakers announce shutdowns due in large part to the impacts of the pandemic.

We expect to slow down to continue through the second quarter and it will have a meaningful impact on our eight gas and other automotive businesses at least for a few too.

The revenues for aerospace and defense programs declined sequentially off a strong fourth quarter base, but did increase year over year.

Continue to be positive on this market and expect continued you're on your grow.

Revenues in R.E.M.S. segment increase sequentially human primarily to orders in general industrial applications.

Growth in a small but growing base for easy battery pad materials and nice gross.

Ice grow in our mass transit business.

The increase in general industrial demand, which comprise over 45% of the segments revenues in the quarter pointed to our pervert conversion refilling inventory levels as opposed to an increase in the end user general industrial demand.

In fact.

We expect to demand for these materials to soften in the second quarter, but the general economic slowdown.

Portable electronic revenues, which comprised almost 25% of the revenues of the quarter declined meaningfully in the quarter.

Particularly in China.

Resulting partially from the business disruptions caused by the Corona virus pandemic.

Late in the quarter, we saw pick up into band as China economy, and came back online, but we do not expect the increase demanding carry through the second quarter as he impacted improving the virus pandemic will temper global demand for portable electronics.

P.E.S. revenues increased divorce and the first quarter due to a strong demand in R.E.D.H.G.D. applications, both for power semiconductor substrate as well as laminated busbars for power distribution.

The semi conductor substrate revenues, which accounted for approximately 25% as a segment revenues increased 28% compared to the fourth quarter and a laminated busbar revenues for E.V.A.G.D., which accounted for less than 10% of the segment revenues through 18% sequentially.

While we enjoyed night at that point to growth in R.E.V.A.T.V. business or the first quarter. We expect demand for this business to decline in the second quarter as a significant end customer shut down production in certain locations to address the Corona virus right.

We also have revenue gaze at renewable energy applications, which comprise greater than 50 per cent of segment revenues.

Power semiconductor substrate for general industrial out applications, which comprise over 30% of the segment revenues were down slightly compared to queue for.

These industrial equipment applications generally track with manufacturing cap expending as such we expect demand to soften and the second quarter as Catholics spending declines, resulting from the economic downturn.

Turning to slide 13 are gross margin for G., 120, 20, with $65.6 million or 33% of revenues slightly less than the 33.1% achieved thank you for.

The decrease in the gross margin percentage was due primarily through the negative product mix discussed earlier and the higher incremental costs associated with the Corona virus pandemic as we'd temporal or temporarily to stand in certain benefits to provide additional support to our employees.

We continued to improve our operational performance, where ongoing focus on lowering material costs and increasing efficiency in yields in all business segments mitigating the negative impact of the product mix and the incremental costs to address the pandemic.

Terrorists were lower in the quarter to compare to queue for resulting from our efforts to leverage our global factory footprint and shift production facilities that mitigated that mitigated terror cost as a result, we expected terrorists to up less than a 25 basis point impact on gross margins going forward.

Gross margins increased significantly for H.P.S. and the third quarter as cost reduction efforts and decrease terrorist benefit at the margin.

The M.S. gross margin was essentially flat on a percentage basis in the quarter as the benefit of volume increases were offset by an unfavorable product mix, resulting from lower portable electronic revenues and Q1.

And the first quarter, we continued to execute under P.E.S. recovery plan.

As mentioned we are encouraged by then continued signs of progress made in the quarter for manufacturing yield and continued material cost reductions.

We did not see these benefits materialized on the gross margins due to an unfavorable product next in our <unk> business direct labor efficiency challenges that were pandemic related.

Reserve taken on excess inventory, resulting from past material planning challenges.

The operational execution work continues and we are encouraging confident we will capture the incremental 600 basis points of improvement in this business subject to increase volumes, which will result in over 100 basis point improvement in the company gross margin.

Well, we expect continued improvement in the efficiency than yield to this business segment in the coming borders the pace of the gross margin improvement will the volume dependent.

So I 14 details changes to adjusted net income for T. 120, 20 of $17.2 million compared to adjusted net income for the few Bora $41.3 million.

Oh, that's discussed earlier the adjusted operating income for Q1, 2020 of $22.6 million and 11.3% of revenues were slightly higher than queue for his adjusted operating income on a dollar basis, but slightly lower as a percent or revenues.

Adjusted operating expenses for Q1, a $43.1 million or 21.7% of revenues, but $1.4 million higher than queue for adjusted operating expenses.

The higher dollar expenses, resulting from increase performance based cost compared to queue for.

Rodgers and current higher tax expensive things, you, one compared to acute for awhile and cheating and effective tax rate of 20.6% in line with our forecasted rate of 20 per cent into 21%.

We now expect are effective tax rating for 2020 will be 24% of 25% higher than our previously communicators as effective tax rate of 20 per cent of 21%.

An increase in reserve for uncertain tax position it lower to benefit from disagreed tax items anticipated in 2020, and the anticipated geographic mixed up pretax income.

Overall, the financial impact on the company's first quarter result from the Corona virus pandemic, we're not significant as Bruce mentioned, we did experience it very small increase in R.E.M.S. revenues from the sale of materials into medical applications to address the pandemic.

Experienced higher cost of goods sold expenses as a form of increased support costs for our employees approximately point $6 million as well as higher freight costs of distributing products.

Finally, certain of our operating expenses were lower in Q1, as a result of less travel unless recruiting.

All costs and benefits, resulting for the pandemic are included in or pro warmer results.

Turning dislike 15, we ended the first quarter with the cash position of $380.3 million, an increase of $141.4 million from December 31st.

The increase resulting from a 150 million draw an all revolving credit facility in March which I'll discuss later.

We ended the first quarter with a net cash position castrate equivalent balance in excess of amounts owed under our revolving credit facility of $35.3 million.

You want unaccompanied spent $11.2 million on capital expenditures.

Last call, we communicated <unk> bend range of 40 million to $45 million for 2020.

We are closely managing our plan capital spending in the difficult economic environment. At this time, we expect to come in at the lower end of the range, but are not yet prepared to adjust our range. As we believe there are growth opportunities, particularly E.V.A.T.V. programs that may require additional capacity.

The company generate at 8.6 million dollar from operating activities into one net of an increase in working capital of $18.5 million, primarily from the increase in accounts receivable due to the timing of revenues late in the first quarter.

As a result as a cast used for working capital G., one free cash flow was negative in $2.5 million.

In March the company drew $150 million honest revolving credit facility as a precautionary measure against they potential significant and protracted economic downturn, resulting from the financial impacts of it grown a virus pandemic.

The company that's not presently expected required this cash to fund is current or future operation and has invested to cash in short term government backed securities.

At March 31st the company had an outstanding balance on his revolving credit facility of $273 million.

The company has $177 million available on its revolving credit facility and hasn't uncommitted accordion option of $175 million.

You're wired payment terms are interest only on a monthly basis.

Revolving credit facility as interest coverage and leverage covenants.

Which the company was in compliance with at the end up a few one and continues to be in compliance with it this day with significant headroom against the covenant limits.

Revolving credit agreement expires in February 2022.

The company ended the first order with the healthy balance sheet net cash position as well positioned to withstand than current economic challenges into investing growth opportunities.

Our current cash flow, great even level is greater than 20% lower than our first quarter revenues on a run rate basis, depending on the product mix of revenues and we have the ability to flex our costs with changing demand levels.

And this economic environment, we will continue to the closely manager spending levels and make it prudent investments in capital, but we will look to invest in opportunities to accelerate grows out of the downturn.

Taking a look at our future 2020 guidance on slide 16, we see opportunities and challenges that were discussed by Bruce with me.

Resumption of the five you go out in China and late she won and continuing indicates you too will provide some buffer against the very challenging automotive demand landscape or several Williams interior, one set of clothes plants and definitely impacting our conventional automotive and R.E.V.A.T.V. business.

In addition, we believe our general industrial business <unk> E.M.S.N.P.E.S. will be impacted by the significant economic downturn, we'd expected the second quarter and possibly longer resulting from the grown a virus pandemic.

We do however expect to see incremental rabbitears for medical applications addressing the needs of the Corona virus pandemic of greater then wait $6 million in the second quarter.

Well Rogers employees did an outstanding job managing the supply chain and delivering products to customers into one the impact of the pandemic on supply chain, an employee availability is difficult to estimate for the second order and second half 2020.

Therefore, our revenue Guy and since provided with the assumption that our supply chain will continue to supply critical materials, and we will continue to produce and deliver products for our customers with minimal disruptions.

Revenues for June two are estimated to be in the range of 190 million to $205 million.

Similar to our guidance for Q1 arrange for future was wider that historically provided you to the increase level of uncertainty for the potential impact of the Corona virus pandemic.

Mm.

We will continue to monitor and flex are spending for manufacturing infrastructure S.G.N.A. capital expenditures to address the anticipated demand levels will also continue our progress and lowering costs improving efficiency and improving yields at all businesses with added focus on P.E.S. as discussed earlier.

You know what these actions the low volumes will continue to negatively impact or gross margin in q. too.

In addition, we'd expect the incremental costs associated with the expanded benefits divided to employees as well as supplies to keep our employees to say, resulting from the <unk> endemic to increasing cute you until approximately 3.5 million to $4 million.

As a result, we're guiding gross margin in the range of 32.5% to 33.5% for cute too.

We also expect to reduce certain topics spending huge you principally travel related and recruiting expenses by approximately $1 million as a result of the Corona virus pandemic.

<unk>, we got we got a gap Q2 earnings and arrange it 50 80 cents 70 cents for fully diller didn't share.

On an adjustment basis, we guide fully diluted earnings and the range of 80 cents to one dollar per share for the second order.

Are adjusted results are.

Of all incremental costs and benefits, resulting from the affirmative virus pandemic.

Oh now during the call back over to the operator for questions.

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So <unk> you know as we talk about in in a in that prepared remarks, the the impacted a trade policies and so forth, obviously without one <unk> or one oh, yeah I'm in China has impacted us because of the redesign work and local sourcing that they've done as we look at.

Cross the network and of other <unk> and so forth, we anticipate certainly into two history are near a historic levels.

Of share a witness those other <unk> and as we move outside of China, and and think through the the other early m.'s that are providing a base stations aside from the large Chinese one we would anticipate that our share would remain strong there as.

As those were allowed to move across the world.

Okay to to match on site get to more constructive outlook once we get to broader corpus appointment, how kind of China.

Might have wanted to to do a follow up just on some of the gross marching point <unk> and congratulations to the team for getting P.E.S. improvements really set structurally as we look at the things that are going on across the business and admittedly we've got near term.

Crisis issues that are impacting things, but but it's we think about longerterm marching expansion potential.

Given the improve mentioned P.E.S., how are we really talking about volume driven games beyond <unk>.

Navigate through in the second quarter or are there more meaningful efficiency and optimization programs that can really provide significant clip from here.

[noise], Yeah, Craig I think I think we're going if we're gonna see contributions on both sides of that I again, I think the operations team really has done a a phenomenal job focusing on cost reductions whether it be material cost reductions yield improvements and and efficiencies, but I think they're still work to be done.

On that and in in all businesses right, we're going to really focus and continue to focus on on T.E.S. because again, while we've made some good headway there there's still a lot of room to be to be had there, but you know I think as we move forward, we'll see equal benefits from from continued focus on cost and costs down.

Manufacturing efficiencies compared with compared with the volume benefits as well.

Okay, Great and then I'll I'll I'll come back to you if I could Bruce for one more before I hopped back in the queue, just looking beyond very near term beyond two q. and maybe even three cute, but really focusing on the back half of the year in the businesses, except philosophy and in late 2020 and 2021.

It should look at the the changes that are occurring.

Where do you feel like the businesses points for real growth and growth acceleration and and where my things be changing and have the business into less advantaged position. Then you might have pot you had going into the crisis. Thanks for the health guys.

Sure. Thanks, Thanks, Craig so in in terms of coming out of the year of course, we don't give a four year guidance, but from a marketing perspective.

I think a lot depends here on the impact of Corona virus, specifically on automotive, we still believe and and we even continue today to see trends in E.V.A.T.V. conversion that remain very strong I think there was some announcement today, the large west coast or <unk> provider revealing.

He's a producer V., saying that they were backlog was was very strong. So that's a real good indication to us that to market is still very interested in E.V.A.T.V.'s you know that the the work that we're doing with a number of German auto manufacturers continues even through the crisis in terms of design wins.

And and looking at a next generation systems, both on the battery side and power supply side. So we we <unk> or power module side. So we we see again E.V.A.T.V.'s coming out of this as being strong. We also see you know gross and the five g. telecom side because of the role.

Some China, but it's muted for us as we talked about because of the share situation, specifically specifically in China, but that growth is is also we anticipate we would hope to see some of that coming through the years well certainly in Q. too.

So those are areas that that we're we're we see a strange and I would also mentioned A.N.D. aerospace and defense that has was robust through 2019 coming into 2020, a little bit off but.

Really around and have a program and beginning new programs that that impacted there, but as we move through the year, we see that his remaining strong not only in the A.C.S. business, but also in en masse.

And thanks person then just to clarify bat trying to view. It is sent the company's new that they could have some some business with that leading supplier or after two q. would not be expecting to have that thank you.

I think it's it's very cloudy, let's say <unk>. The the tenders that have gone out we we understand our position beyond cute too it is very difficult to predict.

Thank you.

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Good afternoon, thanks for the color and thanks for taking questions person, Mike want to follow up a little bit wireless telecom opportunities and challenges, but given the changing landscape in terms of market share, but also given the you know the build up numbers that we've seen D.C.Q.

As being potentially a high water mark near term for wireless telecom revenue.

Building for you in the back half of the year, but cloudy you know to what degree at any additional color just kind of netting all those puts and takes that would be very helpful.

I I think you know certainly Q2, we see the see the ramping and q. too and into the second half of the year for a base station build out in China. So we wouldn't need to participate in that as it as it moves through the year, but it is very difficult as you get towards the the end of the year to to understand.

And where it all ends up what I, what I would also say you know we talked a little bit about the redesign and D. content thing, that's that's gone on and and so part of the the push down on on maybe the total potential revenue in wireless and five g.

Is because we're now looking at content per base station of in the mid 100 down a bit from what we had projected earlier because of those redesigns in that decontenting. So that that's muting some of the the growth opportunity to air for us.

Very helpful. In is that with all we EM. So just with the large Chinese so we.

I think you know as we've discussed in the past <unk> has their own designs and and I would say the the drive by that one large Chinese L.E.M. to significantly redesign for local content has had a big effect versus maybe some other folks.

Okay, and then shifting gears, you know I'm kind of a a broad high level question, but the covered pandemic and the in the related increasing demand for bandwidth it could that accelerate the opportunity and five g. in North America, and Europe or too early to tell.

It's a very good to talk you know we've we've considered that is certainly [noise] and the press you've seen more interesting people, saying, hey, we need better more bandwidth higher speech. So we're hopeful that that could have an acceleration certainly we've seen some of this with our in our A.C.S. business, where we supply.

Circuit materials used in <unk> tablets that are utilized for obviously distant learning and so forth. So you know the pandemic has had some impact on those kinds of opportunities for us.

Got it and then shifting gears to to eight s. given the sharp declines as seen in soccer and each one specifically in Q. to you see Q2 is potentially a near term bottom in terms of demand for your products or you know just too too difficult to say in terms of the crystal.

All for H., two and and similar question for E.V.A.T.V. Thanks.

Yeah, I <unk> on the eight aside a you know very much tied to traditional automotive right those go into.

Additional called cars as well as E.V.A.T.V.'s across the board certainly we've seen all the shutdowns announcements of the automotive factories. So certainly cute too as we said in a in a prepared remarks is going to be a down a quarter for eight S.E.V.A.T.V. is a bit of another story, we'll see how.

Well that holds up given what we've seen in the press about some of the V. manufacturers, but certainly you would imagine with consumer confidence waning here people may aren't going to be out buying a lot of automobiles, but maybe the ones. They buy will be more oriented towards the V.A.T.V. side.

Got it and lastly for me <unk> good color, Mike did as well on in terms of gross margin understanding that there's a decent amount of the you know potential optical or increase over time will be volume related given that the D.C. The you know the ability to build.

Off of Q2 levels and coming quarters. As you know maybe can you quantify that the extent to which which you can drive March is higher.

Just based on a fish.

Yeah, I I think a again is it you know as I had mentioned to to crack earlier that yeah. I I still think that we have we definitely have runway with respect to greater efficiencies yields right and so you know again, if I were to look at the opportunities down the road I still believe that we'd probably have.

You know if you think about getting from you know 33% into the the upper thirties, no I wouldn't say, probably I still think you know 35, 40% of that will be driven by increased inefficiencies you know with with you know the other piece of it coming from volume So yeah I I.

Still think Dan that we have we definitely have opportunities to continued to to move up the gross margin from performance areas in the second half of the year. Okay. Thank you had to call.

And there now.

This time.

Okay.

Alright.

Yeah, if there's another question, where we're happy to take it.

That's true.

Question at this time.

And you do have an additional question from Grand slams and be Riley F.B.I.

Thanks for taking that follow up question Bruce have wanted to go back to one of the points that came up both in your commentary and and and Mikes comment tuned it's about the level of inventory you know at top fabricators. Your cutters. Her her elsewhere. All the work we did on inventory throughout the supply chain show stretch. It was a 10 year lows.

Going into the crisis center and so one of the question since while there may have been some some restocking cup was able to occur in the first quarter. What's your sense on on work inventory levels heart downstream from the company aren't they it's sufficient levels, if we start to get demand recovery or orange.

They're really further replenishment that will be needed so that we get to the right bubble for the new level uncertainty that we have been in the current environment. Thank you.

Thanks, Thanks for the follow up question Craig.

One we've understood and what we've seen and this is specifically in the E.M.S. business.

A a round or or converters are preferred converters that they're restocking in anticipation of a rebound here at some point now of course, the links and depth of of the impact of Corona virus on the industrial side of the business is is hard to know.

But there was a sense certainly I'd say, maybe quarter and chew one <unk> to to build up that inventory as a in anticipation of maybe coming out of this and making sure that they had materials available. So it's it's a good point it again, it's very cloudy, but.

There was a sense certainly that let's make sure that we've got a inventory available. So when people come back end and start demanding it they've got it got it on hand, so I mean, we'll see how that turns out.

Thank you. Thank you guys.

[noise] and we have an additional questions you from Daniel.

Securities.

Thank you again, maybe just a little bit of additional color cross geography, starting with China, and then into Europe in the U.S., where you know I'm sure you've got good Intel on the ground where are we in German case.

You know the relative.

Oh.

How where we are.

Emerging from Russian environment, and recovery as far as just production gosh.

A potential interactions across each of those thank you.

Okay. So you know as we said obviously this this whole thing started a started in in in China with our soon Joe plan, you know, we're back up and running pretty much 100% there in in terms of Ah capability and we've seen yeah, I'd say <unk>.

Interesting amount of demand coming back in certainly driven by five g., but also a is some of the other demand is held up a little bit tailing off on on hand, helds, but overall it it's been pretty solid there in Europe again, I think won't we'll start to see.

His somebody impact on the automotive and that's a lot of what is supplied out of our two operations there in in in Europe in the P.E.S. side of the business. So I think <unk>, we'll start seeing that net effect coming in in Q. too.

On on that as well as on the eight ass on it and some of that's coming out of Europe, as well and in the United States.

You know we've been operating our facilities. So all of them. Some we are a a provider of a central materials going into a number of different and markets and and demand as we outlined a his remaining relatively do it again variable by by market, but.

Well, we'll see again, where we end up at the end of the quarter as we keep on referring automotive probably handheld and then the knock on effect on general industrial which is supporting you know <unk> type type sales into factories, so factory expansion.

Don't go down we won't necessarily see a strong sales on on general industrial because of that but that's the way we see it it was interesting to see the recovery in China of our teams and also bounced back of some of that and that came out when everybody got back to work. So hopefully that will follow in Europe in North America.

Understood things analytical approach.

Yeah.

Okay.

Okay.

<unk>.

Well again, thank you everyone for joining us on today's call as we outline you know Rogers isn't a very strong position. We continue to focus on our strategic markets. We continue to focus near term to ensure that were matching our our costs and an output with demand that we see in the market.

Place and we're able to flex and do that but you know robust balance sheet and we continue to seek opportunities to move the company ahead on a strategic nature as well. So again, thanks for joining us have a safe evening and stay well.

Mm.

Oh.

Today's conference Com. Thank you for participating you may now.

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