Q1 2025 Rogers Corp Earnings Call
Good afternoon, My name is Kevin and I'll be your conference operator today.
At this time I'd like to welcome everyone to the Rogers Corporation first quarter 2025 earnings Conference call.
I'll now turn the call over to your host Mr. Steve Haymore Senior director of Investor Relations. Mr. Haymore, you may begin.
Good afternoon, and welcome to the Rogers Corporation first quarter 2025 earnings conference call. The slides for today's call can be found on the investors section of our website along with the news release that was issued earlier 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 as subject to the many uncertainties that exist in rogers' operations and environment.
These uncertainties include economic conditions market demands and competitive factors.
Such factors could cause actual results to differ materially from those in any forward looking statement made today.
Please turn to slide three.
The discussion during this conference call will also reference certain financial measures that were not prepared in accordance with U S. Generally accepted accounting principles.
A reconciliation 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 are available on our Investor Relations website.
Colin Gouveia: With me today is Colin Gouveia, President and CEO, and Laura Russell Senior Vice President and CFO.
Colin Gouveia: I'll now turn the call over to Colin.
Speaker Change: Thanks, Steve Good afternoon, everyone and thank you for joining us today I'll begin on slide four.
Speaker Change: Before I discuss the results for the quarter, Let me first address how recent changes in global trade policies may affect Rogers in the near term.
Speaker Change: As I've discussed in the past, our global manufacturing footprint and local for local supply capabilities are important strengths of our business. This strategy helps limit our exposure to the impact of U S tariffs on Chinese goods.
Speaker Change: Where we see greater potential exposure is with shipment of work in process materials from our U S factories into China, we have implemented mitigation plans to minimize the impact of these tariffs in Q2.
Speaker Change: I'll discuss this topic in more detail shortly but with the flexibility inherent in our global operations and our strong balance sheet. We're in a good position to navigate current market challenges.
Speaker Change: Turning to our results.
Speaker Change: The first quarter unfolded much as we expected with sales gross margin and adjusted earnings all slightly ahead of the midpoint of our guidance Q1 sales of $191 million were slightly lower sequentially, primarily due to the impact of foreign exchange rate changes and normal seasonality in our portable electronics end market.
Speaker Change: The announcement of new tariffs in recent weeks had minimal impact on Q1.
Speaker Change: We continue to work closely with our customers on new design in opportunities and during the first quarter, we secured new wins in several key areas.
Speaker Change: Our silicone technology was selected by a leading European OEM to be utilized in inverters for the industrial renewable energy and EV HEV markets.
Speaker Change: Rogers has reputation for quality and strong technical support capabilities were key factors in this design win.
Speaker Change: And the EV HEV space, our polyurethane and silicone materials were designed into several different battery related applications with major Oems in the U S. Europe and Asia are Keramic power substrates were selected by a power module customer for their onboard charging solution targeted to multiple Chinese Oems we have also seen.
Speaker Change: A meaningful increase with Chinese Oems and our <unk> opportunity pipeline. We are encouraged by the growth in these new opportunities our new facility in China scheduled to ramp production in mid 2025, we will support these local kramnik volumes.
Speaker Change: Although it's difficult to predict market conditions in which our customers participate which ultimately dictates. The contribution these wins will have on our sales. These design wins underscore our technologies competitiveness and our ability to solve the most critical challenges of our customers.
Speaker Change: We also continue to adjust our cost structure in response to recent demand levels and to further increase our competitiveness.
Speaker Change: I'll review the actions we have taken later in my remarks.
Turning to slide five in our Q1 results by end market compared to Q4, I'll begin with the Adas and industrial markets, which both increased versus the prior quarter.
Speaker Change: <unk> sales improved at a low teens rate versus Q4 due to stronger demand from both European and Asian customers as referenced on our Q4 earnings call, a leading Asian automotive radar supplier selected our materials for a new 77 gigahertz application, which led to increased shipments to this customer in Q1.
Speaker Change: The growth in industrial sales was led by the Alaska American materials solutions or EMS business.
Speaker Change: And our advanced electronic solutions or Aes business, we continued to see softness in the industrial market consistent with what our power module customers are experiencing.
Speaker Change: EV HEV sales declined in both the Aes and EMS business units Keramic power substrate sales remained soft as power module and other downstream customers continue to manage through the modest end market demand.
Speaker Change: In the EMS business demand for our battery solutions was weaker in the U S and Europe as some customers adjusted inventories in response to lower sales and tariff uncertainty.
Speaker Change: Aerospace and defense declined slightly.
Speaker Change: Defense sales and the radio frequency solutions business, our RFS business continued to grow with both U S and European customers commercial.
Speaker Change: Commercial aerospace sales in the EMS business were lower primarily result of order timing.
Speaker Change: Lastly, as mentioned portable electronics sales declined sequentially due to normal seasonality.
Speaker Change: Turning to slide six and our assessment of the tariff exposure on our business.
Speaker Change: As referenced earlier, our global manufacturing footprint has helped Rogers mitigate most of the impact from current tariffs on goods coming from China into the U S.
Speaker Change: With our local for local strategy, a large percentage of our products produced in China are sold to customers in region.
Speaker Change: For this reason, we only have a small exposure to the current 145% tariff on goods from China.
Speaker Change: The flow of U S goods imported into China is where we currently see the most direct exposure to tariff policies in some instances our supply chain today ships certain raw materials and work in process inventory from the United States to our facilities in China. In addition, we saw some finished goods in China that are only manufacturer.
Speaker Change: <unk> in the U S.
Speaker Change: In response to this tariff exposure, we have implemented mitigation plans, which include managing inventories sourcing materials from other countries, where possible satisfying customer demand from our non U S manufacturing locations and recovering some of the impact through certain pricing actions.
Speaker Change: We expect these actions will largely offset the impacts of tariffs in the second quarter.
Speaker Change: For the flow of goods between Europe, and the U S. We expect minimal second quarter direct impact from the current 10% tariff rate.
Speaker Change: In addition to the direct impacts on tariffs there are secondary effects that are clouding the outlook for all companies, including Rogers.
Speaker Change: This includes the uncertain impact that the current trade and tariff environment will have on global economic growth.
Speaker Change: It is unclear what impact these emerging risks will have on our sales in the second half of this year, but we will continue to pursue appropriate mitigation strategies as conditions warrant.
Speaker Change: Turning to slide seven I will highlight the key actions, we are taking to further improve our cost structure, and which are helping us better navigate this current environment.
Speaker Change: We implemented significant cost improvements over the past two years, but I'll focus my remarks on the most recent actions that are reducing 2025 costs compared to the prior year.
Speaker Change: First our footprint optimization work is continuing plans to consolidate our RFS facilities, which includes the wind down of production in Belgium remain on track for mid 2025.
Speaker Change: We're successfully qualifying customers at other locations and with this closure, we expect a $3 million improvement to operating income this year with annualized savings of $6 million.
Speaker Change: Also in our RFS business, we completed the sale of a manufacturing facility in Arizona in late Q1 for $13 million.
Speaker Change: Finally, with the closure of our R&D Center in Boston last year.
Speaker Change: We have not only achieved better alignment of R&D resources with our business units, but we also expect cost savings of approximately $2 million this year.
Speaker Change: We continue to reduce our operating expenses and manufacturing costs, we took the difficult but necessary actions to eliminate certain positions in the first quarter. Following similar actions in Q4 2024.
Speaker Change: These head count adjustments will result in savings of $10 million in 2025 with full year run rate savings of $12 million.
Speaker Change: Additionally, we continue to drive reductions in discretionary spend such as professional services travel and other areas.
Speaker Change: In total these actions are expected to result in net savings of $25 million in 2025 with run rate savings of $32 million.
Speaker Change: Around 70% of these savings will be in operating expenses and the remainder in manufacturing costs.
Speaker Change: We're focused on driving topline growth as I discussed at the start of this call. Despite the challenging macroeconomic and evolving tariff climate, we continue to aggressively pursue new design wins that underscore our customers' desire for Rogers as latest technologies, while also delivering the products and services they need to succeed today.
Speaker Change: However, given the current market realities, we are prepared to further flex our cost structure if necessary.
Speaker Change: I'll now turn it over to Laura to discuss our Q1 financial performance and Q2 2025 outlook.
Laura: Thank you Colin.
I'll begin on slide eight with a highlight of our results for Q1.
Laura: And overall results for the first quarter were in line with our expectation.
Laura: Sales of $195 million gross margin of 29, 9% and adjusted EPS of <unk> 27, Oh slightly exceeded the midpoint of our previously announced guidance.
Laura: Q1 sales decreased approximately 1% from the prior quarter <unk> million impact from changes in foreign currency exchange rates and seasonally lower portable electronic sales.
Laura: Adjusted earnings per share decreased to 27 from 46% in Q4 due to the effect of lower gross margin, which was in part offset by lower adjusted operating expenses.
Laura: On slide nine I'll discuss our first quarter sales by operating segment.
Laura: EES revenue increased 2% versus the prior quarter to $104 million from higher <unk> and aerospace and defense sales.
Laura: These increases were partially offset by lower EV HEV if anything.
Laura: <unk> decreased by approximately 4% to <unk> million from lower portable electronic EV, HEV and <unk> and defense sales in contrast, industrial sales increased sequentially.
Laura: Turning to slide 10-Q, one gross margin was 28, 9% a decrease of 220 basis points from the fourth quarter.
Laura: The expected reduction in gross margin was equally attributed to utilization headwinds and unfavorable product mix, which impacted both margin contribution and they're manufacturing effectiveness.
Laura: As shared last quarter, we intentionally caddy the excess cost in Q1.
Laura: This decision was to ensure the ability to respond to an expected improvement in customer demand in the second half of the year.
Laura: The extent of that improvement is natively certain given the current tariff situation.
Laura: This ultimately we are carefully evaluating these calls and we'll further adjust as needed.
Laura: Adjusted EBITDA of $19 5 million or 10, 2% of sales decreased by $3 8 million sequentially.
Laura: This does pay marginally due to the lower gross margin and unfavorable currency translation, which was partially offset by lower adjusted operating expenses.
Laura: Adjusted operating expenses decreased by almost $4 million from the prior quarter, reflecting the ongoing cost reduction efforts that Colin highlighted.
Laura: Continuing to slide 11, I'll next discuss Q1 cash utilization.
Laura: Cash at the end of the first quarter was $176 million, an increase of $16 million from the end of the fourth quarter.
Laura: In addition to cash generated from operations. We also received net proceeds of $13 million related to the sale of a place with manufacturing facility in Arizona.
Laura: The payment of uses of cash in Q1 included capital expenditures of $10 million and cash taxes paid of $8 million.
Laura: Turning to slide 12, I'll provide an update of our capital allocation priorities in the current operating environment.
Laura: Our overall goal is to maintain a strong balance sheet. During this period of increased uncertainty, while allocating excess cash to phase II.
Laura: Over the past two years to three years, the focus was in allocating capital to fund organic growth initiatives.
Laura: With those investments now largely complete we are focused on decreasing the capex intensity of the business.
Laura: As it pertains to our 2025 Capex plans, we have identified further reduction opportunities and now expect to spend between $30 million to $40 million for the full year, a decrease of $10 million.
Laura: Next to returning capital to shareholders has increased in priority, given our growing cash position and a lower share price.
Laura: Consistent with our opportunistic share buyback strategy, we will continue to monitor market dynamics, and our share price and low leverage our existing departed Peru gamma triples.
Laura: For reference, we have $104 million remaining or ordinary existing share repurchase program.
Laura: Third center Gestate bolt on M&A remains a key part of our strategy.
Laura: We continue to target opportunities with the right product and regional fit.
Laura: Our EPS accretive and with Idaho is that exceeds our return in today's world.
Laura: Three evaluation, we are continuing to make progress with multiple opportunities that fit these criteria.
Laura: Lastly, we intend to prudently manage laser etch for any potential M&A transaction.
Laura: In light of the current environment, we would not expect any use of that exceed one five times EBITDA and only for that clearly center gestic opportunity.
Laura: Next on slide 13, I will discuss our guidance for the second quarter.
Laura: Beginning with the top line, we expect Q2 sales to be between $1 90 and $205 million.
Laura: The midpoint of this range represents a 4% increase in sales there since the first quarter.
Laura: The EV HEV Athos industrial and portable electronic end markets are all expected to increase.
Laura: In recent weeks, we have seen a small element of customers delaying orders because of the tariff uncertainty.
Laura: These order delays have been largely isolated but the low end of our range contemplates the potential for similar chain from other customers.
Laura: We're engaged in gross margin to be in the range of 31% to 33% for Q2 with the increase a result of both improved volume and favorable product mix.
Laura: As indicated we are working to mitigate that to date impact of higher tariff costs.
Laura: In recognition of the uncertainty that causes we have wait in the T M range by 100 basis points.
Laura: We expect adjusted operating expenses to increase slightly in Q2 from the first quarter.
Laura: <unk> to prior year's decision related to the timing of when some share based compensation expenses are incurred.
Laura: EPS is expected to range from breakeven to 40 cents of earnings the adjusted EPS range is starting to sent to 70 cents of earnings.
Laura: Lastly, based on current visibility we appreciate their full year tax rate to be approximately 27%.
Laura: I will now turn the call back over to Colin.
Colin Gouveia: Thanks, Laura let me conclude on slide 14 with important priorities for Rogers not just in Q1, but for the remainder of the year. We are sharply focused on executing our commercial and operational objectives, securing important new design wins with major Oems strengthening our sales funnel across both our aes and <unk>.
Colin Gouveia: Businesses and continuing to aggressively pursue our operational efficiency and business transformation initiatives, which includes more efficient internal processes and improve customer experience and overall, a more flexible and scalable enterprise.
Colin Gouveia: We are implementing robust action plans to address.
Colin Gouveia: And wherever possible mitigate the impact of tariffs our local for local strategy is an important element of our mitigation plans and will pursue other steps as necessary.
Colin Gouveia: We have taken prudent actions over the last year.
Colin Gouveia: Which we continue to implement in Q1 to improve our cost structure and operating efficiency. These actions have delivered material savings across the company if conditions warrant we will pursue additional cost saving measures and lastly, we are highly focused on maintaining a strong balance sheet that provides rogers with flexibility and capital deployment Optionality.
Colin Gouveia: Thank you for your time today I will now turn the call back to the operator for questions.
Colin Gouveia: Thank you well now be conducting a question and answer session.
Speaker Change: If you'd like to be placed in the question queue. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue.
Speaker Change: We ask you. Please ask one question and one follow up then return to the queue. Once again that is star one to be placed in the question queue. Please ask one question and one follow up then return to the queue. Our first question today is coming from Dan Moore from CJS Securities. Your line is now live.
Dan Moore: Thank you good afternoon, Colin good afternoon, Laura Thanks for taking the questions.
Speaker Change: I'll just start with the <unk>.
Speaker Change: The cost savings just how much of the $25 million cost savings that you expect to achieve in <unk>.
Speaker Change: 2025 is.
Speaker Change: As in the Q2 guidance kind of on a run rate basis, and then regarding the <unk>.
Speaker Change: $32 million annualized does that all earmarked for margin.
Speaker Change: Improvement in bottom line improvement or might some portion of that being reinvested in the business.
Speaker Change: Hi, Dan its Laura I'll start there and calling can of Maine and within that then at Huntington.
Speaker Change: So in terms of the second quarter and largely most of the savings that we're going to see the associated to the reduction in force that we mentioned with regards to E balancing our opex investment associated to the cut and lane entitlement and a lot of the manufacturing savings that we've reported.
Speaker Change: Sure.
Speaker Change: I really pay the case, either one or rundown, Nevada based manufacturer tumor Belgian facility and consistent with what we communicated previously.
Speaker Change: We're still on track to exit that manufacturing them late Q2 early QC.
Speaker Change: And so we will see benefits of that in this aitken's huh.
Speaker Change: $3 million.
Speaker Change: But most of the second quarter is more so on the.
Speaker Change: Hum.
Speaker Change: In terms of the portfolio.
Speaker Change: I think it's a bit.
Speaker Change: Oh it was.
Speaker Change: For Q2.
Speaker Change: Yes.
Speaker Change: Okay. Okay.
Speaker Change: And then just looking at obviously.
Speaker Change: Given all of the moving parts visibility is extremely challenged just seasonally last year Q3 was your strongest quarter seasonally aided by portable electronics do you still expect that to be the case. Once again this year at least for the bottom line, given particularly given the benefit from incremental cost reduction actions any any thoughts.
Speaker Change: There would be helpful.
Speaker Change: Just thoughts on the second half of the year.
Speaker Change: Probably central around some of the key assumptions around.
Speaker Change: What happens for us in terms of portable electronics ramping.
Speaker Change: We also have still the assumption that we see some of the inventory issues related to the power module market finally, abating and that will all contribute to what we think is <unk>.
Speaker Change: Prudent going forward, but that's.
Dan Moore: I guess, there's a caveat in there Dan around it is still too difficult to predict might happen with the geopolitical situation regarding tariffs or other areas.
Speaker Change: Yes.
Speaker Change: Understood I'll jump back with any follow ups. Thanks.
Speaker Change: Great Okay.
Speaker Change: Thank you. Your next question today is coming from Craig Ellis from B Riley Securities. Your line is now live.
Speaker Change: Yes, thanks for taking the questions and appreciate all the transparency in the presentation, especially on cost reduction.
Speaker Change: I wanted to start just by following up on one of the points that I mentioned and its a question both for Lora New Colin.
Speaker Change: So she talked about some customers, making very modest adjustments on orders, but the question is more about just the tone of customer conversations.
Speaker Change: <unk> had since <unk>.
Speaker Change: Tariffs.
Speaker Change: The tariff tissue really starting to ramp up.
Speaker Change: In late March and early April.
Speaker Change: What are you hearing from customers are you hearing that while they haven't done anything yet they could do.
Speaker Change: Things that might have a more impact harm business just help us understand what what's going on out there as you interact with your key customer constituents. Thank you.
Speaker Change: I can start with that as I've spent a lot of time with customers and talking to customers as have our commercial teams and technical teams for that matter. So I would say our customers are.
Speaker Change: Our feeling very resilient as we are they understand it's unpredictable, but they've been great to work with and when we talk about how can we potentially mitigate potential more tariffs, it's working with them in terms of.
Speaker Change: If we source from other areas could they move qualification and a faster pace, they're willing to do that I would say the dialogues have been constructive open we feel like we're in this together and I see a lot of cooperation coming from our customers and we're cooperating with them. So.
Speaker Change: It's unclear it's uncertain, we have been through a lot together going back to even before Covid and so we feel like this is one more hurdle that we'll work together to overcome but theres not a lot of despair, it's mostly around hey, this is in front of us let's figure out how to mitigate this and move forward and we'll be fine. We're just really trying to take <unk>.
Speaker Change: Step forward everyday with our customer base.
Speaker Change: Yes, that's really reassuring. Thank you Colin and then the second question I'll direct to you as it relates to one of the points that you made on the Crombec opportunity pipeline.
Speaker Change: In China, a great to hear there is good expansion going on can you just.
Speaker Change: Help reconcile what youre seeing with that opportunity pipeline, maybe provide a little bit more color on how it's developed and could further develop through the year and then more broadly the global market is pretty soft in.
Speaker Change: What do you what do you see happening regionally versus globally, and how does that all play out in the strength of the business. This year. Thank you.
Speaker Change: Okay, well I'll start by saying that we continue to make good progress on.
Speaker Change: On standing up our Kramnik facility. The prototyping continues and we still anticipate being able to supply customer orders by sometime in the middle of this year.
Speaker Change: And I would also say that our customer base in China remains excited.
Speaker Change: Related to the fact, we will be able to produce in China for China.
Speaker Change: We have a team that's been I think aggressively pursuing design in wins, both with Western Oems based in China, and Chinese Oems and we have several in the pipeline. Both one in some we think will be closing soon so we actually feel.
Speaker Change: Good about that I would say that from the macro perspective.
Speaker Change: It's still quite sluggish and the power module space and.
Speaker Change: We are anticipating improvement in the second half of the year that will relate to how tariffs unfold, most probably and what happens to inventory levels and of course consumer demand for EV HEV.
Speaker Change: We also still see from a keramic and power module perspective, the industrial segment still quite sluggish again, probably related to interest rates and other things related to tariffs as well, but from a longer term perspective, we still feel very comfortable that we're in the right space we do.
Speaker Change: Believe EV HEV will sort out and settle out into that 15% CAGR at some point and from <unk> perspective.
Speaker Change: We feel really good about our technology differentiation and especially our tech service and applications expertise that is helping drive our design wins and then as we ramp China will be very prudent and figure out how to balance supply and demand and we handle that on a monthly basis as we adjust in that area. So I would say.
Speaker Change: We still feel optimistic but still unclear on when the macro will finally get back to where we want it to be.
Speaker Change: That's real helpful and if I could sneak one in for Laura Laura impressive gross margin expansion.
Speaker Change: In the second quarter and I think you indicated that mix was a significant contributor there can you provide more color on the mix dynamics at play and then because there is so much cost reduction going on.
Speaker Change: Is there some cost reduction that's also helping albeit a minority rather than a majority of the increase thank you.
Speaker Change: Sure and so what I would say is with regards to close it up simply that is consistently you know what part of our DNA, we focus on cost management, and our manufacturing locations into our procurement and supply chain.
Speaker Change: On a day to day week to week basis. So there will be elements of cost reduction that will favorably in March.
Speaker Change: Margin on a quarter to quarter transition.
Speaker Change: But in addition to that and mix has a significant impact to us as a business with it appears that we have endless aikman applaud the regions that we're serving and the mix that we had in the first quarter was a little challenged on a quarter to quarter basis with what we expect to be sailing into the second quarter.
Speaker Change: Now I'll favorably assess this and then addition to that you know without mix and isn't just a Florida all the way down to debase label and heavy manufacturer that 2019 and facility and so we do see increased optimization or not makes into the second quarter, which helps on someone.
Speaker Change: With that and margin expansion that we happen to get there.
Speaker Change: And then finally, you know you hear me publicly repeatedly talk about you know the.
Speaker Change: The benefit utilization borders and so with that you know.
Speaker Change: Expansionary $7 million in adult lane into second quarter, we will see the feasible payments it when they get to wind season as well.
Speaker Change: That's very helpful. Thanks for thanks Colin.
Speaker Change: Thank you next question is coming from David Silver from CL King <unk> Associates. Your line is now live.
David Silver: Yeah, Hi, Thank you very much.
David Silver: Firstly I'd just like to mention I did appreciate the.
David Silver: The slide deck in particular slide six and the walk through of.
David Silver: Your different tariff exposures and the.
David Silver: <unk> bye bye different exposure very helpful.
Speaker Change: I did have a question I guess.
Speaker Change: A little different angle I guess on the tariffs but.
Speaker Change: More so than maybe the immediate.
Speaker Change: Tactical moves that you're that you've highlighted.
Speaker Change: I was thinking about maybe a longer term perspective, but.
Speaker Change: With your R&D and your technical work with your customers in particular, where the collaboration.
Speaker Change: Is is highest.
Speaker Change: Have you noticed or would you note any change in the behavior attitudes of the customers towards working with.
Speaker Change: With Rogers or working with a U S based company I mean in other words.
Speaker Change: Have a projects that maybe have a.
Speaker Change: Commercialization date, maybe next year over the next year or two as has the current environment led to any significant pauses or rethinking on the parts of your key customers. Thank you.
David Silver: Hi, David calling here I'll take that.
David Silver: I would say that it certainly has been a very dramatic last several months and theres been a lot of discussion with our customers about what the future looks like.
David Silver: And.
David Silver: There have been opinions.
David Silver: All over the map from customers all over the world for those I've spoken to in Europe, and in Asia and in the U S.
David Silver: What I feel though is that at the end of the day, we feel like.
David Silver: And our customers feel like that if we continue to work together as we have for years and Rogers has been a long time supplier to a lot of our customers will be able to navigate these waters together and we'll be able to go forward I can't say I've seen any.
David Silver: Specifically answer your question.
David Silver: Anti American company rhetoric, I mean, there are some people who have opinions on what's going on with the tariffs, but nothing specific against Rogers and most people if not all of the folks that I talk to feel like.
David Silver: The global economy.
David Silver: It has proven to be a successful engine for growth for the entire world and things will work through whatever we're in at the moment and normalize and we'll be back to where we want to be to a more stable macro and so you know I'm paying attention everyday to these changes keeping close contact with the customers as is the Rogers T.
David Silver: <unk> <unk>.
David Silver: We don't feel what you brought up is going to be a big impediment to our growth going forward.
David Silver: Thank you for asking that one.
Speaker Change: Yeah, I, probably worded it not not as diplomatically as I intended but it was more just from customers considering elevated uncertainty as opposed to.
Speaker Change: Anti American sentiment per se, but thank you for walking through that I appreciate it.
Speaker Change: I would like to maybe just touch base on.
Speaker Change: Your commercial update.
And in particular.
Speaker Change: The China opportunity funnel that you talked about.
Speaker Change: You know I've noted you've made new investments in products for for both Acs and EMS.
Speaker Change: From the increased opportunities that that you would cite in China.
Speaker Change: Or I'll, just say that the region, but is there a balance of.
Speaker Change: Increase on both the Es side in the EMS side or.
Speaker Change: Is it tilted more towards poor Ron then kramnik type products or would it be more solutions oriented where there's elements of both of your segments just to comment on.
Speaker Change: The development of your opportunity funnel in China. Thank you.
Speaker Change: Sure.
Speaker Change: Yeah.
Speaker Change: Yes, Thanks, David I'll take that one as well.
Speaker Change: Would say that our opportunity funnel in terms of.
Speaker Change: How it's balanced it's fairly well balanced between <unk> and Aes. So from the EMS perspective, a poor on is lead technology for us, but we also have our <unk> foam.
Speaker Change: We have two polyurethane manufacturing lines in South Korea units that makes a different type of polyurethane foam that goes quite well and a lot of end market segments and from an EMS perspective, we're seeing growth and targeted program wins in the portable electronic areas industrial EV HEV.
Speaker Change: Those might be the three largest ones, although not completely.
Speaker Change: The final end applications, we sell to but and then from the Aes perspective, it's mostly I would say EV HEV. So it's a das radar, it's power modules that go into EV, HEV or industrial and a good portion of renewable energy and Thats also a key end market segment for our role.
Speaker Change: <unk> laminated.
Speaker Change: Eliminated bus bars, so I would say that a good proxy would be yeah, we see a general.
Speaker Change: I would say balanced funnel between the businesses and it's also quite diverse in terms of products, we sell going into multiple different end applications. So we're not just focusing I would say with one product into one end market in China.
Speaker Change: It's quite the opposite.
Speaker Change: Yeah.
Speaker Change: Yes.
Speaker Change: Great. Thank you very much I appreciate it.
Speaker Change: Thank you David.
Speaker Change: Thank you as a reminder, that star one to be placed in the question queue.
Speaker Change: Our next question is a follow up from Dan Moore from CJS Securities. Your line is now live.
Speaker Change: Thank you again.
Speaker Change: The color on both.
Speaker Change: Both capital allocation priorities as well as the.
Speaker Change: Capex update given that what are your expectations for free cash flow this year.
Speaker Change: If it's not a range, maybe just kind of discuss some of the other components what are your expectations for working capital et cetera.
John: Hey, John.
John: Chart here and so as you saw we expanded our cash balance in Q1, I'm, sorry, I'll put $176 million and 16 million quarter on quarter.
John: And if you consider that in relation to lane and our profitability in the first quarter.
John: Even even with that lower level of activity and we expanded absent the sale of patient with $8 million.
John: <unk> Civil you know a capital investment of $10 million.
John: We do engage them for the full year, but I think that tells you is something a bit the resiliency in our liquid.
John: And the position that we're in.
John: From a balance sheet per se.
John: And that theme the capital allocation considerations and the update that we shared entities and with you.
Speaker Change: That's helpful. Laura and just thinking longer term beyond this year are you pointing to lower capex.
Speaker Change: Or is that more of a temporary pullback in still thinking something along the you know maybe 7% of revenue range. Thanks again.
Speaker Change: Of course, and no I would suggest you know historically, we've been in base thing and as we expanded our global footprint and satisfying their local for local strategy and we're largely complete with the Lewis and capacity investments, which means you know or organic investment <expletive>.
Speaker Change: And if you look at that see it as a proxy will be sub 5%.
Speaker Change: As for at least two syndication is and so we think Spain maintain strategic decrease.
Speaker Change: One thing that I would mention though is.
Speaker Change: Consistent with what we should do in seeking optimization opportunities will review investment opportunities their businesses and the R&D teams are deemed to sorry.
Speaker Change: On an ongoing basis and make decisions based on opportunity and to deliver significant return and that they are complying with their investment thesis.
Anticipate and reduced and obtain city going forward, but I just would like to caveat that with we have to evaluate opportunities as they present.
Speaker Change: Okay.
It makes perfect sense. Thank you.
Speaker Change: Youre welcome.
Speaker Change: Thank you. Your next question is a follow up from Craig Ellis from B Riley Securities. Your line is that life.
Speaker Change: Yes, thanks for taking the follow up Dan really just hit on it with the inquiry on.
Speaker Change: On the level of Capex intensity going forward, but.
Speaker Change: I'll use it as an opportunity to take a little bit deeper Laura as we look at the business and its capital intensity as we switch more from from just.
Speaker Change: Building out our local for local capability and really optimizing the footprint in place.
Speaker Change: Can you characterize the relative capital intensity of the two main segments are there parts of those businesses would have relatively higher.
Speaker Change: Capex requirements to to sustain them more or are there. Other factors that we can be aware of that point help us understand.
Speaker Change: In Q4.
Speaker Change: 4% to 6% range, where we might be allocating that capital. Thank you.
Speaker Change: And so what I would tell you is with the structure of their factories.
Speaker Change: Yes.
I would suggest.
Speaker Change: Suggests that if I look at the investment with me over the last few years.
Speaker Change: They've been somewhat balanced between both of our segments associated to capital and capacity expansion.
Speaker Change: But also within that cafes and basement, Craig is and what we need to be sent to maintain that existing fleet and.
Speaker Change: And when I think about that as it relates to our global manufacturing footprint.
Evelyn: It quite well Evelyn.
Evelyn: And in terms of visibility that we have not actually there may be some.
Evelyn: Individual one off things that we need to undertake to maintain a facility or upgrade some thing and that's unforeseen that may be a little more than pain.
Evelyn: Think if you look at that over a PD is obtained its going to balance itself and now with kids and hazard.
Speaker Change: Hey, Jason it's probably somewhat balanced and even if you can set there the investments that we have been making in recent years. They always are inclusive of in basin not just in our capital expansion, but also our facility maintenance and in addition to that in basements in AD and D for Federal Tonight.
Speaker Change: And then there are technology capabilities, and then finally Owen systems, and and ERP. So that we can make or our organization what do you think.
Speaker Change: And to seek optimization in the future.
Speaker Change: Very helpful. Thank you Laura.
Laura: Youre welcome.
Laura: Thank you as a reminder, that star one to be placed into question queue. One moment. Please while we poll for further questions.
Laura: Yeah.
Speaker Change: We reached end of our question and answer session I like to turn the floor back over for any further or closing comments.
Speaker Change: I would just like to say that thank you for joining our conference call and we look forward to following up with many of you.
Speaker Change: Over the next several weeks thank you very much.
Speaker Change: Thank you that does conclude today's teleconference and webcast you may disconnect. Your lines at this time and have a wonderful day, we thank you for your participation today.