Rogers Reports Q4, Full Year 2022 Results

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Rogers Corporation announced financial results for the full year and fourth quarter of 2022.

“Rogers continues to execute on its profitability improvement plans and navigate the challenging macroeconomic environment as we focus on our growth strategy," said Colin Gouveia, Rogers' President and CEO. "As recently announced we have undertaken a series of actions to improve operating margins in the coming quarters, including reducing our global workforce by 7%, divesting the non-core, low-margin natural rubber product line and optimizing our manufacturing footprint. In the fourth quarter we continued to face market headwinds from continuing COVID-related disruptions in China and weaker demand in certain markets, which tempered sales volume and gross margins. As we respond to the current market dynamics we also remain focused on driving growth by expanding our leadership in advanced materials solutions across our markets. This is especially true in the EV market where we are well-positioned with sales growth of 35% in 2022 and continued design win traction."

Q4 2022 Summary of Results

Net sales of $223.7 million decreased 9.5% versus the prior quarter resulting from the impact of China COVID-related restrictions, weaker demand in certain markets and unfavorable currency exchange rate fluctuations. AES net sales decreased by 4.1% related to unfavorable currency exchange rates and lower sales in the aerospace and defense and other markets. EMS net sales decreased by 15.6% primarily resulting from lower portable electronics and general industrial market demand. The lower sales primarily resulted from weaker customer demand due to COVID-related disruptions in China and the challenging macroeconomic environment. Currency exchange rates unfavorably impacted total company net sales in the fourth quarter of 2022 by $4.2 million compared to prior quarter net sales.

Gross margin was 31.8%, compared to 31.6% in the prior quarter from lower manufacturing spend and yield improvements, partially offset by lower sales volumes.

Selling, general and administrative (SG&A) expenses increased by $3.7 million from the prior quarter to $54.3 million. The higher SG&A expense was due to an increase in professional services and employee-related costs.

GAAP operating margin of 37.0% increased from 7.5% in the prior quarter, primarily due to an increase in other operating income from the receipt of a $142.1 million regulatory termination fee, net of transaction expenses. This increase was partially offset by $65.4 million of impairment and restructuring charges, which were primarily associated with the consolidation of the AES laminate circuit materials business and the divestiture of the natural rubber product line in the EMS business unit. Adjusted operating margin of 9.3% decreased by 150 basis points versus the prior quarter.

GAAP earnings per diluted share were $3.58, compared to earnings per diluted share of $0.78 in the previous quarter. The increase in GAAP earnings per diluted share was due to higher operating income, partially offset by an increase in tax expense. On an adjusted basis, earnings were $1.04 per diluted share compared to adjusted earnings of $1.11 per diluted share in the prior quarter. 

Ending cash and cash equivalents were $235.9 million, a decrease of $0.6 million versus the prior quarter. Fourth quarter net cash provided by operating activities was $127.6 million, and included the receipt of the regulatory termination fee, net of transaction expenses and taxes. Also in the quarter, the Company repurchased shares of $25.0 million, had capital expenditures of $29.8 million and made a principal payment of $75.0 million on the outstanding borrowings under the Company’s revolving credit facility.

Full Year 2022 Summary of Results

Net sales of $971.2 million increased by 4.1% compared to 2021, led by higher EV market sales for both the AES and EMS business units and from the Silicone Engineering acquisition. The increase in sales was partially offset by customers who were impacted by COVID-related restrictions in China and other challenges in the macroeconomic environment. AES net sales declined as higher EV sales were more than offset by lower sales in the wireless infrastructure, defense, ADAS and clean energy markets. EMS net sales increased from the Silicone Engineering acquisition and higher general industrial and EV market sales, partially offset by lower sales in the portable electronics and consumer markets. Currency exchange rates unfavorably impacted total company net sales in 2022 by $36.9 million compared to the prior year.

Gross margin was 33.1% compared to 37.4% in 2021. The decrease in gross margin resulted from unfavorable factory utilization, lower manufacturing yields and higher raw materials and freight costs. These items were partially offset by commercial actions.

SG&A expenses increased by $25.7 million from the prior year to $218.8 million, primarily due to higher costs associated with the terminated DuPont merger, and increases in software expenses, travel and intangible asset amortization.

GAAP operating margin increased to 14.9% from 12.6% in the prior year, primarily due to an increase in other operating income from the receipt of a $142.1 million regulatory termination fee, net of transaction expenses. This increase was partially offset by lower gross margin, higher SG&A expense and $66.6 million of impairment and restructuring charges, which were primarily associated with the consolidation of the AES laminate circuit materials business and the divestiture of the natural rubber product line in the EMS business unit. Adjusted operating margin was 11.7%, compared to 16.4% in 2021.

GAAP earnings per diluted share were $6.15, compared to $5.73 per diluted share, for full year 2021. The increase resulted primarily from higher operating income and higher tax expense. On an adjusted basis, earnings were $4.91 per diluted share for full year 2022, compared to $7.20 per diluted share for full year 2021.

Ending cash and cash equivalents of $235.9 million increased by $3.6 million versus the prior year. The Company generated operating cash flow of $129.5 million, had capital expenditures of $116.8 million, repurchased shares of $25.0 million and had net borrowings of $25.0 million under the Company’s revolving credit facility.

Financial Outlook

The following outlook for the first quarter of 2023 includes $3 million of sales from the natural rubber product line, which will be divested by the end of the quarter. The recently announced cost improvement actions are expected to begin taking hold in the first quarter with the full benefit expected in subsequent quarters.