Jack Monti - Director, IR Bruce Hoechner - President and CEO Janice Stipp - SVP, Finance and CFO Robert Daigle - SVP and CTO

Craig Ellis - B. Riley, FBR Daniel Moore - CJS

Good afternoon. My name is Cristina, and I will be your conference operator today. At this time, I would like to welcome everyone to the 2017 Third Quarter Conference Call. [Operator Instructions] Jack Monti, Director of Investor Relations, you may begin your conference.

Thanks, Cristina. And thanks so much everyone for joining Rogers' third quarter 2017 earnings call. To follow along with the presentation, please see the Investors section of our website. Turning to Slide 2, we have a disclosure on forward-looking statements. During the call, we'll be making certain forward-looking statements subject to a number of risks and uncertainties, which may cause actual results to differ materially versus today's outlook. In addition, some of our financial metrics discussed will be on a non-GAAP basis, which management believes better reflects the underlying core operating performance of the business. Turning to Slide 3, it’s my pleasure to introduce Roger's Management team. Bruce Hoechner, President and CEO, is joined by Janice Stipp, Senior Vice President and CFO, and Bob Daigle, Senior Vice President and CTO. I will now turn the call over to Bruce.

Thanks Jack, good afternoon everyone and thank you for joining us on today's call. I'm very pleased to report that in Q3 2017 Rogers achieved all time record net sales and record third quarter earnings. Net sales were $207 million, an increase of 25% over Q3 2016. Revenue growth was evenly split between organic sales and contributions from our recent acquisitions. Notably, our Q3 results marked Rogers' fourth consecutive quarter of double-digit organic growth. Net sales combined with our commitment to operational improvements led to substantial profit gains during the quarter. Compared to Q3 2016, we achieved gross margins of 40% up 220 basis points, adjusted EBITDA of $51 million up 47% and adjusted EPS of the $1.41 up 46%. Over the past several years Rogers has greatly expanded, diversified and improved the performance of our business portfolio through new product innovation, thoughtfully identified well-integrated acquisitions, increased geographic penetration, and enhanced operational execution. Today our products play a vital role in many exciting advanced mobility and advanced connectivity applications such as Advanced Driver Assistance Systems or ADAS, electric and hybrid electric vehicles or EV HEV and the latest generation of high performance wireless networks. These rapidly emerging markets play well to Rogers' strengths putting us in a great position to capitalize on the significant growth opportunity. Please turn to Slide 5, I would like to take a few minutes to review Rogers growth strategy. Our results confirm that we have implemented a winning approach and we are clearly benefiting from our solid execution. We have confidence that our commitment to the four pillars of this roadmap will help us maintain our record of generating substantial and sustainable results, as well as strong shareholder returns. Our focus on market driven innovation is helping us advance our position in a number of rapidly growing areas. One example is our PES business where we are seeing continued adoption of our silicon nitride substrates for Wide Bandgap Semiconductor's. These products offer high thermal connectivity and reliability which are essential for EV HEV applications. We are proud of our ability to identify and pursue synergistic M&A opportunities and to successfully incorporate them into Rogers. The integrations of DeWAL integration and diversified silicone products have gone extremely well with both businesses making significant contributions to Rogers's net sales in 2017. The EMS integration teams have taken a disciplined approach to ensure that the operations continue to run smoothly. Looking ahead, we will remain focused on augmenting our organic growth through synergistic M&A with companies that play at the top of the pyramid. These are businesses with market and technology leadership, highly engineered applications, differentiated offerings, and an attractive financial profile. Our commitment to operational excellence is enabling our topline results to flow through to the bottom line. Improvements to our manufacturing operations are enabling us to increase capacity while controlling costs and maintaining quality. We continue to target top quartile operating profit growth when compared to our peers, as we work towards our 2020 vision. On the revenue side, our goal is to deliver organic growth from our current businesses in the range of 7% to 10% per year. In addition, we expect the continued execution of our M&A strategy to add 5% to 8% and revenue growth per year for overall topline growth of 15% per year. Some of the acquired revenue may not come in smooth increments but by the end of 2020, we expect Rogers to deliver roughly $1.2 billion in sales with operating profit margin of at least 20%. Turning to Slide 6, we view two growth drivers as key priorities, advanced mobility and advanced connectivity. These categories are aligned with the investments we're making in our technology portfolio, marketing and innovation initiatives. In advanced mobility applications our growth is driven by mission-critical products for EV HEV market, as well ADAS. The growth outlook for these markets is significant. From a regulatory perspective the EV HEV market has been gaining remarkable momentum with governments beginning to announce that they intend to ban traditional combustion engines in the coming decades. This includes China, France, the U.K., India and Norway. These regulations along with consumer demand are prompting numerous OEMs to accelerate their plans to introduce new EV HEV models. In advanced connectivity, we expect future growth to come from the 5G infrastructure build-out where industry sources cite new developments on the horizon. This includes a recent plan announcement by a major Chinese telecom operator to deploy 100,000 5G base stations in China by the end of 2018. Rogers has greater material content in these highly sophisticated systems than in 4G LTE equipment and we are already seeing 5G applications out in the market today with several operators implementing fixed wireless competing with traditional cable offerings to the home. Rogers is highly differentiated in this space and is well-positioned to capitalize on the projected growth. With these tailwinds across our key growth drivers, we will accelerate our investments and capacity to meet demand. Turning to Slide 7. ACS achieved third quarter net sales of $73 million and 11% increase over Q3 2016. Growth was driven by applications for ADAS, aerospace and defense and 4G LTE infrastructure. During Q3 we saw a rebound in demand for both base station power amps and antennas for wireless 4G LTE applications. As I mentioned, we are optimistic about the accelerated rollout of 4.5G and 5G where service providers are reporting that deployments originally scheduled for 2020 timeframe are moving to late 2018 and early 2019. This bodes well for Rogers as we have a solid leadership position in this market. ADAS is another exciting high growth area for ACS. Demand for Rogers applications in these markets increased 50% over last year. Our portfolio supports full spectrum of requirements for short made and long-term sensors for features like blind spot detection and adaptive cruise control. ACS has done an outstanding job in getting specified into these applications over many years and now we are reaping the benefits as these programs go into production. We will continue to focus on introducing new innovative technologies to meet customer and market demand. Please turn to Slide 8, in Q3 2017 EMS delivered all time record quarterly net sales of $82 million, an increase of 51% over Q3 2016. Our recent acquisitions contributed $21 million of sales revenue to EMS. On an organic basis, EMS net sales increased 14% over Q3 2016 due to higher demand across all end market applications. We saw particular strength in portable electronics in general industrial applications. We continue to broaden our portfolio solutions with new design wins in applications such as the flexible flat cable harness for clean room manufacturing equipment. In addition revenue from portable electronics has improved significantly after several years of headwinds. This return to growth has been driven by a focus on new designs at many global and regional OEMs where our PORON polyurethane is one new design wins in a wide variety of sealing applications. We are also accelerating growth in EMS by aggressively pursuing general industrial opportunities with increased focus on Europe and Asia. Looking ahead in EMS, we expect ongoing benefits from our newly added businesses, our geographic penetration and innovation capabilities. We will continue to actively seek acquisitions that operate at the top of the pyramid extend our market reach and expand our technical capabilities to provide a broader set of solutions to our customers. Please turn to Slide 9. PES achieved third quarter net sales of $46 million, an increase of 17% over Q3 2016. These results were driven by double-digit growth in applications for renewable energy, e-mobility and laser diode coolers. As we look ahead in PES, we will maintain focus - our focus on e-mobility applications ranging from electric power steering and regenerative braking to EV HEV. As previously mentioned, we are looking at significant growth and demand for these applications and our leading PES technologies have us well positioned to capitalize in the opportunities that lie ahead. The PES team is also focused on improving profitability through operational excellence initiatives including broader use of continuous improvement methodologies like Six Sigma and Lean. In addition the team is working to optimize its global footprint and improve manufacturing operations, productivity and yields through automation. Turning to Slide 10, looking at the macroeconomic conditions, we're very encouraged by the positive growth outlook in many of our key markets. Based on recent reports, business confidence is gaining globally and we will continue to monitor conditions to respond with agility should market shifts occur. Our results in Q3 reinforce that we are in the right global markets where growth is significantly outpacing GDP. As mentioned earlier, the robust demand that we're seeing across many of these key markets is accelerating strategic investments to increase capacity and expand our capabilities. In summary, we are extremely pleased with our performance in Q3. We believe that our increased market and customer diversification positions us well to deliver consistently strong performance. With powerful tailwinds in many of our key markets, we are confident in our ability to continue to deliver impressive shareholder returns. I will now turn the call over to Janice who will report on our Q3 results in greater detail as well as additional financial highlights. Janice?

Thank you Bruce, and good afternoon everyone. Our Q3 results reflect a continued momentum of the positive trends we have experienced throughout 2017 including double digit growth in our business units driven by our leading technologies, acquisition strategy, solid margin expansion all while continuing to invest in strategic growth initiative. As you'll see in the presentation today, the momentum we experienced in the first half continues into the third quarter of 2017. Now let me turn to Slide 12, I’ll review our third quarter results in more detail followed by our fourth quarter guidance forecast. Q3 2017 revenue as previously noted was $207 million, which exceeded both our guidance in Q3 2016. Our growth was primarily the result of strong volumes across all our business units and a recent acquisition. Adjusted operating margin was up 400 basis points from 15.5% in Q3 2016 to 19.5% in Q3 2017, a significant increase primarily due to higher volume, performance and acquisitions partially offset by SG&A primarily due to incentive compensation, acquired SG&A, higher sales marketing expense related to our higher sales and timing of professional services. Adjusted operating income was $40.3 million in Q3 2017 improving $14.8 million versus 25.5 million last year. Adjusted EBITDA of $50.7 million improved $16.2 million or approximately 47% compared to the third quarter of 2016. Net income of $25.5 million in the third quarter of 2017 was up $9.4 million versus the prior year or 260 basis points as a percent of revenue. Third quarter 2017 adjusted earnings per share of $1.41 was above our guidance exceeded Q3 2016 by 40% or 45.4%. Please turn now to Slide 13 for a review of our quarterly revenue. Our revenue was up 25.1% on year-over -year basis. Third quarter effective currency exchange rate favorably impacted revenue by $0.9 million primarily due to euro offset by the renminbi. Adjustment for FX our organic revenue was up $19.9 a 12.1% the acquisition revenues were $20.7 million or 12.5%. Looking at our Q3 2017 adjusted operating income on Slide 14, third quarter adjusted operating income was $40.3 million reflects an adjusted operating margin of 19.5%, an increase of 400 basis points or $14.8 million compared to the third quarter of 2016. The increase is primarily due to favorable volume mix and performance driven by an increase the past utilization operational process enhancements and automation, conversion of fixed cost of variable were possible and the recent acquisition. This income was partially offset by a $5.4 million increase in SG&A primarily due to SG&A from our recent acquisitions, higher incentive compensation, sales marketing related to higher sales and the timing of professional services. Now let's look at our adjusted EBITDA on Slide 15. Adjusted EBITDA at $50.7 million increased by $16.2 million in Q3 2017, as compared to Q3 2016 and improved as a percent of revenue to 24.5%. This increase was driven primarily by many of the same reasons just noted during this discussion of adjusted operating income such as stable volume, and performance partially offsetting this is the $5 million increase in SG&A. Turning to Slide 16, we exceeded Q3 2017 guidance range for adjusted earnings per share, as well as exceeded our Q3 2016 adjusted earnings per share by 45.4% or $0.44 resulting in $1.41 in adjusted earnings per share for Q3 2017. As the slide depicts the $0.44 increase was primarily due to $0.66 of favorable volume and other, $0.05 favorable performance, offset by $0.17 unfavorable SG&A primarily bonus incentives, acquired SG&A and timing of professional services. $0.01 unfavorable miscellaneous income and expense and $0.09 unfavorable due to changes in the effective tax rate, primarily due to the change in our deferred tax asset valuation allowance related to an investment in R&D an income mix partially offset tax deductions and stock based compensation. If you turn to Slide 17, you’ll see our Q3 2017 segment revenue. ACS, EMS, and PES segment revenues increased by 11%, 51.2%, and 16.7%, or by $7.2 million, $27.8 million, and $6.6 million respectively. More specifically, in Q3 of 2017, our ACS segment revenue increased primarily due to ADAS, aerospace/defense and stronger demand in 4G/LTE wireless infrastructure. The EMS segment revenue increased 51.2% in Q3 2017. Organic sales increased $7.1 million or 13.1% due to higher demand for portable electronics, general industrial, mass transit and EV HEV application. In addition, the recent acquisition revenues contributed $20.7 million. Finally, our PES segment was the fastest organically growing segment, with 16.7% growth in revenues, principally due to renewable energy, laser diode coolers, mass transit, EV HEVs and variable frequency motor drives. Looking at Slide 18, you’ll see our segment adjusted operating income. First, ACS adjusted operating income was $13.7 million, up $5.6 million from Q3 2016 or 650 basis points as a percent of revenue. This was primarily due to favorable impact of volume mix, performance due to productivity improvements focused on cost containment efforts, operational process enhancement and automation. These favorable impact have been partially offset due to commodity prices, slightly higher price due to increased volume, raw material supply and capacity constraints, SG&A primarily incentive compensation and R&D investments. Next, EMS adjusted operating income was $19.3 million, up $7.4 million in Q3 2016. This increase was primarily due to favorable impact of acquisitions and volume increases in the portable electronics, general industrial, mass transit and EV HEV applications. Favorable performance as a result of operational excellence initiatives, converting fixed cost structure to variable and favorable capacity utilization partially offsetting these positives or higher corporate allocation due to the acquisition and increased SG&A primarily incentive compensation. Lastly, PES adjusted operating income was $5.5 million, up $1.9 million from Q3 2016. This increase was mainly due to favorable volume across this market improved productivity as a result of our operational excellence initiatives, as well as leveraging our Eastern European footprint and partially offsetting these favorable items are higher commodity cost, due to copper and SG&A incentive compensation. Turning to Slide 18, you can see we entered the third quarter with a cash position of $151 million. Rogers continues to generate solid operating cash flow of $99.9 million to the first two quarters which represents a $5.6 million increase versus the same period last year. The increase in cash flow is largely driven by the higher 2017 net income partially offset by the use of working capital with higher accounts receivable inventories driven by our sales growth, although our working capital metrics have improved. We have strong adjusted EBITDA of $151.6 million year-to-date, which help fund our strategic priorities including the acquisition of DSP as well as the debt paydown in the year. Year-to-date cash conversion is approximately 66% due to working capital requirements and funded growth and our third quarter cash conversion is approximately 70%. Year-to-date cash taxes paid are $24 million. Lastly we had invested $17.7 million in capital expenditures during the first nine months of the year or 2.9% of revenue. Taking a looking at our Q4 2017 guidance on Slide 20, revenues are estimated to be in the range of $200 million to $210 million, with earnings in the range of $1 to $1.28 per diluted share. The fourth quarter revenue guidance expected full year revenue range of $812 million to $822 million or 24% to 25% increase versus last year. On an adjusted basis we guided Q4 earnings in the range of $1.35 to $1.45 per diluted share. The full adjusted earnings per share translates into range of $5.77 to $5.87 per share. At the mid-point, our Q4 2017 revenue guidance represents a year-over-year revenue increase of 18.5% compared to Q4 2016. This revenue guidance includes anticipated favorable currency fluctuations of 2% or $3.4 million. Guidance for earnings per share has a mid-point of $1.23 per diluted share and in total reflects an increase of $0.58 per diluted share compare to earnings of $0.65 in Q4 2016. On an adjusted earnings per share basis guidance has a midpoint of $1.40 per diluted share which is $0.46 or 48.9% increase from $0.84 in Q4 2016. This year-over-year increase is primarily due to higher volume, acquisition, improved operational performance, partially offset by higher commodity prices and SG&A. For the full year 2017, Rogers expects capital expenditure to be in a range of $25 million to $30 million which is lower than previously anticipated due to the timing of the capital expenditures. In addition from the recent headlines discussed in eMobility and eConnectivity Rogers is well positioned with our technologies and market focus that benefit from the accelerated growth in these market trends. Although to meet these accelerate growth trends we will see increase spending, the carryover capital and accelerated growth next year. The effective tax rate is guided to be approximately 33% for the full year In summary, Rogers has a competitive product portfolio diversified customer base and customer seeking Roger’s expertise to serve other challenges and lean across structures in a business model that drives revenue, earnings and cash flow growth. I'll now turn the call over to Bruce.

Thank you, Janice. This now concludes our prepared remarks. We’ll now open the line for Q&A.

[Operator Instructions] Your first question comes from Craig Ellis from FBR. Your line is open.

It's B Riley FBR. Our team congratulations on the very good execution once again in the quarter. Bruce I wanted to follow-up on what I think were two references in your prepared comments to capacity and investment clearly you're seeing a very strong demand environment good execution I think year-to-date capital expenditures were about $17.7 million but where do you feel like there needs to be further capacity investments and where do you have room to grow into the plant and equipment that you do have?

There are couple of product lines that are tight on capacity getting up to a point where we're bit uncomfortable. So we've already moved ahead on approving investments there for capital expansion. We are now evaluating more broadly given the tailwinds that we've seen pretty much across all the product lines for additional strategic investments to ensure that we have appropriate capacity. And we’re in the midst of doing that now so in our Q4 call we will be able to give much clear guidance on the full year outlook in 2018 for CapEx.

And then I wanted to follow-up on one of the segments you mentioned in talking about communication infrastructure, the announcement that was out on the investment China 100,000 base stations for 5G. As we look ahead and it seems like no matter where you look there are signs of 5G pull in but as we look what’s happening in the segment a good performance in the quarter, are we at a point where with the activity that you're seeing in 5G we’re ready to hand off to a more sustained growth in that business or could it still be a bit lumpy in the near term before you move into the sweet spot of that infrastructure investment?

What we’re seeing is the 4.5G rollout essentially completion of 4G across places like China plus NB IoT narrowband Internet-of-Things also specifically in China growing and basically bridging the timeframe between when 5G really starts rolling out as you referenced the 100,000 base stations towards the end of 2018 going in to 2019 is the beginning of that and then we'll see more certainly as 2019 roles through. So this is a bit of a bridging timeframe that we’re seeing but we were encouraged in Q3 by the strength overall in the telecom space we did see growth and we're anticipating a similar sort of outlook in this quarter. So as I mentioned a bit of a bridging at this point with really 5G towards the end of next year 2018 and moving into 2019.

That's helpful and the last one from me before I jump back in the queue. Nice balance with organic and inorganic growth in the quarter the company mentioned that yet again there was good revenue execution from DeWAL and DSP where are we with those two business in terms of taking their U.S. based revenue from acquisition and importing that internationally and driving international growth with those two franchises?

As we had mentioned earlier that was part of the strategy for that acquisition and just to mention we've seen through the year through the first three quarters of this year approximately just over 20% growth in our sales for DeWAL in Asia and I think that reflects our focus on expanding that business strategically into Asia and we anticipate continued success as we move through.

[Operator Instructions] Your next question comes from Daniel Moore from CJS. Your line is open.

So Bruce you talked about the 4.5 G obviously, it sounds like 4G traditional 4G LTE had a little bit of a resurgence, so I am reading that correctly it is that also embedded in the Q4 guide and then we’ll switch gears to some of the other end markets.

We’re seeing - I would say that 4G and when we look 4G is really driven primarily right now in China. When we look at China its probably close to 90% 4G build out and we anticipate that over the next year or so that build out will get up closer to the 98%, 99% and so that’s what driving a bit of the investment that you're seeing and the growth that we’re seeing in 4G.

And then switching over to PES, you talked about I mean it sounds like all your end markets are going gang busters. But with laser diodes where are we now in terms of percentage of revenue I’m just trying to get sense of how meaningful that will be going forward. And maybe an update on renewable energy what are you seeing and what your expectations for continued growth into 2018 there?

So laser diodes in the quarter, laser diode coolers grew at a very high rate 25% and it’s a relatively low base. It accounts for the total of the corporation only about 2% of the corporation. But again we see the outlook for this to have continued high growth as far as we can see now this is all part of the automation that moving forward in the industrial side, medical side as well. So we're very bullish on that. In terms of renewable energy which was a growth area that was a primarily solar renewable energy in China that propelled that growth forwarded. We’ve seen that ebb and flow over the course of the last couple years and I think it's very project related. But I think the big news in curamik is pretty much or I should say in PES across the board we saw very strong growth. And I’ll draw particular attention to EV HEV also eMobility overall advanced mobility both EV HEV, as well as X-By-Wires we call it the electrification of traditional internal combustion engine. So a lot of focus there a lot of growth and our curamik materials are very well suited as a mentioned in my prepared remarks as the technology moves in that direction.

And then let me just throw one more at portable electronics is gone from what was a headwind for a period of time to nice tailwind. Talk about your expectations for continued content growth in 2018?

Well again we don’t project really much pass the fourth quarter but as our more strategic outlook in that business and we've done a very good job and the team has done an outstanding job in really understanding the customer needs next generation need and we’re getting the wins that that we think we deserve. Some challenges out there OLED continues to be a challenge for us that’s a very tough application the back pad on OLED because it's so thin. But we continue to look at next generation OLED is well, the flexible and bendable screens. And those are coming in the next two years or so. And our technology is very well suited in those areas.

[Operator Instructions] Your next question comes from Craig Ellis from B. Riley, FBR. Your line is open.

Janice I wanted ask you a few, with regards to operating expenses and admittedly the variances are typically done year-on-year, but when I look at the trends in the business in the third quarter revenues was up nicely sequentially, operating expense actually declined a little bit I was surprised with that. Was there anything special that happened quarter-on-quarter is that just classic Rogers' efficiency initiatives are coming into play?

Yes, various efficiencies coming into that really fall in cost utilization but also the other things that was offsetting was the copper, copper is growing we do have derivatives in place to offset it and we have indexing so that was a little bit of the mismatch in the quarter. So one thing we could have an operational for this quarter is premium freight that we’re getting the handle on that’s really to the raw material, supply we had some constraints with the supplier. We are working on a second source in addition that supplier has given us more production allocation so we won't have any issues in the next quarter for that product which is really the copper foil.

Just clarifying those comments though, the copper derivatives and the premium freight were those OpEx items or COGs items.

Premium freight is – in your growth volume cost of goods sold derivatives, we don't have hedge accounting, so that would be other income and expense.

And then Bruce, for you, and perhaps for Janice as well, at the Analyst Day the company was real clear on the importance of inorganic growth in achieving the $1.2 billion target, can you just give us an update on how you're looking at the landscape now and in the readiness of the company given the progress made thus far with DSP and DeWAL integration.

Sure, we have - as you mentioned this is part of our core strategy - M&A is part of our core strategy and we have a very seasoned team now out identifying opportunities and we continue to work through those. So we see still opportunities out in front of us and we are as an organization quite able and ready to pull the trigger at the appropriate time.

And do you sense that evaluation expectations are still reasonable one of the things that has changed fairly meaningfully since Analyst Day is that we have had a significant and fairly broad-based move in the market. Do you sense that you can still transact at multiples that are as reasonable as some of the things that we've seen in the last year or has the market really inflated expectations for counterparties and put things in a position where targets are as abundant as you would like?

We’re seeing multiples that are reasonable in the sense of what they’ve been over the last couple of years and so from our perspective we are - we still think there's good value out there.

[Operator Instructions] And there are no further questions at this time. I’ll turn the call back over to the presenters.

Thank you very much. And thank you everyone for joining the call today. We're pleased with our performance in Q3 and we’re looking forward to a strong finish in 2017. Have a good day everyone, thank you.

This concludes today's conference call. You may now disconnect.