Good morning. My name is Scott and I’ll be your conference operator today. At this time, I would like welcome to the 2016 fourth quarter conference call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. [Operator Instructions] Jack Monti, Director, Investor Relations, you may begin your conference.

Thanks, Scott. And thanks so much everyone for joining Rogers fourth quarter and full year 2016 earnings call. To follow along with the slide presentation, please see the Investors section of our website. Turning to slide two, 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 from today's outlook. In addition, some of the 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 three, it’s my pleasure to introduce Roger's management team. Bruce Hoechner, President and CEO, is joined by Janice Stipp, VP and CFO, and Bob Daigle, SVP and CTO. I will now turn the call over to Bruce.

Thanks, Jack. Good morning, everyone, and thank you for joining us on today's call. Before we get to the slide deck, I would like to welcome Jack Monti, our new Director of Investor Relations, to the Rogers team. Jack has been with us for nearly four months and has already proven to be a very valuable part of our investor relations organization and involved in broader finance functions as well. Jack is keenly aware of what is important to our investors and he is quickly getting up to speed on our business and our markets. Please join me in welcoming Jack to Rogers. Please turn to slide four. In Q4 2016, Rogers delivered strong net sales and margin performance to close out a very good year. The company achieved net sales of $173 million, exceeding our previously announced guidance, an increase of 13.1% over Q4 2015. Excluding the effect of currency fluctuations and the divestiture of non-core assets, net sales increased 17.2% over Q4 2015. Our operating discipline led to gross margins of 38.6%, an improvement of 420 basis points over Q4 2015 and just below our target of 40%. Q4 adjusted EPS was $0.94 compared to $0.80 in Q4 2015 and above the top range of our guidance. For the year, Rogers achieved net sales of $656.3 million for an increase of 2.3% over 2015. Gross margins were up 130 basis points to 38%. Adjusted EPS for the year was $3.72 compared to $3.48 for full year 2015. On an adjusted basis, 2016 net sales increased 6.4% over the prior year. In 2016, we continued to execute our strategy, making progress in a number of vital areas. We completed the acquisition of DeWAL Industries and, in early 2017, Diversified Silicone Products, augmenting the product portfolio and technology capabilities of…

Thank you, Bruce. And good morning, everyone. We just completed a very successful year as measured by almost every financial metric. Additionally, in 2016, we executed critical initiatives within the business as we continue to improve our cost structure and enhance our product capability and begin the process of integrating the DeWAL acquisition. Turning to Q4, we are pleased with our results. As you will see in our numbers, the momentum that we experienced in Q3 continued in Q4. Adjusted earnings per share of $0.94 exceeded the high end of the guidance estimate. Q4 2016 revenue of $173 million exceeded guidance level in Q4 2015. The increase over last year was primarily a result of strong volumes in all business units, partially offset by the non-core asset divestiture. Improved gross margins of 38.6%, up 420 basis points compared with Q4 2015, as a result of increased demand, better operational performance and improved margins associated with the non-core asset divestitures just noted. We continued strong cash generation, ending the quarter with cash of $227.8 million on the balance sheet and $117 million of cash provided by operating activities for the 12 months ended December 31, 2016. Net income at $11.9 million was approximately 81% higher than Q4 2015. Now, if you turn to slide 14, I’ll review our fourth quarter and full year results in more detail followed by our first-quarter guidance forecast. Q4 2015 revenue, as previously noted, was $173 million, which exceeded guidance in Q4 2015, primarily a result of increased volume in all of our business units, partially offset by the Q4 2015 non-core asset divestiture. Adjusted operating margin was up 210 basis points from 12.7% in Q4 2015 to 14.8% in Q4 2016, primarily from operating leverage from higher volume and favorable performance, partially offset by the…

Thanks, Janice. This concludes our prepared remarks and we’ll now open the line for Q&A.

[Operator Instructions] Your first question comes from the line of Craig Ellis with B. Riley. Your line is open.

Thanks for taking the question and congratulations to the team on excellent execution. Janice, I wanted to start off with just a couple of clarifications. One, with respect to the upside strength in the fourth quarter, can you identify what was better than the management's expectation going into the quarter? And secondly, regarding the pricing comments, is the pricing dynamic in the fourth quarter something that’s seasonal or was that more of a one-time item?

The first item is really all three BUs actually did extremely well in the fourth quarter. We had very strong portable electronics in the EMS business, with the new pad that we’ve been introducing. ACS had very strong power amp business and aerospace and defense was very strong for them and in addition to their antenna business was up. And then, PES had strong e-Mobility. And then also, we had the DeWAL acquisition within EMS also. On the pricing commitments, we saw that as we gave it all through 2016, so it wasn’t an increase only in fourth quarter. But we see that kind of subsiding in 2017 as we see that the commitments to the customers continuing in 2017 and we don’t see the price commitments continuing at that kind of a rate.

That’s very helpful. And then, the more forward-looking question, with regard to the initiatives that the company that contribute to increased operating efficiency, both gross margins and operating margins. As we look at 2017, which will be most impactful and can you provide any color on how those four items rank in terms of their impact to 2017 potential results?

Yes. I would say the one that will impact us – the first part of the year is really our process and automations with our operational excellence program. We have a very good program in place and we’ve seen improvements every single month. The one that we talked about is the capacity utilization is very important to us. I think we announced it earlier with our unions in Europe that we’re consolidating two plants in Belgium that will have a significant improvement in the PES business and ACS business. So, those two are very strong initiatives for us as we talk. And then the underutilized assets, obviously, as we consolidate or we look at our plants laying [ph] around the world we’re looking to sell or repurpose those assets, and so that will be very important also.

Thanks. And then, I’ll give a two-parter to Bruce and then hop back in the queue. Bruce, with respect to the comments on strategic refinement or the portfolio implications of that refinement, what we’ve seen with the recent acquisitions, are those still ahead? And then, looking at your broader market view, about a balanced mix of headwinds and tailwinds, but can you put that into longer-term perspective? Is it starting to skew more towards the favorable or are we still about equally balanced versus what you would have seen, say, a year ago? Thank you.

Sure. So, the first part of the question around the strategic focus of each of the business units, I think the EMS acquisitions are a very good example of what we have been talking about playing at the top of the pyramid, adding material capabilities technologies to that business that we can then leverage our footprint around the world, our technical prowess and so forth to drive growth into those businesses. So, DeWAL and DSP are really good examples of that – honing of that strategy. As we look at businesses like ACS, we continue to focus ourselves on where we see really strong organic growth opportunities, right? We’ve talked about ADAS, we’ve talked about certainly the telecom area and we see technologies that we have introduced through our innovation center that are, in some cases, almost game changing and much higher performing than what’s available today and we are introducing those over the next one to two years, and so we see that as an organic growth driver for that business. And then, certainly, we’ve talked a lot about the e-Mobility side of things with the PES business and we continue to see very, very good strength in those markets. I was just in China in January and what we’re hearing and what we’re seeing when we talk to people the Chinese Association of Automotive Manufactures that they’re doubling the number of EV units in 2016; and looking ahead to 2017, probably hit 1 million units by the end of the year in EVs and HEVs. So, we’re right in the sweet spot there and that’s a real focus for the PES business.

Thank you. And then, your assessment of the macro backdrop, it’s looking balanced based on the slide you presented, but are we seeing any directional move to more positive versus what you would have seen a year ago? Thanks, team.

Yeah, sure. I think on the macroeconomic scale, there is a lot of uncertainty, right? The election of the United States and so forth has turned some things that we would have expected not to be questioned around free trade and so forth to maybe get up into that category of review. From our perspective at Rogers, we see this as – for us, since we produce where our customers consume, tariffs and so forth are not that big of an issue. However, for our customers who export around the world from those locations, it might be. So, we watch that carefully. The flipside of that is some of the regulation and tax changes that we’ve heard coming out of Washington that are business positive. So, we see that as an upside. The way I look at it, though, we have focused our attention on advanced connectivity, advanced mobility, and those are real growth drivers for us and we’ve got the right products, our technology continues to advance forward, our relationships with customers that are leading in these areas are very, very strong. So, our outlook, while it might be pluses and minuses on the macro scale, the outlook for Rogers given where we’re playing, we feel very, very good about our position in the market and our abilities to meet the needs and bring solutions to our customers.

Your next question comes from the line of Joan Tong with Sidoti & Company. Your line is open.

Good morning, guys. Let me add my congratulations to you guys on the very solid quarter. And a couple of questions here. First off, I want to ask about the power amp business and also the antenna business. Obviously, we have seen some improvement. We also have seen some of those, like independent research, projection for transceivers, it’s revising up a little bit in the past couple of months. So, just want to see what your view on that and how would that translate revenue growth for you guys in 2017. Maybe layer on top of that the drivers. And you guys talk about the 4.5G, probably a longer term in 2018 like the 5G deployment. So, maybe just a little bit color, that would be helpful. Thanks.

Okay, Joan. Thanks for the question. I’m going to ask Bob Daigle to comment on that for us.

Sure, Joan. So, I think – to your point, I think – what you are reading in the press is more optimistic about the deployment of base stations. And a lot of what you are hearing about is the traditional – it’s the LTE. So, it’s the 4G LTE. You’re also hearing a little bit about the demonstrators out there for 5G. And I don’t know if you were at CS, but it was interesting to me at the Consumer Electronics Show, Erickson was already demonstrating performance of their 5G systems at the show. You had the chipset guys, I think, from everything I am hearing much earlier than had been expected, introducing the higher performance chipsets. So, I think you’ve got a little bit of positive momentum around both the continuing deployment of 4G LTE, a lot of the globe still doesn’t have good coverage in that area. You’ve got a lot of bottlenecks out there in terms of coverage, which are being addressed, and you are starting to see movement in terms of early 5G demonstrators in actually some new application areas, such as providing broadband to the home and effectively competing with the cable television guys. So, all in all, I think a little bit more bullish than, I think, people would have been six months ago in the telephone space.

Okay. That’s helpful. But, Bob, just to follow up on that comment regarding, like the bottleneck and the 4G LTE and still continuing, and in the past we have seen some volatility, in 2016. Obviously, 2015, you had part of the inventory adjustment issue. But even though, in 2016, the end demand seems to be pretty volatile, so are we seeing that we are kind of like over that hump that we are seeing, more like sort of a steady uptake for that business? And then you have 4.5G and 5G later on this year or maybe in 2018? Can you comment on that?

Yeah, I don’t think, Joan, the market dynamic differ, right? I think chop, chop – it’s always been choppy. I think the outlook is better. But I think the visibility is a challenge for everybody in the supply chain in the telecom space. I am not aware of anything changing fundamentally in that space that makes visibility a whole lot better than it was. But as Janice pointed out, we had a very strong – we ended the year very strong in that space. And as you pointed out, the industry reports are actually increasing their numbers now for 2017. So, that’s all very positive.

Okay, got it. Got it. And then just move on to the portable electronic side of things, obviously, it looks pretty solid in terms of performance and the new application, the back pad business as well as the OLED. Just want to get help – help us to get sort of like – some sort of comfort in terms of you’re actually expanding the business and the upside is not just coming from the OEMs, volumes being higher in this like – sort of like holiday season, but you’re actually getting more and more application and broadening your opportunities there. Thank you.

Yeah. Joan, this is Bruce. We do track our design wins and our design wins are increasing. So, these are new design-ins for the business. So, we continue to expand our footprint in the back pad area. So, it’s very positive. It’s not just per-unit increases that are driving the uptick here. I think the other thing that I’d like to point out about the growth in EMS, we had also very good EV/HEV growth in our phones that are used in batteries for longevity and so forth and insulating. And so, that’s been a big growth particularly in China, as I mentioned on the EV/HEV growth there. So, a lot of what we’re talking about here in EMS returning to organic growth, it’s really market-driven organic growth on a number of different fronts.

Okay, okay. And, Bruce, can you talk about the e-Mobility outside of China, the EV, the hybrid type of applications? Outside China, are we seeing growth as well?

Yes. Certainly, in the United States and in Europe, we’re seeing a much more openness, particularly by some of the European manufacturers, to electric and hybrid electric vehicles. I think some of that has been driven by some of the issues that have gone on with one of the major German car companies with their diesel. And I think what we’re seeing now is a renewed look at EV/HEV as an alternative to getting more energy efficient automobiles on the European side. In the United States, we continue to see the leading electric vehicle manufacturer having good sales and introducing a new model. I believe, by the end of this year, we’ll see that come out. That will be driving per-unit growth because it’s a lower-cost model. So, all of that is very positive from our perspective.

Okay. And then, my final question. I’ll jump back in the queue. It’s for Janice regarding the ACS segment. The operating margin, you mentioned the volume pricing, but you also mentioned the pace would be sort of stabilize no more, like accelerated pace in terms of pricing issues. So, should we think about 2017, you would see some year-over-year margin expansion in that particular segment?

Yes, we do anticipate that.

Okay. All right, thank you.

Your next question comes from the line of Sean Hannan with Needham & Company. Your line is open.

Good morning, folks. Can you hear me?

Yes, Sean. How are you doing?

Okay. All right, great. Thanks so much for taking the question. And also, great job on quarter guidance. Sounds like you folks are really doing a great job in terms of executing the strategy. I want to really make sure to emphasize that from a broader perspective. So, first question, I want to see if I can get a little bit more color around your viewpoint, particularly updated viewpoint, going back to the wireless infrastructure topic. So, as you think about opportunities relevant to antennas, power amps, how do you think about a scenario where there could be a pause ahead of 5G? How do you expect 5G to impact you timing-wise, scale-wise? Any color from a bigger picture, kind of a multi-year scenario as you see that evolving and playing into your demand?

I’ll ask Bob Daigle to comment on that.

Yeah. Sean, I think the challenge – yeah, everyone is struggling a little bit with the crystal ball, I think. We’re trying to – it gets back to what we always say in terms of controlling the elements that are things we can influence. And so, our focus right now on 5G is really getting the same, very high share in that infrastructure build in those designs that we had in 4G LTE. We’ve been very successful. And we expect to be very successful and already seeing some very nice wins there. In terms of timing – and I think the other element would be content where one of the things that I think is very positive in terms of 5G is the complexity of the systems are driving, we believe, better opportunities for – in terms of the number of units. They’re going up in frequency. It usually means smaller cell sites, it usually means more sites. We see 4.5G also continuing to play well for us in terms of a lot of the antenna deployments, the massive MIMO will benefit the circuit material side for the printed circuit board antennas. So, all in all, I think we’re seeing 5G as likely being a larger opportunity. Timing, choppiness is always a question. The other things we’re really focused on, again, I think that bodes really well for the ACS business is this whole ADAS area, which has become a very large part of – a large part of ACS. And again, I thought it was interesting at the Consumer Electronics Show where, if you looked around, the key theme there – Consumer Electronics Show had become an auto show this year and really around this whole autonomous vehicle area, with major OEMs like Audi announcing target 2020 to have fully autonomous vehicles in the field, Ford by 2021. The other area, which I think Bruce alluded to a little bit earlier, is really expanding our base through innovation for ACS. And one of the areas we’ve been putting a lot of effort around and are seeing some very, very positive feedback from customer trials is in our extremely low loss materials, which are targeted at Internet infrastructure where we’ve developed a new product platform, which basically is outperforming anything that’s been provided to the digital infrastructure customers. So, again, there’s a lot of moving parts to ACS, but there is a few very, very large nice growth drivers, which make us pretty – make us optimistic frankly about the next few years for that business.

That’s helpful. And you actually set up part of my next question. When I look at ADAS, when I look at growing content – so, clearly, higher end, higher need content within the auto space. There seems to have been a lot of that out there, especially I think there have been some content points coming even some of your US new customers. The dollar content for boards is accelerating perhaps more quickly than what was even anticipated a year or two ago. So, for example, what is going into luxury vehicles versus typical midsize vehicles, the path of that dollar content per vehicle is moving at – or at least has been moving at a better pace than a lot of industry estimates. So, just want to see if I can get a viewpoint around what you are seeing on that. It seems to play well into your optimistic comments a little bit earlier. Any color on that would be great.

Yeah. Yeah. Sean, this is Bob again. So, yeah, I’ll give you a personal experience. So, we’re shopping for a car right now and what’s interesting to me is – and these aren’t just the luxury cars. These are mid-tier vehicles and a lot of what I am looking at right now has five radar sensors on them. It has the adaptive cruise and then – these are like Fords and these are Hondas. These aren’t BMWs and Audis, which you’d expect to see these things. A transverse, so basically the sensors that are looking sideways if you’re backing out of a parking spot for traffic. So, you’re seeing fairly mainstream vehicles these days starting to come up with five radar sensors on them. So, yeah, I agree with what you’ve been hearing, Sean, and what you’re hearing with the customer base that these systems are being deployed faster than I think what people had believed and are becoming more mainstream than we would have probably imagined two, three years ago. And the consumer feedback continues to be extremely positive around these safety sensors. Anybody who has blind spot detection basically says they’ll never get a car without it. And I think that bodes well for the future.

Just to clarify, it hasn’t seemed to me that that necessarily is robbing from kind of the near-term multi-year growth scenario. Would you concur on that or thoughts on that? And I have just one last question? Thanks.

Yeah. I think penetration is still – we’re probably talking less than 20% still for penetration, Sean. So, there’s a lot of – it’s great, there’s a lot of runway, right? So, it’s helped us in the past few years. We’ve built a very nice business. But the fact that you are still at relatively low penetration rate, I think, suggests that there is a lot of runway ahead of us for the next few years here.

Okay, great. Last question here. In terms of the acquisitions you folks have made, obviously, including DeWAL most recently, can I get a perspective perhaps – either coming from Bruce or whoever feels that there is some good commentary to provide. Can I get some feedback in terms of where have you found some surprise, whether it be strengths or perhaps areas to work on? Of course, no deal is truly perfect. So, any color on what you are fighting with recent deals now that they are truly under your management and purview as you optimize them and move them forward?

So, a couple of really good examples, and I’ll go back to the Arlon acquisition which we’ve now had for two years. Some of the technology that came over from Arlon was – when we look at the deal and due diligence, we understood there was some interesting technology, but what we’ve seen is with Rogers’ capability on applications to take the Arlon technology and really apply it – and this in extremely low loss type applications that Rogers didn’t participate in, in any large way. We’ve found that to really enable us to start moving very rapidly in that market with very much leading market capabilities. So, that’s one of the real clear benefits that I’ve seen. In DeWAL, for example, we’ve been able to utilize some equipment from some of our other manufacturing locations to help with capacity and so forth and help us easily expand that business in a very cost-effective way. So, there is – as we go through here and we identify on the technology side, on the operating side, there has been early benefits that we’ve seen with DeWAL and some of the technology side with Arlon.

Your next question comes from the line of Daniel Moore with CJS Securities. Your line is open.

Good morning.

Hi, Dan.

I wanted to just maybe shift gears a little bit. Obviously, cash generation in 2016 was exceptional. Maybe talk a little bit about the incremental CapEx for 2017, uses there, whether working capital will be a benefit or a headwind in 2017. And then a quick follow-up as it relates to the incremental capacity with the new credit facility.

Okay. Just to let you know, this year, we did do a lot of capital expenditures, although they’re carried forward into next year [indiscernible] because we didn’t finish them and they’re carrying forward to 2017. 2017 is about 4%. And if we average the two, it’s 3%, 3.5% that we want to actually spend every single year. So, it’s just unusual that some of the projects at the ended at end of the year that are following through on it. On the capacity utilization, we talked about it in the Belgium – you’ll see a large improvement, not so much in 2017 as we go forward of consolidating the two, real run rate improvement will be starting in 2018 or the end of 2017. So, you’re not going to see that improvement. But as you look at any consolidation, obviously, there’s a large margin pickup when we do that.

That’s helpful. And, Bruce, given the strong balance sheet right now, the incremental capacity you have, the new credit facility, continued cash generation, talk about the M&A pipeline. Looking at larger deals, how do you think about 2017 relative to 2016 after you’ve just completed two deals and the opportunity for the next 12 months.

So, as we’ve said, historically, this is part of our core strategy, both organic growth and synergistic M&A, and we have a lot of focus now on looking at opportunities, top-of-the-pyramid opportunities, companies that we think have good growth prospects from an innovation perspective where we can acquire them and apply our science and technology to help expand their technology. And, of course, power organic growth. So, we’re active is the way I’d describe it.

Got it, thank you. And lastly, along those same lines, maybe just a little bit more – since it’s more recent – on the DSP acquisition, how it fits, what kind of accretion we might expect for 2017 and what’s possible over the next year or two?

We haven’t really disclosed a lot, obviously, subsequent then in the K at this point in time and the purchase price. A lot of it has to do with – similar silicone products that we have today that eventually we see some synergies in the operational performance and some of the engineering and R&D performance that we see. So, in 2017, obviously, you’re not going to be seeing a lot as we’re integrating, just the basics on it. But the margins really should be similar to the EMS margins that you’ve seen today on our financials. So, you’re not going to see any kind of deterioration because of that. It’s very similar.

Just another comment on DSP. DSP is very much a North American company. And they provide us with capabilities on – particularly on silicone sponge, which we did not have strong capabilities there. We see this as a growth opportunity for us, particularly using that technology and those products, not only in the US, but around the world where we have a very strong footprint in Asia and in Europe. So, it’s still to come, right? We’ve only owned it now for maybe a month-and-a-half or so. So, we’re still working through a lot of it. But part of the acquisition thought process was there their experts in these kinds of technologies and we can really leverage that through our network.

Got it. Appreciate the color. Congrats on a really strong finish to 2016.

Thanks.

Your next question comes from the line of Julie Li with Drexel Hamilton. Your line is open.

Thank you very much for taking my question. First, congratulations on the solid quarter results. My first question is the A&D and market with ACS. You’ve mentioned, this quarter, there is a strong result coming from that end market. I’m wondering what’s the nature of this growth. Was it due to one or two contract wins during the quarter and how should we think of the sustainability of that revenue?

Yes. So, Julie, it’s Bob Daigle. So, it was broad. We play very, very broadly in these defense electronic systems. And I think if you go back over the years, people generally think of A&D as pretty slow growth. We generally have seen pretty nice growth frankly in that business because we’re playing in the more advanced systems, pretty much anything electronic including the drones, applications like Space Fence, for example, which is something that has been deployed today, anything that’s in the high-frequency area. So, again, I think this is more – this is a pretty broad-based business. It is not one application or two that tends to drive this business. And I think, overall, we’ve generally seen some nice growth year-over-year.

Thank you for the color. And my final question is on the further merger/acquisition opportunities. Is it fair to say that 2017 would be a year for the management team to focus on integrating DeWAL, DPS rather than actively seeking further acquisitions?

So, we are actively integrating DeWAL and Diversified Silicones. And we continue to seek other opportunities, right? This is, again, part of our core strategy, top-of-the-pyramid businesses, high profit, higher technology, differentiated, and so we’d continue to see that. And when opportunities come, we will take advantage of them.

Okay, thank you very much.

There are no further questions at this time. Mr. Hoechner, I’ll turn the call back over to you.

Thanks, Scott. Thank you, everyone, for joining the call today. We are very pleased with our performance in 2016 and we are looking forward to another great year in 2017. Thanks for your support and have a great day.

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