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 Fourth Quarter 2025 Earnings Conference Call. I will now turn the call over to Mr. Stephen Haymore, Director of Investor Relations. Mr. Haymore, you may begin.

Good afternoon, and welcome to the Rogers Corporation Fourth Quarter 2025 Earnings Conference Call. The slides for today's call can be found in the Investors section of our website, along with the news release that was issued earlier today. Please turn to Slide 2. 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 3. The discussions 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. With me today are Ali El-Haj, Interim President and CEO; and Laura Russell, Senior Vice President and CFO. I will now turn the call over to Ali.

Thanks, Steve, and thank you, everyone, for joining us this afternoon. I'll begin on Slide 4. We finished 2025 with another quarter of solid performance. Q4 sales of $202 million approached the high end of the guidance. Adjusted EPS of $0.89 per share and adjusted EBITDA margins of 17.1%, both exceeded the top end of guidance. Compared to the fourth quarter of 2024, sales improved 5% and adjusted EBITDA margins increased 500 basis points. We also generated significant free cash flow in the fourth quarter and continued to return capital to shareholders with $14 million in share repurchase. The stronger finish to 2025 resulted from gradual end market improvements and implementing critical structural changes. With a simplified operating model and a leaner cost profile, Rogers is in a stronger position entering the new year. In 2026, the priority will remain on improving Rogers multiyear growth outlook and continue to drive profitability initiatives. The organization has a clear understanding of the critical objectives for this year, and we have the right team and capabilities to deliver. Our Q1 guidance incorporates significant year-over-year improvements with sales growth of 5% and a 530 basis point increase in adjusted EBITDA margins. Laura will cover both the fourth quarter results and Q1 outlook in greater detail. Slide 5. Total sales increased by 5% versus the fourth quarter of 2024, led by higher industrial, ADAS and renewable energy end markets. Industrial sales remain our largest segment and ended the year at 27% of total revenue. Q4 industrial sales increased at a high single-digit rate year-over-year, driven by market recovery and winning additional business from traditional customers. For the full year, sales improved at a mid-single-digit rate. Aerospace and defense sales were 16% of revenue despite a slight decline in Q4 compared to the same period last…

Thank you, Ali. Starting on Slide 8, I'll begin with a summary of our fourth quarter financials. Q4 sales and gross margin were near the high end of our guidance for the quarter and adjusted earnings exceeded the top end of our range. Fourth quarter sales increased 5% compared to the prior year period. AES Q4 revenues increased by 14.6% versus Q4 2024 from higher sales in the EV/HEV, ADAS, renewable energy and industrial markets. EMS sales declined by 6.7% over the same period due to lower EV/HEV sales, which were concentrated in regions experiencing demand challenges. The decline was partially offset by higher industrial sales. Adjusted earnings per share of $0.89 in Q4 were nearly double the prior year period due to higher sales and significant improvements in operating expenses. Turning to Slide 9. Q4 adjusted EBITDA was $34.4 million compared to $23.3 million in Q4 2024. Adjusted EBITDA margin of 17.1% improved 500 basis points year-over-year. The improvement in EBITDA was a result of higher sales, improved product mix and the benefits realized from our profitability improvement initiatives over the past year. In particular, adjusted operating expense, excluding stock-based compensation, decreased by $6.3 million over this time frame. Offsetting these improvements was a $1.7 million increase in underutilization costs, which is primarily related to the start of production for our ceramic China facility. Continuing to Slide 10, I'll discuss cash utilization for the quarter. Cash at the end of Q4 was $197 million, an increase of $29.2 million from the end of the third quarter. Cash provided by operations was $46.9 million, an increase from the prior quarter due to improved working capital management, particularly from a continued focus on managing inventories. Uses of cash in the quarter included share repurchases of $14.3 million and capital expenditures of…

Thanks, Laura. In summary, we had another quarter of solid execution. We delivered Q4 results that were above the midpoint of guidance for the quarter and generated significant free cash flow. We entered 2026 with a clear objective to achieve top line growth, further improve profitability and deploy capital effectively. That concludes our prepared remarks. I will now turn the call back to the operator for questions.

[Operator Instructions] Our first question today is coming from Daniel Moore from CJS Securities.

Congrats on a solid end to the year. Maybe start with the guidance, Q1 pointing to mid-single-digit growth. I think you said that's kind of more of the same versus trends in Q4, improvement in industrial. Just your outlook near term for ADAS, any improvement in renewables and/or defense. And I know you don't give full year guide, but mid-single-digit growth kind of the reasonable thought process kind of for the near to midterm?

Yes. Thanks for the question. Again, our expectation for Q1, we still see a stronger and continued growth in the industrial section -- the industrial sector of the business. However, we see some softness still remain and uncertainty on the automotive side, on the EV side. And as you know, portable electronics tend to be a little softer in Q1 than we experienced in the last 2 quarters. So that's probably what's keeping the guidance the way it is for now. And as I mentioned prior to this, Q1, Q2 and '26, we expected to see some uncertainty here due to macroeconomics in general in those 2 sectors, the auto sector, specifically the EV and the portable electronics. But other than that, everything else, we really see some growth from high single digits to mid-single digits in Q1.

Got it. Very helpful, Ali. And then as a follow-up, you talked about data centers. Just elaborate on key applications there, presumably managing heat. And you mentioned, I think, one new opportunity potentially in 2026. Can you give a little bit more color there? That would be really helpful.

Yes. As mentioned in the earlier remarks, this became our focus over the last, I would say, 2 to 3 quarters, and we're going to continue this effort. We believe we have a very strong opportunity coming up in the thermal management side. Also on the signal integrity technology, we're working on some opportunities there. Both of these, we really see strong momentum. We're working with brand name OEMs. We cannot, unfortunately, give you more details on this, except to say larger brand name OEMs actively qualifying these technologies. And we anticipate to be able to share more information and more details, hopefully later on in 2026 with revenue impact sometimes in '27, maybe even late '26.

I think the other thing we could add to that, Dan, is there is some smaller revenue for other applications in that segment in that space. I think Ali may have previously mentioned that we already captured a design more on the EMS side from a technology perspective that sells directly into data centers from an application perspective.

Yes, that's growing. That's really growing nicely. Revenue-wise, it's still a smaller piece of the pie, but we -- again, I think it's not as much -- the impact of the newer technologies will be a lot more significant than the current business in this industry.

Next question is coming from Craig Ellis from B. Riley Securities.

Ali and Laura, congratulations on getting nice COGS and cost and working capital execution in the business. Nice to see. I wanted to follow up with some of Daniel's questions regarding your #1 priority for this year, Ali, improving multiyear growth. So data center makes a lot of sense given the capabilities the company has and the way voltages are rocketing higher there. And so it would seem that you'd have a lot you could do. My question is broader than data center and looking at what your ambitions are beyond that sleeve of industrial with the portfolio this year. Could you just talk about any specific initiatives that have been in play the last few quarters that you would expect to convert either to new design wins this year, new opportunities this year? And beyond data center, when would we see the revenue benefit of those initiatives?

That's a lot of questions. We'll try to answer it as much as we can to the extent of our ability here. I think the growth target is really across the board for all business segments. It's not just data center or one technology versus the other. we have initiated here certain targets, identified certain opportunities in certain end markets where we're going after, both in the EMS and the ADAS side of the businesses. We've realized some wins in -- with existing customers. So we're expanding some market share there, especially on the EMS side. Some of the businesses with the current technologies will grow as the end markets continue to grow, whether it's automotive in the ADAS sector, for example, the adoption of some of those applications will continue to grow that business. But we also started sometime last year development in the newer technologies that's really not a me-too type product for applications like the newer battery technology for EV and renewables, which will help us generate not just additional revenue, but really penetrating the market in applications we're not there today that will help us grow that business in the double-digit rate type. So on the automotive side, we're also trying to go directly engage with the OEMs. So we're designing ourselves in with some of these products directly with the OEMs. Obviously, working with our partners, the PCs, the converters and some of the module makers to make sure we're designed in, in conjunction with them. We think this type of approach to the market is going to help us expand and grow the top line a lot faster rate than we have done in the past.

That sounds good. My follow-up question was on another 2026 priority and the ambition for profitability improvement. And the question is, with significant momentum in this area, given what I think was $30 million in initiatives that's largely been executed and then the $13 million, I believe, of ceramic-related initiatives in 2026 with -- I think that's starting to benefit gross margin in the back half of the year. Are there new additional initiatives that you're planning for '26? Or is it executing on those 2 objectives and realizing and holding those gains?

So let me start with that, Craig. So you're largely correct in saying the initiatives we've already announced are already in flight and much of those savings are already seeing the fall through to the P&L. Where we're not fully concluded is as you correctly stated, with the ceramic restructuring activity, specific to our operations in Germany as we respond to the demand that we're seeing for that business. We will see the benefit of that in the second half of 2026. And as I said in my prepared comments, the benefits we still anticipate to be in the range of $13 million annually and the cost of that program is still forecast in the range of what we committed as part of the restructuring. Now what I would say is, if I think about the business and the opportunity to optimize our financial performance, We've undertaken substantial restructuring to position ourselves positively. But really what's going to drive a substantial transition and shift is what Ali is talking about with regards to our top line expansions and the innovation and the technologies that are really going to allow us to differentiate ourselves from a market perspective and continue to command pricing in accordance to that. But what will complement that will be our continued management of the business, which is supported by the operating structure that's been implemented and the monthly reviews to ensure that we're very nimble in responding to current demand and capacity requirements and investing in accordance to that. I think just finally to round that out, we did mention the restructuring, the impact that had on our operating expense. You saw that, that dropped from about $210 million in 2024, about $193 million, $194 million in '25. That restructuring, we're largely through, but we'll continue to monitor our levels of investment in accordance with the opportunities as we see them present themselves.

That's really helpful, Laura. And if I can sneak in one related follow-up. Ali, is there anything you can share with us on how significantly you'll be able to load up the new ceramic facility in China as it gets going in the back half of the year?

Yes. I mean, Craig, we're still, to be honest, disappointed that it's going slower than we expected it to. But it is moving. I think the customers are still there and they're interested in buying from the China facility and move some of the products or source the China facility. What we're trying to do here balance between aggressively going after the market and therefore, we don't want to play the price game, let's put it this way. So we're trying to be diligent and be careful about not participating in a price erosion type for the market. We still anticipate the plans to be there. So our plans did not change. It just shifted from a time perspective. So we still see growth in that facility in Q2, Q3, Q4. But again, really slower than we expected it. We expected to see better situation we're in, in Q1. We're not there yet.

Our next question is coming from David Silver from Freedom Capital Markets.

I'm going to go back, and I'm hoping you can just level set me on the pace and the total of the cost savings. So my belief was, I guess, at the end of this year, you were expecting a run rate of $32 million. And then there was the $13 million additional that was cited related to Germany. And then I believe you're using a number of $30 million. And I'm just trying to kind of separate what was mentioned last quarter versus what might be additional as of December 31.

No problem. Let me start, David, and see if I can address your question. So you're right in so far as saying $25 million was the run rate for the initiatives that we had announced previously. What you're also right in saying is the full year benefit of those initiatives is $32 million. But the difference in that $25 million and the $32 million is the full year benefit, some of which we haven't yet seen realized in 2025. So I've got an incremental $7 million that will hit the P&L in 2026 for those initiatives that deliver $25 million of savings in '25. In addition to that, the ceramic restructuring in Germany that we announced in the middle of last year hasn't yet delivered savings to the P&L. We're in the middle of that process. And as a result of that, we won't see the savings materialize into the financials for that until the second half of '26. So that $13 million we've not yet seen. And in addition, we've got another $7 million that hasn't yet hit the P&L. But $25 million is there, and I would share with you that about 70% of the $25 million we did realize in 2025. The savings for that is in the expense category with the residual being in our gross margin and our COGS.

Okay. appreciated. So then my next question, which one did I want to ask here? Sorry. I wanted to go back to the press release and in particular, Ali, you quoted as saying you have an enhanced innovation strategy. So you have talked quite a bit about different business opportunities and qualification processes. But I'm just kind of scratching my head and I'm wondering when you say an enhanced innovation strategy, does that refer to an enlarged selling effort? Does that refer to increased R&D? I mean what qualitatively, what's included in your comment about an enhanced innovation strategy in service of improving long-term growth prospects?

I think it's both. It's really enhanced selling process, but more importantly, it's -- we've identified and the team is working on distinct 3 different projects that we will differentiate to the business. There really be differentiation from what the market today has, what's available on the market today. And those products, we believe they are unique that will solve problems that exist today and for future issues that's facing whether it's in data center applications or in communication applications or EV battery applications, and new technologies. So we've identified those areas, and we're developing products as we speak. Some of these products are in qualification process, as mentioned. For these applications, these applications, as you know, they're very high-growth applications. And for us today, in some cases, we're not really participating in any material type way. We think those will be differentiators to the business going forward, will allow us to have the growth rate that we want to do within Rogers. That's what I meant by enhanced. It is very specific, targeted on -- for certain applications and also differentiated. It's not a me type technology, me type product and within our capabilities and our expertise.

Okay. And then last one for me. This is kind of a question related to tariffs, I guess, but more second or third order effects. So in other words, last April, your company had to respond in short order to one wave of tariff announcements. This time, it's seemingly from our administration here, it's more targeted. But on the other hand, we're also hearing stories about offshore partners deciding to trade with each other as opposed to maybe a U.S.-based supplier that might encounter some incremental difficulties. From your perspective, has there been any signs that your key OEM customers in offshore locations or headquartered in offshore locations? Is there any change in the way you're doing business with them? Or are they diversifying away or adding non-U.S.-based suppliers in certain cases? In other words, how is the environment for doing business now with the lingering or more targeted tariff-related announcements? How does that affect your day-to-day strategies and your ability to pursue new business?

I think that the fact that Rogers is a global company and having manufacturing facilities globally really kind of neutralize that issue completely. So we're able to respond to our customers, whether they're in Asia or North America or Europe because we're local manufacturing -- we're locally manufacturing all their needs or in most cases, all their needs. We have seen some OEMs who are trying to shift again to buy locally. And that for us actually has been a benefit, and we anticipate that to continue to be beneficial for us because we'll be able to respond to these needs, again, just because of the way we are today, we've got the global capabilities, local capabilities on a global basis. So we can supply Asia from Asia. We can supply North America from North America. And in Europe, we can supply most of the products from within Europe. And we're looking to enhance our capability in additional manufacturing in the European continent within the next 12 months or so.

[Operator Instructions] Ladies and gentlemen, we reached the end of our question-and-answer session, and 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.