Executive Summary / Key Takeaways

• Rogers Corporation is a specialized engineered materials company with a rich history, strategically focused on high-performance applications in secular growth markets like EV/HEV, ADAS, and portable electronics, underpinned by differentiated technology in areas like thermal and vibration management.
• Recent financial performance reflects significant market headwinds, particularly inventory corrections in EV/HEV and industrial sectors, resulting in a 10.7% year-over-year net sales decline in Q1 2025 to $190.5 million, though results slightly exceeded guidance.
• The company is aggressively executing operational excellence and cost reduction initiatives, targeting $25 million in net savings in 2025 ($32 million run rate), alongside manufacturing footprint optimization, expected to significantly improve profitability as demand recovers.
• Rogers is prudently investing in new capacity in China to support local-for-local strategy and capitalize on Asian EV/HEV growth, while maintaining a strong balance sheet with $175.6 million in cash and no outstanding debt, providing flexibility for organic growth, M&A, and opportunistic share repurchases.
• The outlook anticipates a gradual recovery in key markets, particularly in the second half of 2025, driven by inventory normalization, portable electronics seasonality, and new capacity ramps, though near-term uncertainty persists due to macroeconomic conditions and evolving trade policies.

Engineered for the Future: A Story of Specialization and Resilience

Rogers Corporation, with roots tracing back to 1832, has evolved into a leader in high-performance engineered materials and components. The company's journey from historical product lines, including those that contained encapsulated asbestos (a legacy managed through insurance and accruals), has shaped its strategic focus on innovation and specialized applications. Today, Rogers operates primarily through two strategic segments: Advanced Electronics Solutions (AES) and Elastomeric Material Solutions (EMS), targeting demanding markets where material performance is critical.

The company's strategy is built on four pillars: being market-driven, innovation leadership, synergistic M&A, and operational excellence. This framework guides its efforts to capitalize on major industry trends, particularly the increasing electrification of vehicles, the expansion of advanced driver assistance systems (ADAS), the evolution of next-generation portable electronics, and the growth of renewable energy infrastructure. Rogers positions itself not merely as a material supplier, but as a solutions provider, leveraging deep applications expertise to address complex customer challenges.

At the heart of Rogers' competitive positioning lies its differentiated technology. In the AES segment, products like Curamik ceramic substrates and ROLINX busbars are critical for power management in high-voltage applications like EV inverters and renewable energy systems. The company's AMB (Active Metal Brazed) substrate technology, specifically, is designed for high-power silicon carbide modules, a market segment expected to grow at a 20% CAGR over the next several years. While specific, comprehensive quantifiable performance metrics across the portfolio appear limited, management highlights that their materials offer superior performance and reliability, which are key factors in securing design wins. For instance, their ceramic substrates are engineered to improve thermal dissipation, enabling enhanced system performance.

In the EMS segment, materials like PORON polyurethane and BISCO silicone foams provide critical solutions for cushioning, gasketing, sealing, and vibration management. These are increasingly vital in EV battery packs for pressure management (cell pads) and vibration control (compression pads), as well as in portable electronics for impact protection and sealing. Management commentary underscores that these materials are chosen for their ability to solve critical challenges and improve battery efficiency and reliability. Recent R&D efforts across both segments are targeting emerging opportunities, including next-generation radar technology (waveguide) and solutions for AI data centers focused on thermal management and signal integrity, with prototypes already under evaluation by customers. These initiatives aim to extend the company's technological lead and capture future growth vectors.

Rogers operates in a competitive landscape that includes larger, more diversified players like 3M (MMM) and DuPont (DD), as well as more focused companies like TE Connectivity (TEL) and Parker-Hannifin (PH) in specific product areas. While precise, directly comparable market share figures for all niche competitors appear limited, Rogers positions itself by offering highly specialized, high-performance materials where standard solutions are insufficient. Compared to competitors, Rogers often competes on the technical merits and performance characteristics of its materials, which can enable customers to achieve better system-level performance (e.g., higher efficiency, improved reliability, smaller footprint) even if the material cost is higher. This technological differentiation, supported by strong technical service, forms a competitive moat, particularly in demanding applications like high-power electronics and critical sealing. However, larger competitors benefit from greater scale, broader distribution networks, and potentially larger R&D budgets, which can pose challenges in market reach and overall cost structure. Rogers' strategic response involves focusing on innovation, optimizing its own cost structure, and leveraging its local-for-local manufacturing strategy to better serve regional customer needs and mitigate geopolitical risks.

Against this strategic backdrop, Rogers' recent financial performance reflects the challenging macroeconomic environment. For the first quarter ended March 31, 2025, net sales were $190.5 million, a decrease of 10.7% compared to $213.4 million in the prior-year quarter. This decline was primarily driven by lower sales in the EV/HEV and wireless infrastructure markets. In EV/HEV, customers continued to manage inventory levels and adjusted to softer end market demand, impacting both AES (Curamik) and EMS segments. The wireless infrastructure decline was due to the completion of a significant program in 2024. Gross margin in Q1 2025 decreased by 210 basis points year-over-year, falling to 29.9% from 32.0%, a result of lower volumes and an unfavorable product mix. Operating income was $0.3 million, resulting in a thin operating margin of 0.2%, down significantly from 5.5% in Q1 2024, primarily due to lower gross profit and increased restructuring charges ($5.9 million in Q1 2025 vs. $0.1 million in Q1 2024).

Despite the top-line pressure, Rogers has demonstrated a focus on operational execution and cost control. Selling, general, and administrative (SGA) expenses decreased by 6.3% year-over-year in Q1 2025, and R&D expenses were down 20.2%, reflecting deliberate actions to reduce costs. The company has implemented significant cost improvement actions over the past year, including a global workforce reduction substantially completed in Q1 2025, expected to yield $10 million in savings in 2025 ($12 million run rate). Furthermore, plans to consolidate high-frequency circuit material manufacturing operations, impacting the Evergem, Belgium facility and expected to be completed in the second half of 2025, are projected to improve operating income by $7 million to $9 million annually. In total, these actions are expected to result in net savings of $25 million in 2025, with a $32 million run rate, approximately 70% of which will impact operating expenses and the remainder manufacturing costs. These initiatives are critical for preserving profitability and cash flow in the current demand environment and are expected to drive margin expansion as volumes recover.

Rogers maintains a strong financial position, which provides crucial flexibility amidst market uncertainty. As of March 31, 2025, cash and cash equivalents stood at $175.6 million, an increase of $15.8 million from year-end 2024. This increase was supported by cash provided by operating activities ($11.7 million in Q1 2025) and proceeds from the sale of the former Price Road facility ($13.4 million). The company has no outstanding borrowings under its revolving credit facility and carries minimal debt, resulting in a very low Debt/Equity ratio (0.02 TTM). This strong balance sheet contrasts favorably with some competitors who carry higher leverage (e.g., MMM Debt/Equity 3.56, DD 0.31, TEL 0.35, PH 0.87), providing Rogers with greater resilience and strategic optionality.

Capital expenditures are expected to be in the range of $30 million to $40 million in 2025, a reduction from prior expectations, reflecting the completion of major capacity investments. The company's capital allocation priorities are focused on funding organic growth initiatives, pursuing synergistic bolt-on M&A opportunities (with a stated preference for transactions not exceeding 1.5x EBITDA leverage), and returning capital to shareholders through opportunistic share repurchases ($104 million remaining authorization).

Looking ahead, Rogers' outlook anticipates a gradual improvement throughout 2025, with the first quarter likely representing the low point. The guidance for Q2 2025 projects net sales between $190 million and $205 million, with the midpoint representing a modest 4% sequential increase. Gross margin is expected to improve to a range of 31% to 33% in Q2, driven by anticipated higher volumes and a more favorable product mix. Adjusted EPS is guided to be between $0.30 and $0.70. Management expects the second half of 2025 to be stronger than the first, based on assumptions including a recovery in the Curamik power module market, the normal seasonal ramp in portable electronics demand (supported by recent design wins in higher-performing devices), and the ramp-up of new manufacturing capacity in China. The new Curamik power substrate facility in China is scheduled to begin mass production in mid-2025, positioning Rogers to capture growth with both Western and Chinese OEMs in the rapidly expanding Asian EV market. Similarly, a new BISCO silicone line in China is undergoing customer qualifications and is expected to contribute in the second half.

However, the outlook is tempered by persistent risks and uncertainties. The timing and pace of recovery in the EV/HEV and industrial markets remain unclear, heavily influenced by macroeconomic conditions and customer inventory levels. Evolving global trade policies, particularly tariffs between the U.S. and China, pose a risk, potentially increasing costs for materials shipped between regions or impacting customer demand. While Rogers has implemented mitigation plans leveraging its local-for-local footprint and sourcing flexibility, the secondary effects on global economic growth are difficult to predict. Supply chain dependencies for certain key raw materials also remain a factor. The company's ability to successfully execute its cost reduction and footprint optimization plans, as well as the timely qualification and ramp-up of new capacity, are critical operational factors to monitor.

Conclusion

Rogers Corporation is a company with a long history of adapting and specializing in high-performance engineered materials. Its core investment thesis rests on its differentiated technology, strategic focus on secular growth markets like EV/HEV and ADAS, and a commitment to operational excellence. While currently navigating a cyclical downturn marked by inventory corrections and macroeconomic uncertainty, the company's aggressive cost reduction initiatives, manufacturing footprint optimization, and strategic investments in new capacity, particularly in the critical Chinese market, position it for potential recovery. The strong balance sheet provides a solid foundation and flexibility for future growth initiatives, including opportunistic M&A. Investors should weigh the near-term headwinds and execution risks against the long-term growth potential in its target markets and the expected benefits from its self-help initiatives, which are designed to drive improved profitability and cash flow as demand eventually rebounds. The successful ramp of new capacity and the timing of a sustained recovery in key end markets, particularly power modules, will be crucial indicators for the trajectory of the business in the coming quarters.