ROG earnings call analysis

NYSE:ROG Q4 2025 Earnings Call Transcript Generated on 6/6/2026 Kevin | Conference Operator: 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. Steve Haymore, Senior Director of Investor Relations. Mr. Haymore, you may begin. Steve Haymore | Senior Director of Investor Relations: 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 investor section of our website, along with the news release that was issued earlier today. Please turn to slide two. 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 Roger's 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 three. 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 Alhaj, interim president and CEO, and Laura Russell, senior vice president and CFO. I will now turn the call over to Ali. Ali Alhaj | Interim President and CEO: Thanks, Steve, and thank you, everyone, for joining us this afternoon. I'll begin on slide four. We finished 2025 with another quarter of solid performance. Q4 sales of $202 million approached the high end of the guidance adjusted EPS of 89 cents 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 continue 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' multi-year 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 points increase in adjusted EBITDA margins. Laura will cover both the fourth quarter results and Q1 outlook in greater detail. Slide five. 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 year, For the full year, the segment grew at a high single digit rate. The growth for the year was driven by both strong defense and commercial aerospace demands. EV, HEV sales remained at 14% of revenue. Q4 sales were lower year over year as decline in EMS sales more than offset growth in the AS segment. The decrease in EMS sales resulted from a higher concentration of customers in regions where EV demand has been challenging. Total full year sales ended well below the prior year with decline in both business units. We are continuing our efforts to grow in this market with our Keramik China expansion and the ongoing strategy to adapt to changes in the EV battery market and technology. ADAS sales increased year over year and for the full year grew at a double digit rate. Sales continued to benefit from increasing adoption of ADAS solution and higher level of vehicle autonomy. Lastly, portable electronic sales were lower both in Q4 year over year and for the full year primarily as a result of a product in AES business reaching end of life. Turning to slide six, we are already seeing results from the structural and organizational changes implemented during the second half of 2025 with enhanced customer relationships and improved service levels. We have revised our KPIs, targets, and objectives to ensure organizational alignment, focus on growth, and customer service. These changes have brought on an increased intensity in new product development efforts and will accelerate new product introductions, enabling design wins. We are confident that our talented team will continue to drive significant improvements in innovation and growth. In addition, we are seeing the results of actions taken to improve profitability. We realized $25 million in cost and operating expenses improvement in 2025, with another $20 million of annualized savings expected to be complete by the end of 2026. This included an 8% reduction in full-year operating expenses compared to the prior year. Lastly, through cost containment efforts and working capital management, we generated $71 million of free cash flow, repurchased shares totaling $52 million, and ended the year with $197 million of net cash. Next on slide seven and turning our attention to 2026. Returning to top line growth is Raja's highest priority this year. To achieve this objective, we remain committed to fully leveraging our global footprint to increase our competitiveness and grow share in all regions. With our customer-centric organization, we are intently focused on securing design wins to drive growth and further diversify our end markets. Our design win efforts are targeting both new and existing market segments. We have identified data centers as a significant potential new market for Rogers and secured some initial design wins in the EMS business during the fourth quarter. While these wins are an important start, We are pursuing much larger opportunities by leveraging our strength in thermal management and signal integrity technologies. We believe that our technical solutions in these areas are unique and provide compelling value for our customers. We expect at least one of these design awards decisions to be made later this year. Prioritizing and accelerating the pace of new product introduction in new and adjacent markets will be a critical enabler for our growth. Improving profitability will remain a key objective in 2026 with the restructuring of the ceramic Germany operations on track. We plan to keep 2026 adjusted operating expenses in line with 2025. As we execute on these priorities, we expect to grow full year adjusted EBITDA compared to 2025. Lastly, we will maintain a disciplined capital allocation strategy as we focus on improving returns to our shareholders. Capital expenditures are expected to be comparable to 2025 as we continue to invest in our facilities and operating structure. M&A will be an area of increased emphasis in 2026 with any potential targets requiring the right strategic fit and financial profile. The level of share repurchase activity will be subject to these other investment priorities. I will now turn it over to Laura to discuss our Q4 financial performance and Q126 outlook. Laura Russell | Senior Vice President and CFO: Thank you, Ali. Starting on slide A, 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 EVHEV, ADAS, renewable energy and industrial markets. EMS sales declined by 6.7% over the same period due to lower EVHEV sales, which were concentrated in regions experiencing demand challenges. The decline was partially offset by higher industrial sales. Adjusted earnings per share of 89 cents 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 initiative over the past year. In particular, adjusted operating expense, excluding stock-based compensation, decreased by 6.3 million over this timeframe. Offsetting these improvements was a 1.7 million increase in underutilization costs, which is primarily related to the start of production for our Keramic China facility. Continuing to slide 10, I'll discuss cash utilisation 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 4.7 million. For the full year, capital expenditures were 30 million and at the low end of our guided range. As Ali discussed, we expect 2026 capital expenditures to be in a compatible range to last year. We are gazing 30 to 40 million for the full year The turning capital to shareholders will continue in 2026 with a level of buyback subject to other capital needs, including potential M&A transactions. Following our purchases in Q4, we have approximately 52 million remaining on our existing share repurchase program. Next, on slide 11, I'll review our guidance for the first quarter. Overall, we anticipate significant year-over-year improvement in Q1 2026 sales, margin and profitability, underscoring the impact of last year's initiative. Beginning with sales, we expect Q1 revenues to be between 193 and 208 million. The midpoint of the range is a 5% increase in sales year-over-year. The guidance reflects similar market conditions to the fourth quarter, with expected year-over-year improvement mainly in industrial sales. We are guiding gross margin in the range of 30.5% to 32.5%. The midpoint of the range is 160 basis points higher than the prior year, due to higher volumes and cost structure improvements. We expect adjusted operating expenses to decrease more than 5% compared to the first quarter of 2025, and increase slightly from fourth quarter levels, primarily a certain compensation cost reset in the new fiscal year. Adjusted EBITDA is anticipated to range from 27 to 35 million. This equates to 15.5% EBITDA margin at the midpoint of the range, which would be 530 basis points improvement versus the first quarter of 2025. Adjusted EPS is forecasted to range from 45 cents to 85 cents. The 65 cent midpoint compares to adjusted EPS of 27 cents in Q1 of 2025. Excluded from adjusted EPS are restructuring costs related to the ceramic actions in Germany. At the end of 2025, we incurred 5.4 million of associated restructuring charges relative to our total estimated range of 12 to 20 million. The remaining restructuring costs associated with this action will be incurred from Q1 to Q3 of 2026. The programme is still anticipated to deliver 13 million of annual run rate savings. Lastly, we project our non-GAAP full-year tax rate to be approximately 32%. The higher expected tax rate is mainly due to certain lost jurisdictions where no tax benefits can be realized. I will now turn the call back over to Ali. Ali Alhaj | Interim President and CEO: 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 enter 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. Kevin | Conference Operator: Thank you. We'll now be conducting a question and answer session. If you'd like to be placed into question queue, please press star one on your telephone keypad We ask you to please ask one question and one follow-up, then return to the queue. If you'd like to remove yourself from the queue, please press star two. Once again, that's star one to be placed in the question queue. One moment, please, while we poll for questions. Our first question today is coming from Daniel Moore from CJS Securities. Your line is now live. Daniel Moore | Analyst, CJS Securities: Thank you. Good afternoon, Ali. Good afternoon, Laura. 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 industrial, just your outlook near-term for ADAS, you know, any improvement in renewables and or defense. And I know you don't give fully your guide, but mid-single-digit growth, kind of the reasonable thought process, you know, kind of for the near-to-mid-term. Ali Alhaj | Interim President and CEO: Yeah, 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 softening still remain and uncertainly 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 two quarters. So that's probably what 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 two 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 Got it. Daniel Moore | Analyst, CJS Securities: Very helpful, Ali. And then as a follow-up, you know, you talked about data centers. Just elaborate on key applications there, presumably, you know, managing heat. You know, 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. Thank you. Ali Alhaj | Interim President and CEO: Yeah, as mentioned in the earlier remarks, this became our focus over the last, I would say, two to three 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 in 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, you know, 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 in 26. Laura Russell | Senior Vice President and CFO: I think the other thing we could add to that, Dan, is there is some smaller revenues for other applications in that segment, in that space. I think Ali may have previously mentioned that we've already captured a design more on the EMS side from a technology perspective that sells directly into data sensors from an application perspective. Ali Alhaj | Interim President and CEO: Yeah, that's growing. That's really growing nicely revenue-wise. It's still smaller pieces of the pie, but we, you know, again, I think it's not as much. The impact is that newer technologies will be a lot more significant than the current business in this field. Daniel Moore | Analyst, CJS Securities: I'll follow up and circle back with the follow-ups. Thank you. Kevin | Conference Operator: Thank you. Next question is coming from Craig Ellis from B-Riley Securities. Your line is now live. Craig Ellis | Analyst, B. Riley Securities: Yeah, thanks for taking the question. And 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 number one priority for this year, Ali, improving multi-year growth. So data center makes a lot of sense given the capabilities the company has and 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? Ali Alhaj | Interim President and CEO: That's a loaded question, but 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 AS side of the businesses. We realized some wins 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 a newer industry. 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 penetrate in the market in applications that are not there today that will help us grow that business in the double-digit rate type. On the automotive side, we're also trying to go directly engage with OEMs. So we're designing ourselves in with some of these products directly with 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 go the top line a lot faster rate than we have done in the past. Craig Ellis | Analyst, B. Riley Securities: 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 Chris March in the back half of the year. Are there new additional initiatives that you're planning for 26 or is it executing on those two objectives and realizing and holding those gains? Thank you. Laura Russell | Senior Vice President and CFO: So let me start with that, Craig. So you're largely correct in saying, you know, 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 operations in Germany as we respond to the demands 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 programme still forecast in the range of what we committed as part of the restructuring. Now, what I would say is, you know, if I think about the business and the opportunity to optimise 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's 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. And what will complement that will be our continual management of the business, which is supported by the operating structure that's been implemented and the monthly reviews that 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 210 million in 2024 to 194 and 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. Craig Ellis | Analyst, B. Riley Securities: That's really helpful, Laura. And if I can sneak in one related follow-up. Ollie, 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? Ali Alhaj | Interim President and CEO: Yeah, I mean, Craig, you know, 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 is balance between aggressively going after the market and therefore we don't want to pay the price again. 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. We expected to see better situation with M in Q1. We're not there yet. Craig Ellis | Analyst, B. Riley Securities: I understand. Thanks, Heli. Thanks, Laura. Good luck. Thank you. Ali Alhaj | Interim President and CEO: Thank you. Kevin | Conference Operator: Thank you. As a reminder, that's star one to be placed into question Q. Our next question is coming from David Silver from Freedom Capital Markets. Your line is now live. David Silver | Analyst, Freedom Capital Markets: Yeah. Hi. Thank you. 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%. 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, you know, mentioned last quarter versus what might be additional, you know, as of December 31st. Thank you. Laura Russell | Senior Vice President and CFO: No problem. Let me start, David, and see if I can address your question. So you're right insofar as saying $25 million was the run rate for the initiative 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 between that $25 and the $32 is 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 2025. 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 we did realize in 2025. The savings for that is in the expense category with the residual being in our gross margin and our COG. David Silver | Analyst, Freedom Capital Markets: Okay, thank you for that detail. Much appreciated. So then my next question, which one did I want to ask here? Sorry. Okay. I wanted to go back to the press release, and in particular, Ali, you're quoted as saying, you know, you have an enhanced innovation strategy. So, you know, 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, you know, an enlarged selling effort? Does that refer to increased R&D? I mean, what, you know, what qualitatively, what's included in your comment about an enhanced innovation strategy, you know, in service of improving long-term growth prospects? Thank you. Ali Alhaj | Interim President and CEO: I think it's both. It's really enhanced selling process, but more importantly, we've identified and the team is working on distinct three different projects that we will differentiate it 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 differentiated so that 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 for certain applications, and also differentiating. It's not a me-type technology, it's a me-type product. And within our capabilities and our expertise. David Silver | Analyst, Freedom Capital Markets: Okay. Thank you for that. 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, you know, your company had to respond, you know, in short order to a one wave of tariff announcements. You know, this time it's seemingly from our administration here. It's more targeted. But on the other hand, we're also hearing stories about, you know, offshore partners deciding to trade with each other as opposed to maybe, you know, a U.S.-based supplier that might, you know, 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-US based suppliers in certain cases? In other words, How is the environment for doing business now, you know, with the lingering or more targeted, you know, tariff-related announcements? How does that affect your day-to-day, you know, strategies and your ability to pursue new business? Ali Alhaj | Interim President and CEO: 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 locally manufacturing all their needs, or in most cases, all their needs. We have seen some OEMs who are trying to shift again to buying locally. And that's for us actually, it's 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 were looking to enhance our capability in additional manufacturing in the European continent within the next 12 months or so. David Silver | Analyst, Freedom Capital Markets: Very good. Thank you very much. Kevin | Conference Operator: Thank you. As a reminder, that's star one to be placed in the question queue. A confirmation tone will indicate your line is in the question queue. One moment, please, while we poll for further questions. Once again, if you'd like to ask a question at this time, please press star one under telephone keypad. A confirmation tone will indicate your line is in the question queue. One moment, please, while we poll for further questions. Ladies and gentlemen, we've 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. jsPDF 3.0.3 D:20260606090413-00'00'

NYSE:ROG Q3 2025 Earnings Call Transcript Generated on 6/6/2026 Operator: Good afternoon, and welcome to the Redwood Trust Third Quarter 2025 Financial Results Conference Call. Today's conference is being recorded. I will now turn the call over to Caitlin Moritz, Redwood's Head Investor of Relations. Please go ahead, ma'am. Caitlin Moritz | Head of Investor Relations: Thank you, Operator. Hello, everyone, and thank you for joining us today for Redwood's Third Quarter 2025 Earnings Conference Call. With me on today's call are Chris Abate, Chief Executive Officer of Dash Robinson, President, and Brooke Carrillo, Chief Financial Officer. Before we begin today, I want to remind you that certain statements made during management's presentation today with respect to future financial and business performance may constitute forward-looking statements. Forward-looking statements are based on current expectations, forecasts, and assumptions, include risks and uncertainties that could cause actual results to differ materially. We encourage you to read the company's annual report on Form 10-K, which provides a description of some of the factors that could have a material impact on the company's performance and cause actual results to differ from those that may be expressed in forward-looking statements. On this call, we may also refer to both GAAP and non-GAAP financial measures. The non-GAAP financial measures provided should not be utilized in isolation or considered as a substitute for measures of financial performance prepared in accordance with GAAP. A reconciliation between GAAP and non-GAAP financial measures are provided in our third quarter Redwood review, which is available on our website, redwoodtrust.com. Also note that the contents of today's conference call contain time-sensitive information that are accurate only as of today. We do not intend and undertake no obligation to update this information to reflect subsequent events or circumstances. Finally, today's call is being recorded and will be available on our website later today. And with that, I'll turn the call over to Chris for opening remarks. Chris Abate | Chief Executive Officer: Thanks, Kate, and thank you, everyone, for joining us today. On our last earnings call, we announced the acceleration of our strategic transition to a more scalable, simplified operating model, one designed to capitalize on the transformative opportunities we see emerging for our business. We committed to proactively repositioning our balance sheet, freeing up capital from legacy assets, and redeploying it into our highly profitable operating platforms. We set a target of reducing our legacy exposure from 33% of our capital at July 30th to 20% by year end, and in support of this transition, repurchased common shares. We can look back now in the third quarter as one of our most productive to date. Across our businesses, we locked or originated nearly $7 billion of loans, a new quarterly record for Redwood. This was despite an otherwise subdued housing market where industry volumes are roughly flat quarter over quarter. Our production included a record $5.1 billion of loans locked at Sequoia, 1.2 billion of loans locked at Aspire, which has rapidly ascended to become a market-leading non-QM loan aggregator, and 521 million of loans funded at Corvest across residential investor products. Volume drivers for the quarter included record contributions from bank sellers and a host of new distribution partners that have enabled us to turn our capital quickly and speak for more production. In step with the growing opportunity across our mortgage banking platforms, We've continued to scale them profitably, generating a core segments EAD of 20 cents per share for the third quarter. We've now maintained mortgage banking segment ROEs above 20% for five consecutive quarters, while boosting capital allocated to these businesses by 80% over that time. Importantly, this growth hasn't come at the expense of efficiency. We continue to build out an AI infrastructure and core in-house capabilities, owning our data, models, and workflows, while leveraging AI-driven document intelligence to extract data at scale and accelerate turn times. We're also partnering with leading Silicon Valley tech firms to stay ahead of the curve. Our AI tools aren't just operational upgrades. We expect them to become strategic assets that will help us drive scale and manage risk as volumes reach new heights, just as they did this past quarter. On the heels of such a productive period, And in recognition of the ongoing success of our existing partnership, we announced today that we have expanded our relationship with CPP Investments by extending the investment period of our joint venture and significantly increasing our corporate secured borrowing facility to $400 million from $250 million. We look forward to building on this foundational momentum with CPP Investments and will now turn our attention to fundraising for our flagship Sequoia platform. where growth prospects underscore the opportunity for additional institutional capital. Turning to our legacy portfolio, we significantly reduced our capital allocated to this segment in the third quarter, with it now representing 25% of our total capital. The noise of the legacy transition continues to play a part in our consolidated results, which Dash and Brook will cover, contributing to a small decline in gap book value to $7.34 per share at September 30th. Book value also included the effect of our $0.18 per share dividend paid to stockholders and 5 million shares of stock repurchased during the quarter. Zooming out on the broader markets, we are closely watching developments across the credit landscape and U.S. economy. Recent bankruptcies affecting clients of several large banks underscore growing pressure in certain consumer asset-backed sectors. While these events may appear isolated, they echo earlier chapters of the credit cycle reminiscent of conditions that preceded the mortgage reforms implemented after the global financial crisis. By contrast, today's residential mortgage market benefits from more rigorous underwriting standards, enhanced transparency, and stronger data integrity, principles deeply embedded in Redwood's credit culture and capital markets practices. And as we continue to see strong growth in the private label securitization market, Our advocacy in Washington to make capital flows into securitization more efficient is bearing fruit. Amidst a very ambitious agenda, SEC Chair Atkins launched a concept release in late September on how to streamline non-agency RMBS disclosures, which we think has the potential to crowd significant new capital into the sector and deepen demand for the assets we create. As we progress through the final quarter of the year, we continue to capture market share in what has been a very subdued housing market. However, with mortgage rates on the decline and with the prospect of further monetary easing ahead, we're optimistic that the housing finance sector will once again resume strong growth in the year ahead. With that, I'll turn the call over to Dash to discuss our operating results in more detail. Dash Robinson | President: Thank you, Chris. The third quarter witnessed our strongest operating performance in the company's history, with ample progress in further reallocating capital and to continue profitably scaling our core activities. To start, Sequoia lost $5.1 billion of loans in the third quarter, a 53% increase from Q2 and a record for the platform. Against the more muted market backdrop in which many other large players reported minimal to no production growth, our volumes with both bank and non-bank sellers grew by over 50%. We estimate that our seller network now covers approximately 80% of market share for jumbo production, up from 20% to 30% as recently as 2023. In step, our estimated jumbo market share is now 7%, up from 1% to 2% over the same time period. This deeper access must be complemented by crisp execution, a continued strength of our platform across a deepening set of products. Sequoia's third quarter activity was split between traditional 30-year fixed, hybrid arms, closed-end second liens, and a number of other products, underscoring our role as a one-stop provider of timely and flexible liquidity for our loan origination partners. Of note, 48% of our third quarter volumes were bank collateral, and 25% was tied to season loans, reflective of trends we have anticipated for some time, namely a resurgence in bank M&A activity and increased rigor within bank C-suites in evaluating the true return profile of funding long-duration mortgages with deposits, irrespective of where the final Basel endgame rules land. By design, our operating progress has been coupled with continued momentum and distribution. Year-to-date, we have distributed nearly $9 billion of collateral, tops in the market, across 13 securitizations and whole loan sales to a variety of partners, including $2.6 billion in the third quarter. This already eclipses full-year 2024 activity and, with demand for securitization still elevated, notwithstanding a modest recent backup and overall execution, We expect activity to continue apace heading into year M. Complementing Sequoia's growth is our emergent Aspire platform, whose expanded loan program we launched in January of this year. This business primarily focuses on loans for prime quality borrowers who require an alternative underwriting approach, including evaluation of personal bank statements or rental income tied to the property. Aspire's $1.2 billion of third quarter locks were nearly four times second quarter volume. The business closed the quarter with a record month, $550 million in September alone, profitably establishing a run rate we expect to build upon in the quarters ahead. The pipeline continues to reflect a focus on well-underwritten loans to high-quality borrowers, with third-quarter production carrying an average credit score of 749, an average LTV of 71%. Aspire's emergence as a top five aggregator of non-QM loans underscores both the institutional strength of our platform and sellers' growing preference to consolidate relationships as they expand their own product offerings. A key element of Aspire's business plan has already played out. Existing sellers are meaningfully broadening the range of products they deliver through the platform. As recently as 18 to 24 months ago, many of our core seller relationships were brokering out or otherwise not directly addressing the expanded credit market. which market observers estimate could be up 40% from a year ago and top $125 billion in size in 2025. The shift has been noticeable and bodes well for the expanded credit market overall and Aspire's growth prospects in particular. Sellers seeking seamless and one-stop solutions for their products can now come to Redwood for their entire suite of non-agency offerings. Concurrently, Aspire continues to make important inroads with relationships new to our platform. critical progress to grow the platform responsibly, diversifying our seller base, and thereby driving reliable margins. The platform grew its loan originator partner base by nearly 50% in the third quarter, with plans to continue growing further, including with several top originators, in the coming quarters. While Aspire's distribution thus far has been focused on whole loan sales, we are in process to expand our distribution efforts further through securitization and joint ventures, outlets where we have had success and other channels of our business. Our residential investor loan platform, Corvest, continued to evolve its production mix while achieving its highest quarterly volume since mid-2022. Notably, originations within Corvest are increasingly driven by smaller balanced products. Originations of residential transition loans, or RTLs, and DSCR comprise 40% of Q3 volume and are up 45% versus the same period last year. The smaller balance market remains a significant opportunity for Corvus, given we have been relatively under-penetrated in a space that continues to grow and remains in demand with our capital partners. The broader origination landscape for investor loans remains robust but uneven, as many platforms' competitive posture as always ebbs and flows in step with their access to capital. Depth of distribution remains a competitive advantage for Corvus, which has distributed nearly $1.5 billion of loans year-to-date, via joint ventures and whole-loan sales. Concurrent with our operating progress, we significantly reduced our exposure to legacy investments since the end of the second quarter. We sold our full re-performing loan portfolio, SLST, and approximately half of our third-party HEI investments at accretive levels versus our June 30th, 2025 marks, while also resolving or transferring a significant portion of our legacy bridge loans, including selling over half of the portfolio into a partnership structure capitalized with multi-year non-recourse borrowings with preferred and residual co-investments by a third party. Pro forma for these activities, legacy investments now represent approximately 25% of total capital, down from 33% at June 30th, 2025, with further reductions expected through year end, primarily through additional resolutions in the legacy bridge portfolio. I'll now turn the call over to Brooke to discuss our financial results. Brooke Carrillo | Chief Financial Officer: Thank you, Dash. For the third quarter, we reported a GAAP net loss of $9.5 million, or $0.08 per share, compared to a loss of $100 million, or $0.76 per share in the second quarter. The GAAP loss primarily reflected transaction-related expenses associated with the resolution or transfer of approximately $600 million of legacy bridge assets and the ongoing net interest income drag from our legacy investments portfolio. Book value per common share was $7.35 at September 30th compared to $7.49 at June 30th, and our economic return on book value was 0.5%, including $0.06 per share of accretion from share repurchases. Total repurchase activity since June was 6.5 million shares, or 5% of our outstanding common shares. On a non-GAAP basis, Core Segments Earnings Available for Distribution, or Core Segments EAD, was $27 million, or $0.20 per share, representing a 17% return on equity. This compares to 18 cents per share in the second quarter and underscores the continued earnings strength of our three core segments, Sequoia Mortgage Banking, which currently includes our Aspire platform, Corvest Mortgage Banking, and Redwood Investments. Across our operating platforms, we've increased capital allocation by more than 80% since mid-2024, including a $160 million increase since the end of the second quarter. Combined GAAP return on equity for mortgage banking segments reached 28% in Q3, marking the fifth consecutive quarter returns exceeded 20%. At Sequoia Mortgage Banking, segment net income rose to $34 million, producing a 29% ROE compared to $22 million and a 19% ROE in the prior quarter. Total lock volume reached $6.3 billion, including $5.1 billion from Sequoia and $1.2 billion from Aspire. Gain on sale margins averaged 93 basis points at the high end of our long-term target range. Portabas Mortgage Banking generated $3.5 million of segment net income and a 30% EAD return on equity. Funding volume of $521 million, the highest since 2022, was up 14% year-over-year, supported by strong loan distribution and a shift in production mix towards term, DSCR, and smaller balance bridge products. Redwood Investments delivered segment net income of $10 million and a 10% EADROE. The modest decline in net income relative to the second quarter was attributable to paydowns and sales of third-party securities, partially offset by gains on retained investments as rates declined and spreads tightened. We deployed approximately $30 million of capital into asset source from our operating businesses and completed our fourth non-recourse financing trade of retained investments, reducing total securities repo balances to just $28 million, which is down 85% from Q3 2024. The investment portfolio saw steady to declining delinquencies across products, including 90-plus-day delinquencies on securitized bridge loans that now sit below 3%, and where we continue to see healthy repayment velocity. Turning to legacy investments, the segment reported a $22 million net loss driven by the transaction costs and continued net interest margin pressure. On the $1 billion of assets sold or transferred this quarter, we recorded an approximate $0.05 EAD loss equating to negative 15% return versus returns exceeding 20% across our operating businesses where the $150 million of capital generated from resolution activity will be redeployed. Total operating expenses decreased 3% or $1.7 million from the second quarter driven by lower portfolio management costs. This is partially offset by higher G&A related to personnel and other expenses supporting the growth of our newer platforms. Across all operating segments, we saw continued gains in operating efficiency with notable improvements in cost per loan, reflecting the benefits of record quarter origination volumes this quarter. Turning to our balance sheet and capital structure, our overall recourse leverage increased from 3.2 times to 4 times, driven by warehouse utilization tied to record mortgage banking activity. Excluding recourse leverage from our mortgage banking businesses, Our combined corporate and portfolio leverage ratio declined from 1.9 to 1.6 times, consistent with the ongoing repositioning of the balance sheet towards our operating platforms. The 2.3 turns of recourse leverage associated with the warehouse lines remain well supported by highly liquid jumbo loans, where we return capital quickly. Recourse debt balances increased by $771 million from the second quarter, reflecting record funding volume of $5.1 billion, and two billion of which has already been sold or securitized month to date. Subsequent to quarter end, we retired our 2025 convertible notes and as announced today, expanded our revolving credit facility by 150 million to 400 million in total capacity, extending the maturity to September of 2028. These actions strengthen our liquidity, simplify our debt profile, and increase flexibility to support continued growth in our core platform. In addition, Our company-wide cost of funds declined approximately 40 basis points from the prior quarter, driven both by lower SOFR rates and narrow net spreads across our aggregate facilities. To close, Redwood is executing with focus and consistency. We are simplifying our business, scaling our core platforms, and redeploying capital into higher return opportunities. The progress this quarter underscores the strength of our operating model and the earnings potential of our core segments, repositioning Redwood to deliver sustainable profitability and and long-term value for our shareholders. And with that, I'll turn the call back over to the operator for questions. Operator: Thank you. We will now be conducting a question and answer session where selected analysts are invited to ask a question. Our first question comes from Bose George from KBW. You may proceed with your question. Bose George | Analyst, KBW: Hey, everyone. Good afternoon. Actually, first I wanted to ask about the EAD sort of longer-term earnings power. You know, you noted you largely expect the legacy assets to be rolled off by 2026. And so, when you look at the earnings power after that, should we look at, you know, the non-GAAP core number this quarter was 20 cents, you know, plus the deployment of all the capital that comes out of that's still in the legacy piece? Is that kind of the way to bridge to sort of the earnings power after? Chris Abate | Chief Executive Officer: Hey, Bose. I can start on that one. The short answer is yes. I think as the legacy segment winds down, our consolidated earnings will start to look a lot closer to what we're generating in EAD today, in core EAD. So as you said, that was 20 cents exceeded the dividend. I think the redeployment is going to be a question of how quickly we can wind that down, but certainly in The third quarter, we turboed it, so to speak. And I think Brooke mentioned we'd freed up $150 million of capital for reinvestment. So that was capital that was generating a negative return on a consolidated basis and now can be redeployed into the mortgage banking segments, which I think we stated have generated greater than 20% ROEs for the past four or five quarters. Bose George | Analyst, KBW: Okay. But just in terms of the $0.20, that basically just strips out the legacy piece. But as you redeploy that, there'll be essentially whatever, 20% return on that piece, right? So that's sort of incremental to the 20 cents. Is that fair? Brooke Carrillo | Chief Financial Officer: Yeah, that's right. We still have $400 million of capital associated with our legacy segment. So as that capital is freed up, absolutely that will be redeployed into mortgage banking. Bose George | Analyst, KBW: Okay, great. And then just one other quick one. The ROE on the Redwood investments, the non-GAAP EAD ROE looked like it was last quarter, I think it was 16. This quarter, it looked like it was 10. Was that right? So can you just discuss what drove that? Brooke Carrillo | Chief Financial Officer: Yes, I'm happy to. So a lot of it came from just lower NII from our investment portfolio. We actually saw our net interest income up about a million dollars overall, and you're really starting to see kind of the benefit of our mix shift here where our capital is being redeployed from the portfolio into mortgage banking. So I think our mortgage banking NII was about $5 million. This was really from sales primarily and payoffs. We had about almost $450 million of payoffs in our bridge and term loans across our consolidated assets. So that was... Okay, that makes sense. Unknown Analyst: Thank you. Operator: Our next question comes from Rick Shane from JP Morgan. You may proceed with your question. Rick Shane | Analyst, JP Morgan: Hey, everybody. Thanks for taking my questions. I have to queue in a little faster because Bo has asked most of what I wanted to discuss. Look, basically, if you sort of look at the timeline in terms of what you're describing for releasing capital from the legacy investment portfolio, it's about $100 million a quarter that's going to run over the next four or five quarters. When we look at the three remaining core businesses, I'm curious if which of those businesses will actually generate additional net income with additional capital? For example, does the mortgage banking business, is it capital constrained right now, or is it a market share issue? Um, and that additional cap, it will be about market share growing regardless of capital or, and so how should we think about that actual capital being allocated to the three different businesses? Chris Abate | Chief Executive Officer: Hey, Rick. I'll take a stab at this one to start. You know, I would say we've shown, I think we said we've grown capital to that sector 80% or so over the past four or five quarters. So effectively what that means is every dollar that we've been able to free up, we've deployed. And I think that dynamic will continue into the foreseeable future. So as As we free up more capital, we have uses for it fairly quickly in mortgage banking across the three platforms, candidly. We have record quarter in Sequoia. We mentioned that Aspire grew 4x quarter over quarter. So when you think about those growth rates, the need for capital is going to continue to be there. It's a big reason why we continued, extended our relationship with CPP Investments which is a great partnership for us. And so I think we're pretty excited about our ability to deploy capital in the core businesses here over the next year or so. Rick Shane | Analyst, JP Morgan: Got it. Okay. That's helpful, Chris. And when we think about it, and, you know, over the last two quarters, the math, the ROE math for Sequoia is bookended 19% to 28% ROE. Even on the low end, that's obviously very attractive and supports the dividend. I am curious, when you think about what drove the expansion and how we think about that going forward, is that ROE expansion a function of scale or is it more a function of shape of the curve and a particularly favorable environment in terms of margin in that business? Dash Robinson | President: Hey, Rick. It's Dash. Great question. It's probably a little bit of all of the above. You know, we've always strived to be as capital efficient in that business as possible. You know, loans on average are coming on and leaving the balance sheet within a month. You know, we could probably continue to do that more efficiently. We've done now 13 securitizations already year to date, which is obviously, you know, above one per month. So that's very, very helpful. So capital efficiency is part of it. You know, our operating efficiency just in terms of just expenses to revenues continue to improve. Those improve notably from, you know, quarter on quarter. So that's obviously helpful from just an overall, you know, expense ratio perspective. The other big emerging story, which we talked about, is just the synergies between Aspire and Sequoia as well. You know, we're just scratching the surface, you know, with an Aspire in terms of our market share. You know, our implied market share annualized in that business is in Q3 is probably like 3% or so if you extrapolate our volumes versus, you know, full year volume. So you asked, you know, about market share, and I think for different reasons within Sequoia and Aspire, you know, those businesses are primed to, you know, continue to grow wallet share. Aspire in particular onboarding new sellers and penetrating existing Sequoia sellers that, as I mentioned, are adding to their product suite. That's a very big deal. You know, we talked a lot about bank posture, just the percentage of bank collateral that Sequoia did in the third quarter was close to 50%. You know, that's very meaningful, particularly when you think about what's going on in banks, C-suites, dispositions, rationalization of ROEs. So the runway is really long to continue to grow share, notwithstanding, you know, the size of the pie with rates, et cetera. And so I think when you put all of that together, you know, those can continue to drive ROEs, you know, hopefully to the wider end of the bookend that you talked about. Got it. Unknown Analyst: Thank you guys very much. Operator: Our next question comes from Doug Harder with UBS. You may proceed with your question. Doug Harder | Analyst, UBS: Thanks. I guess sticking with returns, how do you think about the total size of the corporate expense as you look to maximize kind of the overall ROE And then also, how do you think about what the third-party investment ROE can be as you look to kind of allow the high mortgage banking ROE to fall to the bottom line as much as possible? Brooke Carrillo | Chief Financial Officer: Yeah, Doug, I'm happy to take that. You know, I think it's really important not to view our expense base just in the context kind of of our capital base. You know, we've talked say a lot about our three scaled but still rapidly growing operating businesses. And when we think about who we're competing and what we're producing there, on the jumbo side, we've kind of been neck and neck with the biggest bank dealer desk of the top issuer of prime jumbo loans. And we're running that business on a fairly lean operating expense base. Aspire, as Dash just mentioned, just moved quickly into a top five non-QM aggregator. Corvus continues to kind of lead in the investment and small business lending. And meanwhile, for several years, we've really chosen not to raise dilutive capital and instead focus on returning capital shareholders through buybacks. So, you know, our operating expenses, it might look elevated as a percentage of equity, but we think the kind of right way to look at it is the amount of operating leverage and productivity that we have. have and manage on our platform today. You know, we basically manage 20 billion of assets with about 300 people, and so we remain highly focused on our expense structure, but we also believe that the real path to earnings creation is coming from, you know, further scaling our model and addressing our legacy capital rather than shrinking our infrastructure. So I think the third-party focus will remain, you know, fairly limited. We kind of talked a lot about our strategic pivot last quarter to focusing on our operating businesses that are franchise. I think we're, within third party, we're focused on assets that meet our cost of capital today. And obviously, you know, with where we were marked, that helped move assets that we thought were suboptimal from that perspective. Unknown Analyst: Great. Thank you, Brooke. Operator: Thank you. Our next question comes from Don Fandetti with Wells Fargo. You may proceed with your question. Don Fandetti | Analyst, Wells Fargo: Yes, on the Aspire non-QM, can you talk a little bit about how you see the growth of that underlying market, you know, whether or not, you know, the GSE footprint shrinking could potentially increase that? Dash Robinson | President: Thanks, Don, for the question. I think setting aside the GSEs for just a second, I think we see that market just organically increasing. you know, having significant growth runway. If you look at just the employment mix in this country, there's more and more consumers, you know, who earn non-traditional income away from W-2. I think that's, you know, that's a very big deal. The other piece is awareness. I think particularly with, you know, more originators, particularly larger IMBs, you know, involved in non-QM originations, I think more of the eligible consumer population that you know, can take out some of these loans is being reached, frankly, now that more, you know, originators are involved in this space. Technology, particularly AI, that's a very, very big deal in terms of managing cost to produce, you know, in this space. If you think back to when, like, bank statement loans, you know, really emerged 10 or 12 years ago, very manual, you know, took quite a while for an underwriter to responsibly get through underwriting one of those loans. That's significantly shorter now, and I think we're probably, you know, just at the tip of the iceberg in a good way in terms of, you know, how those efficiencies can come to bear. There's a lot to be, you know, careful about in terms of, you know, how those underwriting processes evolve. That's something we're very focused on, but that's also a big deal. And on DSCR, you know, just for context, about 40% of Aspire's volume was DSCR, which is sort of smaller balance, you know, rental loans. You know, rentership in this country continues to grow. I think rentership was up 2%, 3% annualized last quarter. you know, when you think about just continued challenges with housing affordability, et cetera. And so I just think organically, you know, Aspire's TAM is going to continue to grow for, you know, for good reasons. You know, as it relates to the GSE footprint, you know, these are not products that they really do right now. Far be it for me to fully prognosticate around, you know, how they think about the footprint going forward. We need to be ready for anything. Obviously, an overall footprint reduction with the GSEs on low limits would be a huge boon for all of our businesses, probably most notably Sequoia. But even away from what's going on in D.C., we just think the Aspire TAM is growing for good reasons. Unknown Analyst: Thank you. Operator: Our next question comes from Steve Delaney with JMP Securities. You may proceed with your question. Steve Delaney | Analyst, JMP Securities: Thanks. Good afternoon, everyone. So I want to ask a question about rates, which is probably – after Chairman Powell didn't do a very good job at his little speech earlier today. So I guess we don't know where they're going. But what I want to get at is looking at your securitized prime jumbo portfolio and the WAC, kind of the coupons within those seasoned loans versus what you're quoting now on new prime jumbo loans. Help us get a picture maybe of what that dynamic looks like Are you, do you think your book is going to extend or could it accelerate in terms of CPR, you know, picking up? And just curious how you're going to approach that and got a follow-up related to that, if you would just kind of comment on where you stand with respect to coupon risk. Chris Abate | Chief Executive Officer: Sure. Steve, good to hear your voice. I will take a shot here. You know, I think a third or so of our volume this quarter was refi, refi related. So, you know, a lot of, you know, most homeowners are sort of out of the money. And, you know, I think that that's reflected in our book as well. So I'm not sure we're going to see much on the back of Powell's remarks today, even though, of course, you know, the market's going to likely sell off in the near term. But by and large, we're growing the portfolio at a rate where it's trending towards current coupon. And to the extent that continues, the extent we're on a pace of more than a deal a month and we're retaining subs and likely IO, that puts us in a good position to continue to move the coupon up. And, you know, over time, you know, with a combination of IO, you know, we've got a good balance in the book today. So I'm not sure it's going to be overly meaningful for us because, again, you know, our business today is primarily the moving business. It's mortgage banking and, you know, it's less and less portfolio investing. Steve Delaney | Analyst, JMP Securities: curious, what is the current, I haven't been in the market lately, but what is the sort of current range for Prime Jumbo, 30-year fix, Prime Jumbo loans? Chris Abate | Chief Executive Officer: We were around six and a quarter this week. You know, again, we'll see what happens on the back of Powell's remarks. You know, Aspire is maybe 100 basis points higher than that. So the market has come down meaningfully and Again, we're starting to see more refi business in our pipeline, but that's been largely absent for the last three years or so. So to the extent we do see more easing, QT is officially done. So heading into 2026, if that could become a more meaningful component of our business, that just adds to the opportunity. Steve Delaney | Analyst, JMP Securities: And the refi pickup that you're hearing here recently, is that kind of HPA driven where people have built up some nice equity and they're looking at that? I know that's probably an aspect of the Aspire program, but do you see that even in Sequoia where the people are really coming in and they want to do a little bit of a cash out, whether it's education or whatever the issues are? Chris Abate | Chief Executive Officer: We're certainly seeing some of that. We have those products. I'd also say that just given the capacity in the origination system, people are getting calls sooner. So the old adage that you had to be 50, 75, 100 basis points in the money to refi, I think the combination of capacity and technology has really shortened that up where we're seeing some homeowners refiing. perhaps 25, 35 basis points in the money. I think that presents an opportunity for us. Again, technology is a big part of that. We talked about AI and just processing loans faster, getting approvals faster. Those are real upside opportunities for us as we build out the infrastructure. Steve Delaney | Analyst, JMP Securities: I appreciate the comments. The mortgage business is changing for sure, but it sounds like you guys are kind of riding the wave and right on top of what's going on. Unknown Analyst: So thanks for the feedback. Thank you. Operator: Our next question comes from Eric Hagan with BTIG. Unknown Analyst: You may proceed with your question. Eric Hagan | Analyst, BTIG: Thanks, guys. I appreciate you. You know, really strong quarter for jumbo volume. We're looking out now, like, you know, call it a year and looking at your capital needs. And so if you stay on this pace, what do you think will be the amount of Jumbo volume that you securitize versus sell to third parties over the next year? Chris Abate | Chief Executive Officer: Well, right now, you know, securitization has been, you know, a great option for us. I think we have the most liquid shelf in the sector, so our financing costs are the lowest. You know, in Jumbo, you know, the subordinates that we retain aren't overly thick, so the actual, you know, investment size isn't what it is at Aspire or certainly Corvest. So that business, we have the potential to grow through securitization for an extended period without necessarily needing outside capital per se. I would say, though, we've been able to invest every dollar of capital that we've put in that business. And I know that we can do more. So I think I mentioned fundraising for Sequoia and my prepared remarks, and we're going to be very focused on that over the next few months. We also, I think bank business was half of our volume in Q3. Again, that's way beyond where it's ever been, and I think it's reflective of why we're able to grow market share so significantly in a market that's essentially flat from a housing origination activity perspective. So that's another area, partnering with banks. So we've got great options in Sequoia, and to the extent we can grow Aspire and Corvus as well, I think the mortgage banking piece of the business has been pretty exciting for us. Dash Robinson | President: Just one thing I'd add to that, Eric, sorry, is we talked a little bit about the upsides of the CPP secured facility, which I think is important to return to for a sec in terms of your question, because not only did we upsize that facility by $150 million of capacity, but basically the borrowing-based eligibility is moving in the direction you're indicating, which is, you know, more ability for us to use that facility to finance our operating activities and mortgage banking and not just hard assets. And, you know, the upsize is a big deal, but in terms of, you know, how we're able to use that capital going forward, that's pretty important too. Eric Hagan | Analyst, BTIG: Yeah, that's helpful. That's helpful. What are you guys looking at right now to give you confidence or some visibility that the credit performance in the BPL portfolio has basically been stabilized at this point? Dash Robinson | President: I think it continues to be, you know, a vintage issue. We've talked about that for quite a while. I think the issues are certainly the issues that have taken longer to – you know, deal with or, you know, have resulted in higher severities, you know, are still very much limited to that really first half 2022 vintage. You know, as Brooke articulated in her remarks, our securitized bridge portfolio, which is basically the last three years of production, net of prepays is, you know, now below 3%, 90 plus. That's a good number. We're seeing prepay velocity pick up. And if you look at the loss mid within those portfolios, we've seen You know, delinquencies, you know, come but be resolved efficiently and in many cases with little to no severity, which is a function of, you know, our pivot over the past few years to smaller balance, more single-family focused collateral. And so, you know, Eric, as you know, that business is not a no-loss business. But if you look at the composition of what we've been originating, I think multifamily was like 1% of our overall production last quarter. You're seeing it in just the overall roll rates, but also the efficiency of being able to resolve whatever does go delinquent in the last two, three years of production. Brooke Carrillo | Chief Financial Officer: One thing I would just add to Dash's comment is I mentioned the amount of paydowns we had in the quarter. $280 million or so of that was bridge. That includes about $67 million of REO and some of our special assets. We are, I think, not only seeing the the repayment velocity in performing assets, but also moving that legacy book as well. Unknown Analyst: Thanks, guys. I appreciate it. Operator: This now concludes our question and answer session. I would like to turn the floor back over to Caitlin Moritz for closing comments. Caitlin Moritz | Head of Investor Relations: Thank you, everyone, for joining today. We appreciate the ongoing engagement and sponsorship. If you haven't already, we encourage you also to check out our earnings materials, including the Redwood Review and Shareholder Letter on our website. We're always here to answer questions if you have any, and thank you, and have a good rest of your evening. Operator: Ladies and gentlemen, thank you for your participation. This concludes today's teleconference. Please disconnect your lines and have a wonderful day. jsPDF 3.0.3 D:20260606090415-00'00'

NYSE:ROG Q2 2025 Earnings Call Transcript Generated on 6/6/2026 Sean Molley | Conference Operator: Good afternoon. My name is Sean Molley and I will be your conference operator today. At this time, I would like to welcome everyone to the Rogers Corporation Second Quarter 2025 Earnings Conference Call. I will now turn the call over to your host, Mr. Steve Haymore, Senior Director of Investor Relations. Mr. Haymore, you may begin. Steve Haymore | Senior Director of Investor Relations: Good afternoon and welcome to the Rogers Corporation Second Quarter 2025 Earnings Conference Call. The slides for today's call can be found in the investor section of our website along with the news release that was issued earlier today. Please turn to slide two. 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 Roger's 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 three. The discussion 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, which are available on our Investor Relations website. With me today are Ali El-Haj, Interim President and CEO, Laura Russell, Senior Vice President and CFO, and Jeff Tsao, President of the Advanced Electronic Solutions Business Unit. I will now turn the call over to Ali. Ali El-Haj | Interim President and CEO: Thank you, Steve. Good afternoon, everyone, and thank you for joining us today. First, let me say that I appreciate the opportunity to step in as the interim CEO role at Rogers. Over the past several months, I have directly observed the talent and capability of the global Rogers team, as well as the many compelling opportunities that are ahead. There are challenges that need to be addressed. However, I'm excited to lead the organization and leverage my prior experience to help improve the company's performance. Over the past 30 plus years, I have gained significant experience leading both private equity-owned businesses and divisions of public companies. Like Rogers, these companies have been global manufacturers of highly engineered materials and products that have competed in similar end markets, such as automotive and industrial. At each of these companies, I have demonstrated the ability to deliver growth in both sales and profitability. I look forward to working with the executive leadership team and employees globally to do the same at Rogers. Now turning to slide four. First, I want to emphasize to our shareholders that Rogers' core capability and strengths are intact. The recent leadership transition does not signal a major change in strategy or a deterioration of our competitive advantages. Rather, the changes are needed to increase the speed of execution, improve accountability, and create a more dynamic organization to accelerate growth and improve margins. Next, the performance of the AES ceramic business has been affected in recent quarters by a rapidly evolving EV market. I will cover how we are responding to the market-driven changes facing this business and the actions we are taking to address them. Turning to our Q2 results, our sales, gross margins, and adjusted EPS were all within guidance ranges. Sales increased by 6.5% from the prior quarter, led by a stronger industrial portable electronics, A&D, and ADAS end markets. We look ahead to Q3, and we expect a more modest increase in revenue. However, gross margin and adjusted EPS should see stronger increases due to our ongoing cost and expense containment initiatives. Laura will cover both the Q2 financials and third quarter outlook in more details. Next on slide five. Here are the key elements that provide a strong foundation for Roger's future success. For many years, Rogers has been a trusted partner by leading OEMs globally. They value Rogers' design capabilities, proven reliability, and broad portfolio products. As a customer-focused company, we will continue to build on these values in all areas of our business. Rogers' technical capabilities also remain a strength for the company. Our sales engineers and technical service organizations are critical to our success. They leverage their deep expertise to assist our customers in finding the right materials and solutions for their specific applications. Rogers' greatest strength is its employees. As I have had the opportunity to meet many of the Rogers team around the world, I have been impressed at the talent and commitment they bring to work each and every day. We will continue to invest in the development of our employees and their success. Finally, Rogers' global reach and footprint continues to be a strength and source of differentiation. We have manufacturing and technical expertise in every major region of the world to provide high levels of support to our customers. We are building a global company with local experts. Next, on slide six, I'll highlight some of the changes happening in the global electric vehicle market. Over the past 18 months, we have seen a sharp divergence in the regional growth rates for EV production and sales. In North America and Europe, projections for EV growth have been downgraded over time by millions of units. This resulted in both a significant inventory correction and a stagnation of production levels in these regions. In contrast, EV production in China has remained on track to projections, and unit volumes have grown rapidly. This change in regional growth rates has altered the competitive landscape for Coramic's direct customers. Power module manufacturers in Asia, and specifically China, have capitalized on the fast growth in their home market and have been able to capture large share from Roger's traditional customers. Also, with intense global EV competition and consistent with typical trends in the auto industry, power substrates are facing price and pressure. As a result of these market changes, we experience lower demand than originally forecasted, and we are adjusting the ceramic business accordingly. Turning to slide seven. In support of our local or local manufacturing strategy, we are rebalancing our capacity between Europe and China. As recently announced, we are taking meaningful actions to right-size the ceramic business. With lower growth in the EV market outside of China, it is necessary that we have a cost competitive footprint in each region. Our plans include ramping up manufacturing capabilities in China and reducing capacity in our European operations. The full year run rate savings from these actions are projected to be in excess of $13 million. Our Suzhou factory combined with a localized supply chain will afford us a global competitive advantage. Customer qualification work at this facility is continuing, and we expect to ramp up production in the coming months. We continue to see good traction with additional design wins in the local market. Indeed, in the second quarter, our AMB substrates were designed into a key EV platform by one of the leading Chinese power module manufacturers. The new facility also expands opportunities in industrial and renewable energy and markets. We continue to believe that electrification will provide compelling market opportunities ahead. Executing on this strategy will be key to competing effectively in all regions and enabling our growth in the EV market. We are also focused on growing across our other key end markets. Laura will highlight the growth we saw in Q2, especially in industrial, aerospace, and defense, and ADAS. In industrial, our primary markets are showing signs of recovery and remain a major focus area. We have identified several growth opportunities, such as battery energy storage systems and data centers. In data centers, sales today are small, but we are actively engaging with customers to help them address thermal vibration management and signal integrity challenges. In A&D, we expect the demand from both U.S. and European primes will continue to be strong, and we are working to secure additional wins. In the ADAS market, there are compelling growth opportunities as vehicles move to higher levels of autonomy. We are making progress with design wins in new regions and on new introduced laminate materials which build on our proven performance while reducing manufacturing costs for our customers. I'll turn it over to Laura to discuss our Q2 financial performance and Q3 outlook. Laura Russell | Senior Vice President and CFO: Thank you, Ali. Along with Roger's Board of Directors and employees, I have a great deal of confidence in Ali's leadership abilities. I look forward to partnering together to drive improved results for our shareholders. I'll begin on slide eight with a summary of our Q2 results. Our key financial metrics for the quarter were within our previously announced guidance expectations. Sales were above our expected midpoint as we saw increased demand across most end markets. AES revenues increased by 4.6%, and EMS revenues were 8.2% higher on a quarter-on-quarter basis. On a gap basis, we recorded a net loss of $73.6 million, or $4 per share. This was inclusive of $4.3 million of restructuring costs and a non-cash impairment charge of $71.8 million related to Goodwill and other intangible assets for our Keramic business. As Ali referenced, market and competitive dynamics in the EV space have rapidly shifted in recent quarters. These changes resulted in a lower outlook for Keramic, which triggered the impairment. With the expansion of our local manufacturing capabilities and the cost reduction initiatives we announced, we believe that we can meaningfully improve the performance of Keramic relative to current levels. Adjusted earnings per share in Q2 increased to 34 cents from the 27 cents in Q1 as a result of the improvement in sales and gross margin. On slide nine, I'll discuss our sales for the second quarter buy-in market. Industrial markets had the strongest performance in Q2, increasing at a double-digit rate versus the prior quarter. General industrial sales in EMS increased across multiple product lines and regions. AES industrial sales were also higher with stronger industrial robotic and automation demand. Aerospace and defence sales were also higher in both AES and EMS operating segments. AES defence sales improved slightly and EMS commercial aerospace sales rebounded after a decline in Q1 related to customer order timing. ADAS sales increased for the third consecutive quarter as we continue to see traction with existing customers and grow business in Asia. Portable electronics also increased at a double-digit rate versus the prior quarter, consistent with expected seasonal growth. Turning to slide 10. Q2 gross margin was 31.6%, an increase of 170 basis points from the first quarter. The improvement in gross margin was driven by higher sales and favourable product mix. The impact of tariffs on gross margin was relatively small in Q2, given the de-escalation of rates between the US and China in the quarter and also as a result of our mitigation efforts. Gross margin was below the midpoint of our guidance range for two primary reasons. First, we had a material write-off related to our Belgian facility, which ceased production in Q2. Second, there was an impact from underutilisation at our ceramic Germany factory, which we are addressing with our planned cost reduction action. Adjusted EBITDA improved to 23.9 million, or 11.8% of sales. This resulted from the higher gross margin partially offset by an expected increase in adjusted operating expenses. Continuing to slide 11, I'll next discuss cash utilization for the quarter. Cash at the end of the second quarter was 157 million, a decrease of 18.4 million from the end of the first quarter. For a cash balance decrease in Q2, due to 28.1 million of share repurchases. Capital expenditures were 8.1 million in Q2 and included ERP implementation, maintenance capex and residual investments in new capacity. Consistent with my comments last quarter, our investments in previously announced new capacity are largely complete. Naturally, we will continue to evaluate targeted investments to optimise our organic business performance. Returning capital to shareholders will remain a high priority. We will continue to balance this objective against evolving trade dynamics and cash costs for European restructuring activities. Based on our current view, we anticipate share repurchases in Q3 to be in a similar range to the second quarter. Following our purchases in Q2, we have approximately 76 million remaining on our existing share repurchase programme. Synergistic bolt on M&A continues to be part of our long-term strategy. However, during this transition, the focus will be on organic growth. With that said, evaluation of target opportunities with the right product and regional fit will continue, to ensure we can capture any target meeting our investment criteria. Next, on slide 12, I'll review our guidance for the third quarter. Beginning with sales, we expect Q3 revenues to be between 200 and 215 million, with a midpoint of the range, a 2% increase in sales, versus the previous quarter. The guidance assumes seasonally stronger portable electronics, and a modest recovery in keramic for EV. ADAS sales are anticipated to be down from a seasonally lower auto production. We are guiding gross margin to be in the range of 31.5% to 33.5%, or a 90 basis point improvement at the midpoint of our range. The guidance assumes that tariff policies in place today will remain unchanged for the quarter. The improvement in our forecasted gross margin from 4Q3 is due to volume and product mix benefits. We expect adjusted operating expenses to decrease from the second quarter as a result of lower compensation expense and our continuing focus on discretionary spending. EPS is projected to range from break-even to 40 cents of earnings. The adjusted EPS range is 50 cents to 90 cents of earnings. Adjustments to arrive at our non-GAAP EPS are mainly comprised of severance related to the recent executive management departures and restructuring costs related to operations in Europe. This includes some initial estimated charges for the ceramic restructuring actions announced today. We expect the total restructuring costs associated with the Keramic European operations to be in the 12 to 20 million range and incurred over the period from Q3 of 25 to Q3 of 26. The cost savings associated with these actions are projected to be greater than 13 million on an annual run rate basis and are mainly cost of sales. The savings from these actions will be incremental with the full run rate savings potential beginning in Q4 of 26. These are in addition to the 32 million of annual run rate savings communicated last earnings call. Lastly, based on current visibility, we project our full year tax rate to be approximately 30%. I will now turn the call back over to Ali. Ali El-Haj | Interim President and CEO: Thank you, Laura. Let me conclude on slide 13 with key priorities. Management is focused on simplifying how we operate by empowering our employees, leading to faster decision making and improved speed of execution. With this enhanced agility, combined with a strong customer focus and new product introductions, we are confident in our ability to accelerate growth. That concludes our prepared remarks. I will now turn the call back to the operator for questions. Sean Molley | Conference Operator: Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 to remove yourself from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. We also ask each participant to please limit themselves to only one question and one follow-up. One moment, please, while we poll for questions. Our first question comes from the line of Daniel Moore with CJS Securities. Please proceed with your question. Daniel Moore | Analyst at CJS Securities: Good afternoon, Ali and Laura. Thank you for taking the questions. You know, perhaps we just – I'll pick up where you just left off. But, you know, beyond the $13 million restructuring targeted cost savings, maybe, Ali, just talk about your kind of top two or three priorities, either strategic or financial, as we think about the next six to 12 months. Ali El-Haj | Interim President and CEO: Okay. Dan, as mentioned earlier, I think strategically, first of all, we have a lot of cost initiatives internally that we're working on, operational improvements internally that we need to continue to focus on and improve. And that's why we made the changes that we've made in the organization to speed up the execution and be able to realize, you know, a much more dynamic organization that's going to be responsive to the customer and be able to respond faster, be able to deliver in lower lead time or shorter lead times and stuff like this. This is critical for our current business as well as growth opportunities. So that's one. The second one is, again, on the top line, we did identify a lot of opportunities, short-term, mid-term, and long-term. So the focus will be, again, priorities will be on the short and mid-term, and we continue to pursue those opportunities to be able to impact that third and hopefully beyond that quarter's top-line revenues. Daniel Moore | Analyst at CJS Securities: Helpful, and maybe I'll ask a 2 and a 2A and keep it at two questions. But you mentioned sequential growth several times. You also mentioned the focus will be on organic growth near-term. What are the keys to getting back, and when do you expect to get back to consolidated organic revenue growth on a year-over-year basis? And how do you think about kind of reasonable midterm, say, one- to two-year gross margin targets, given the updated outlook for Keramic? Thank you. Ali El-Haj | Interim President and CEO: Yeah, with regard to top-line growth, again, we're really being aggressive. Our efforts will be, you know, the whole organization is going to be focused on doing so. And we anticipate to have meaningful growth quarter after quarter. As you know, we have guidance for the next quarter. We cannot go beyond that company policy. But our expectation, we will see strong results going forward. An alternative to Laura for the balance of the – go ahead. Laura Russell | Senior Vice President and CFO: Yes. So, hi, Dan. Let me comment on the margin expansion targets. So, you know, as Ali said, the organisation's heavily focused on top-line expansion and execution of the opportunities that we see in front of ourselves. If we can execute that expansion, you know, that utilisation and benefit to the capacity that we already have invested in and have ready and available globally, will assist us in expanding our margins versus how we're performing today. with a, you know, a challenge top line performance level. In addition to that, you know, this year we've announced the significant cost savings that we've undertaken to manage during this environment. And as Ali said, we've already announced in today's comments additional restructuring. So that will also assist us in leveraging and optimising our margins on a go-forward basis. Steve Haymore | Senior Director of Investor Relations: We can go to the next question, please. Sean Molley | Conference Operator: Thank you. Our next question comes from the line of Craig Ellis with D. Reilly Securities. Please proceed with your question. Craig Ellis | Analyst at D. Reilly Securities: Yeah, thanks for taking the question. And, Ali, welcome. I wanted to start just going back to something that you emphasized both in the beginning of your prepared remarks and then at the end when you summarized key priorities, and it was speed of execution. And what I was hoping you could do is give us some specific examples of where you think accelerating speed of execution can make a big difference for Rogers, whether it be in product development and changes to the way the company manages fulfillment, other aspects of how you're bringing value to the customer. What is it specifically that you're looking for and and how much improvement do you need for this business to really hum in your eyes? Ali El-Haj | Interim President and CEO: Yeah, thank you, Craig. I think, you know, one example that I can give you with regard to, you know, speedy kind of, you know, change the company performance to be able to deliver faster. If you look at our lead time in some of our product lines, it just – it is not – acceptable in today's market conditions. We just need to be faster. So we're trying to take our current lead times in some product lines and some plants from whatever today that number is and try to bring it down by 50% to 60%. So be able to deliver faster. If the customer needs it tomorrow, they need to have it tomorrow, not three or four days from now. This is something we need to work on. We have not been doing a great job with it in the past. I think going forward, you will see a significant change in that. Customers will see that and realize that. The second part that we talked about, we have a significant number of new products and next generation type products that we intend to launch and deliver over the next quarters. not one quarter, but over the next coming quarters. And I think we need to accelerate that development process. So by focusing the R&D organization and making sure that the whole company is focused on, this becomes part of the normal operating process of the company, not in a silo by itself and working by themselves. So I think doing these two things, we'll be able to deliver faster prototypes to the customers so that they can put those in their new product development, we'll be able to win programs faster and deliver faster. Craig Ellis | Analyst at D. Reilly Securities: That's really helpful. The second question will be for Laura. Laura, we had previously had in place a $25 million cost reduction effort that I think by the end of this year was going to be on a $32 million run rate, and today I believe we've talked about an incremental $13 million run. So my write-in saying that if we're talking about $13 million and if we were to look out to next year, the $13 and the $32 million run rate exiting this year would mean that we're talking about around $45 million in cost savings as we look at 2026. And if that's so, any color on the slope of the line. And if that's not right, please correct me with those numbers. Thank you. Laura Russell | Senior Vice President and CFO: Sure. Sure, Craig. So you're right. What we discussed in our last call was a 26 savings benefit of 32 million relative to how we exited 24. What we've announced today with the restructuring in our ceramic operations in Europe is an incremental 13 million to that amount. So cumulatively, you're correct in your observation of 45 million. What I would say, though, is the timing won't fully manifest in full year 26. At the moment, and based on our planning assumption, we would anticipate to start seeing the $13 million, which is an annual amount, crystallise in savings through the P&L, likely in the fourth quarter of 26. And as we go through the process and evaluate that further, if there's any material change, naturally we'll provide updates. Craig Ellis | Analyst at D. Reilly Securities: Got it. Thank you. Sean Molley | Conference Operator: Of course. Thank you. And we have reached the end of the question and answer session. And this also concludes today's conference, and you may disconnect your lines at this time. We thank you for your participation. jsPDF 3.0.3 D:20260606090416-00'00'