Good afternoon. My name is Alicia, and I will be your conference operator today. At this time, I would like to welcome everyone to Rogers Corporation's First Quarter 2024 Earnings Conference Call. I will now turn the call over to your host, Mr. Steve Haymore, Director of Investor Relations. Mr. Haymore, you may begin.

Good afternoon, everyone, and welcome to the Rogers Corporation First Quarter 2024 Earnings Conference Call. The slides for today's call can be found on the Investors section of our website, along with the news release that was issued earlier today. Please turn to Slide 2. Before we begin, I would like to note that statements in this conference call that are not strictly historical are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and should be considered as subject to the many uncertainties that exist in Rogers' operations and environment. These uncertainties include economic conditions, market demands, and competitive factors. Such factors could cause actual results to differ materially from those in any forward-looking statement made today. Please turn to Slide 3. The discussions during this conference call will also reference certain financial measures that were not prepared in accordance with U.S. generally accepted accounting principles. A reconciliation of those non-GAAP financial measures to the most directly comparable GAAP financial measures can be found in the slide deck for today's call, which are available on our Investor Relations website. Turning to Slide 4. With me today is Colin Gouveia, President and Chief Executive Officer; Ram Mayampurath, Senior Vice President and Chief Financial Officer; and Griffin Gappert, Vice President and Chief Technology Officer. I will now turn the call over to Colin.

Thanks, Steve. Good afternoon to everyone, and thank you for joining us today. I'll begin with the key messages for the quarter and outlook on Slide 5. Overall, we are encouraged by the improving end market demand that we saw in the first quarter. Sales were near the high end of our guidance expectations, which led to adjusted EPS above the midpoint of the range. The markets where we saw the most growth were aerospace and defense, wireless infrastructure, and industrial. The improved industrial demand is significant as it is both our largest end market and was hit hardest by the prolonged cyclical downturn in manufacturing activity. It appears that demand in many of these industrial markets has hit bottom, and the gradual market recovery is beginning to take hold. The improving outlook for industrial demand adds to the likelihood that Q1 sales will be the low point for the year and that sales should continue to improve into the second half of 2024. Other signs that point to a stronger second half of the year include improving manufacturing PMI data, input from customers, and the typical seasonality in our portable electronics business. Returning to Q1, excess inventory at the customer level remains a challenge for certain product lines. Our ceramic power substrate business, which had a record year in 2023, had several high-profile customers push out orders in late February due to inventory levels. The sales outlook for power modules used in industrial, renewable energy, and EV/HEV inverter applications is very dynamic right now, and we are closely watching for better indications regarding demand levels in the second half of the year. We do expect this headwind to continue into Q2 based on customer feedback. As we continue to drive improvement in our top line, we are also taking steps to improve profitability and cash flow. These actions include adjusting manufacturing costs and start-up expenses for specific product lines to match lower near-term demand levels. In some cases, we are taking out more costs where the recovery may be further away and carrying some costs where we see demand returning sooner. As we manage through the very dynamic near-term environment, we remain firmly focused on executing on our strategic growth plans. This includes continuing to fund our R&D and innovation initiatives and investing in capacity and capabilities to support this growth. We continue to take a measured approach to capacity investments and will adjust the timing of spend to align with demand levels. We are working to strike the right balance between readiness to capitalize on growth opportunities while actively improving margin and cash flow. In terms of our innovation, we have a rich opportunity pipeline that we anticipate will help drive our future growth. I'll now turn it over to Griffin to discuss more about our innovation and technology development efforts.

Thank you, Colin. I'm very excited to share our strategy to accelerate innovation at Rogers and the exciting opportunities we have ahead. I'll begin on Slide 6. Rogers has a rich history of innovation. Over the past 9 months, I've observed firsthand the unique skill sets and capabilities that have established Rogers as an innovation leader. These capabilities include our deep material science and applications expertise, which fuels the development of highly engineered and differentiated solutions. This has enabled us to establish technology leadership positions in secular growth markets and is why customers repeatedly turn to Rogers for solutions to their most complex material challenges. Some examples of the types of innovative solutions we have developed in recent years include advanced power substrates, which have helped enable the growth of silicon carbide in electric vehicles and renewable energy markets, battery compression pads for EV batteries that enable improved range and lower total cost of ownership for OEMs, and miniaturized antenna solutions for the defense market. Our new innovative platform enables the reduction of antenna sizes by 75% to support evolving communication needs. The strengths I've outlined will continue to be the foundation of our innovation strategy as we move forward with continuous improvement initiatives targeted to accelerate and scale our development processes. The first of these initiatives is focused on strengthening our innovation operating model. We are placing increased emphasis on a One Rogers model to drive greater process consistency and improved execution capabilities across all of our R&D and innovation functions. This will help us accelerate our development cycles and make the innovation function more scalable as we grow. In addition, we are taking a portfolio approach with how we allocate resources and invest in opportunities over multiple innovation horizons. For Horizon 1 innovations, we are prioritizing key near-term projects focused on extending our core businesses. For Horizon 2, the focus is on developing capabilities needed to capitalize on technologies and applications adjacent to our core. And with Horizon 3, we focus on the exploration of nascent technologies, which have longer timelines but high potential for disruptive solutions. With this portfolio approach, we are investing resources across multiple time horizons to make sure we continue to support the growth of the business today and into the future. We are also placing a greater emphasis on leveraging technologies such as digital modeling and machine learning to innovate faster and with better outcomes. We also continue to leverage our innovation ecosystem partnerships, including relationships with academic and government institutions, suppliers, and start-ups. We expect these best-in-class techniques to drive improved results that will help accelerate the growth of the business with future innovations. Some examples include process innovations in both our AES and EMS business units. One example in our ceramic business is a process improvement that further enhances the quality and reliability of our AMB substrates. Next-generation automotive radar technology, which can increase detection range by 40%, while lowering the total cost of the radar system by 20%. And multiple engagements with key OEMs and battery manufacturers on emerging EV batteries, where our polyurethane and silicone materials can solve pressure management and other needs. We're very excited about the opportunities in our innovation pipeline and the improvements we are making to further strengthen our innovation and technology leadership positions. I'll now pass it back to Colin.

Thanks, Griffin. Turning to Slide 7. I'll next provide more detail on our first quarter results. Sales of $213 million increased approximately 4% from the prior quarter and were near the top end of our guidance, led by higher aerospace and defense and industrial markets. As mentioned, we are seeing indications of further sales improvement ahead. Gross margin was at the low end of our range, primarily resulting from an unfavorable product mix. We carefully managed operating expenses to achieve adjusted EPS above the midpoint of our guidance. Touching on our gross margin results of 32% in Q1, we expect significant improvement in coming quarters. With higher volumes and the structural cost improvements we've made, we could see margins above 35% later this year. As inventories and volumes stabilize, the work we have done in operations, supply chain, procurement, and pricing will enable margins to grow towards our long-term financial targets. I'll next provide some more color on each of our major end markets, starting with the EV/HEV segment, our significant growth category. Total EV/HEV sales declined in Q1 with lower AES sales, offsetting strong growth in our EMS business unit. BMS EV sales reached a new quarterly record in Q1 on improved demand for EV battery solutions from our global customer base. Sales increased at one key OEM customer beginning to achieve more substantial production volumes following supply chain challenges in 2023. We expect EMS EV sales to increase further in Q2. As I touched on earlier, our ceramic sales declined versus the fourth quarter as our power substrate customers managed inventory levels due to softer end market demand. This decline was consistent across most of our customer base. Based on indications from our customers, we expect that power substrate sales will continue at similar levels in Q2 before strengthening in the second half of the year. In our high-growth markets, A&D sales were strong in the AES business, driven by demand for our high-frequency circuit materials for defense applications. EMS sales also increased versus the fourth quarter from stronger commercial aerospace sales. Renewable energy revenues increased from lower Q4 levels, and ADAS decreased slightly. As expected, portable electronics demand declined from the prior quarter due to normal seasonality. In our core markets, we saw improvement in both industrial and wireless infrastructure sales. Industrial sales improved at a high single-digit rate, led by our EMS business. As mentioned, we are seeing encouraging signs of less customer inventory destocking as well as improving order patterns. Wireless infrastructure sales improved from stronger demand in India, which we expect will continue into Q3. Lastly, I'll touch on some of the recent wins we have secured as we continue to see good design activity across our business. First, we secured two wins with our ceramic advanced substrate technology. In the EV space, a customer in Asia designed our high-performance substrates into their silicon carbide power module solution for electric vehicles. In the renewable energy market, our substrates were selected by a leading U.S. power module manufacturer for new solar and wind programs. In EMS, our highly engineered prone polyurethane foams were selected to be used in the latest smartphone models by two leading Asian OEMs. Our battery cover pad solution will provide advanced vibration management and impact protection in these devices. In closing, I'll recap today's key messages. We have navigated through some challenging markets over the past several quarters and are now encouraged with the signs of recovery that are emerging in our industrial markets. There are still challenges, which are evident in certain segments of the EV/HEV market where inventory and softening demand will likely limit sales for at least another quarter. Longer term, we continue to feel very confident in our strategy and growth opportunities. We believe the electrification will be a very strong growth area for us and will be complemented by our high-growth and core markets. We are focused on growth, but also taking the necessary steps to improve margins more rapidly. We are also carefully managing costs, CapEx investments and managing our strong balance sheet to maximize cash flow. Now I'll turn it over to Ram to discuss our Q1 financial performance and Q2 outlook.

Thanks, Colin. I'll begin on Slide 8 with highlights of our results for Q1. Our results for the quarter were in line with the guidance we provided in our earnings call. Sales were near the top end of our guidance range and adjusted EPS above the midpoint. As Colin touched on, we saw some encouraging signs in the market such as A&D, industrial, and wireless infrastructure. At the same time, there are still some markets where customers are managing inventory levels, and demand has been softer. The demand environment remains uneven, but we see it trending up beginning in Q2 with further improvements expected in Q3. We remain committed to improving our gross margin and managing our operating expenses while ensuring readiness to capitalize on the strong demand as it returns. On Slide 9, I'll discuss our Q1 results in more detail. Net sales of $213 million increased 4% versus the prior quarter due to higher volumes of approximately $7 million and favorable foreign currency fluctuations of close to $2 million. On a reportable segment basis, AES revenues increased from the prior quarter by 4.1% to $122 million. Sales improved in the aerospace and defense and wireless infrastructure, industrial, and renewable energy markets. This was partially offset by lower EV/HEV and ADAS sales. The lower EV/HEV sales are a symptom of near-term inventory management by our chromic power module customers and not a reflection of the very compelling growth opportunities in this market as demand recovers. EMS revenues increased by 3% to $86 million, resulting from higher general industrial and commercial aerospace demand. Sales in our materials for EV batteries also increased from stronger demand from some of our OEM customers. Portable electronics sales were lower and in line with normal seasonality. Turning to Slide 10. Q1 gross margins were 32% and declined from the fourth quarter, primarily due to weaker product mix, including seasonally lower portable electronic sales. Lower volume and unfavorable product mix have impacted our gross margins in the recent quarters. Looking over a multi-quarter horizon, the high point of our gross margin was the third quarter of 2023 when we achieved 35.1%. The 300 basis points change from then to Q1 2024 was primarily due to these two factors. During the same timeframe, margins were also reduced by 150 basis points of underabsorbed costs. However, this was offset by operational excellence and procurement savings actions. To address underabsorbed costs in Q1, which resulted from inventory adjustments by our chronic customers, we have taken actions to better match AES cost to demand. These actions are in part contributing to the higher gross margin in our guidance outlook. In some parts of our business, we will continue to carry a small amount of excess cost as we see demand returning in a shorter timeframe, and we want to ensure that we have the ability to respond. Let me emphasize that improving gross margins is among our highest priorities and that we have made the structural cost changes needed to improve gross margins over 35% by Q3 of this year, assuming sales greater than $230 million.

Q1 adjusted net income decreased slightly to just under $11 million. Q1 adjusted earnings per share was $0.58 compared to $0.60 in the prior quarter. The decrease in Q1 adjusted net income was primarily a result of higher income tax expenses in the quarter, which more than offset higher gross profit, lower adjusted operating expenses, and lower interest expenses. Continuing to Slide 11. Ending cash at March 31 was approximately $117 million, a decrease of $15 million from the end of 2023. We generated an operating cash flow of $28 million in Q1 and had capital expenditures of $9 million in the quarter. As Colin referenced, given our current view of demand in certain markets, we are adjusting the timing of our capital expenditure to better match anticipated demand. We now expect CapEx to be in the range of $60 million to $70 million for the year. With our sound cash position, we elected to pay down the remaining $30 million of our revolving credit facility. As we look ahead, the first priority of our capital allocation strategy will remain funding organic growth. We will be measured in any investments, ensuring sufficient visibility to demand. With no outstanding debt, we are in a strong position to execute on the right strategic M&A opportunity. As always, we are looking at targets that are the right fit and meet our financial return requirements. Returning cash to shareholders will remain a priority, and we will continue to look at this opportunistically. We have been repurchasing some shares in recent weeks, and this will remain a key priority going forward.

Next, on Slide 12, I will discuss our guidance for the second quarter. Net sales are expected to range between $210 million and $220 million. The midpoint of this range is slightly higher than Q1, primarily related to growth expected from EMS in the EV/HEV and general industrial markets. We are guiding gross margin in the range of 32.5% to 33.5% for Q2, with improvements coming from cost reduction actions in our EES business, higher volumes, and better product mix. As mentioned earlier, we will be carrying a small amount of excess cost in anticipation of stronger demand in the coming quarters. Similar to the adjustments mentioned earlier on capital expenditure, we are also adjusting the timing of our start-up expenses. Start-up costs are projected to be between $1 million and $2 million in Q2. Depending on how demand levels evolve, these start-up costs may be adjusted further. Earnings per share is expected to range from $0.34 to $0.54 and adjusted EPS from $0.50 to $0.70. We project our full-year tax rate to be around 26%. In conclusion, our sales have been impacted by challenging market conditions in the past several quarters. However, we have taken actions to lower our cost and manage our profitability. As stated earlier, we believe that we are on a path to exceed 35% by Q3, assuming certain revenue range. Also, we have set a strong foundation of cost control and financial discipline that will enable us to focus our resources and continue our investments efficiently. We remain committed to our long-term financial objectives.

With that, I will now turn the call back to the operator for questions.

I appreciate all the insights, and it's great to have you on the call, Griff. Colin, I'd like to start by connecting two points. Can you share more details about your remarks on the industrial market recovery? Which geographies are experiencing this trend more strongly, and are there any challenges? It's also encouraging to see the design wins in personal electronics with Asian OEMs. Typically at this time of year, we would have insights into the content gain potential for the upcoming U.S. smartphone model releases. Can you provide any additional information on that?

Craig, I'll start with the portable electronics, which is a significant high-growth area for our company. We have a long history of designing high-performing technology using our PORON polyurethane foam and Visco silicone technologies in this space. Last year, PORON electronics reached a 10-year low, but after speaking with our customers this year, we expect a rebound not just from the overall market but also due to strong design wins with Chinese OEMs, which we are very proud of. Additionally, we have secured design wins with other OEMs, giving us strong content this year. This is why we anticipate improved sales in the second half of the year, particularly benefiting from seasonal trends in portable electronics during Q3. Regarding the industrial sector, we are looking at it in two ways. One aspect is tied to our power electronics business, which involves sales of ceramic technology to companies producing power modules. We still view this part of the industrial sector as somewhat slow in the first half of the year, mainly due to excess inventory in power module companies and a slight softening in demand. On the other hand, the industrial segment serviced by our EMS business comprises about 15 to 20 different end market segments. We are seeing some recovery here, particularly with inventory corrections reaching a more favorable point for our customers compared to the excess inventory from last year. Specifically, we notice an uptick primarily in the U.S., where PMI indices have been above 50 for the first time in many months, although a preliminary PMI index for April may indicate a downward trend. There is also a slight increase in China, while Europe continues to face challenges in the overall economy, from our viewpoint. In terms of specific end markets, we have seen recovery in semiconductors, along with increased sales in areas such as lighting, HVAC, and appliances. The medical sector is also performing well for us within the industrial space.

That's really helpful, Colin. For my second question, I'll turn it over to Ram. You mentioned the potential for 35% gross margins at $230 million in sales in the third quarter, which is an interesting point. I understand you're not providing guidance, but could you help us understand what factors might contribute to achieving that level of sales, which appears to suggest about a 7% increase from the previous quarter? Additionally, to what extent is the improvement in gross margin related to a shift in product mix towards personal electronics, which seems to be significantly higher than corporate, compared to further benefits from the ongoing self-help initiatives?

Yes. Sure, Craig. As you know, lower volume and somewhat unfavorable mix have affected our gross margin for several quarters. We have managed to mitigate a significant part of that through cost improvement measures, primarily in manufacturing excellence and procurement savings. Additionally, some actions we are taking in Q1 to align our costs with demand in specific areas of the business will assist us in reaching that 35% margin. There is also a positive mix coming from seasonality and an overall increase in volume that will contribute to this as well. While we are not providing guidance for Q3, we feel optimistic about our trajectory towards achieving a margin of over 35% at certain volume levels.

Yes. And if I could just do a follow-up there Ram. Can you just talk about your confidence that, that 35% would be sustainable beyond the third quarter? What would be things as you look out beyond the third quarter that would be forces driving gross margins higher? And is there any restraining for it, for example, new manufacturing facility build-outs like has been planned for China, etc., that we should be aware of?

Yes. No, no, good question. So first of all, I'll say that the corrections to costs we've made are foundational. And we have actions continuing to improve that, but those are permanent, and we feel pretty confident about that. The top level showing up at 230 or above is what will give us a lot more confidence in getting to 35% or more. So again, the cost corrections, things that we control, we are confident about. We need the sales to get back to certain levels that we've seen in the last year. With regard to your expansion programs, most of the start-up costs are flowing through OpEx, that will give us a slightly higher OpEx this year as we have reported before. It won't impact the gross margin this year.

I would like to begin by asking a couple of questions about the differences in the positioning of your two segments. Both AES and EMS target similar end markets. Given the uneven near-term outlook you mentioned, with some strengths but also some delays, is it reasonable to expect both segments to grow in tandem? Or could there be specific end markets or customers that lead to a significant divergence, with one segment experiencing stronger growth sooner than the other?

David, it's Colin here. Maybe I'll take your question to start, and we might have some other commentary from some of the other folks here. What I would say is that a general comment would be, we're participating in the same industries with all of our technologies, and it wouldn't be unreasonable to assume when things normalize, so we could grow at a similar rate. The issue that we face at this moment is that there's still a bit of a disconnect from some of the different value chains that feed into the same industry. An example would be EV/HEV, where our EMS had a record quarter, and that would be related to specific customer mix, where we're participating with certain end market customers who are starting to grow over our growing or in one case, a major OEM has had significant supply chain challenges. And now that's been overcome, and we see volumes ramping there. Last year, in our chromic substrate business, where a large portion of that business goes into EV/HEV, it was a record year. But this year, it's come up against probably an inventory issue from the downstream value chain, very specific to power module production. So that business is facing several quarters of destocking before it would return to its normal growth trajectory. These inventory issues, I think, are related in part to the fact that EV/HEV is a nascent industry, and there are startups that haven't been in business for a while. These are new products. There is customer demand, which has been fluctuating. And we believe it will take a bit of time for this particular industry to get things sorted out and get to a normal cadence. So when we talk about growth in the EV/HEV space, we believe it will be over the medium and long term, 15% to 20% CAGR per year, but that won't be linear as companies are really working to get in place working supply chains that are more consistent in terms of order patterns. So I'll pause here to see if that answers your question or if you'd like me to elaborate a bit more.

No, that's great color. If I could just follow up a little bit on your overall comments about the demand progression through the first quarter. I think certain parts of your business have bottomed and are starting to recover. But you did mention the high-profile ceramic orders that got pushed out a little bit. If you were thinking of how you felt January 1 and then how you're thinking, I don't know, March 31 or today, is there a noticeable underlying acceleration in, let's say, consumption for your products absent, I guess, inventory shifts? Or would you say that the end market softness that you saw is more, I don't know, organic or more fundamental and not related necessarily to past purchasing patterns?

We are confident in our current customers and design wins. We closely monitor both market share gains and potential losses, and we are not experiencing significant share loss. We have secured design wins, and we believe that some of the end markets we discussed in the industrial sector are improving. We are optimistic about our sales increase in the portable electronics market, which typically begins to ramp up at the end of Q2 and into Q3. One notable change since January 1 is the slowdown in the power module sector, particularly affecting our major product line, Chromic, which serves that market. The end markets connected to this sector include EVs, renewable energy, and industrial applications such as inverters for appliances. This slowdown is the most significant change we have observed, as many companies in this space have reported similar concerns regarding inventory and slowing markets related to EVs, which presents a headwind for our ceramic business.

Okay. A cash flow question. But in looking at your cash flows over the past several years, I would say there's been a considerable net usage of working capital. So the last several lines of the top section of the cash flow statement is what I'm focusing on. But by my model, there was a significant usage in 2021, a larger usage in 2022, and a small release, I guess, net in 2023. Maybe if you could just comment on that and maybe the potential for a further significant release, I guess, of the buildup in working capital that occurred, I guess, during much of the pandemic. Yes, I can address that. We experienced supply chain challenges and shortages which led to a buildup of inventory in 2021 and 2022 as we stocked up on what we could find. Additionally, raw material inflation early in 2022 increased our inventory value. We have been managing this situation and have reduced our inventory in 2023, with a continued focus on bringing it down to appropriate levels in 2024. This is part of our strategy for managing operating cash flow. The inventory increase that occurred in 2021 and 2022 was linked to the procurement challenges and the subsequent inventory buildup we faced during that time.

Yes. Griffin, you have been in your role for a little while now, and I'm curious if there have been any notable changes in your priorities or focus since the start of the year. You mentioned shorter-term, medium-term, and longer-term initiatives. The EPA recently released regulations limiting PFAS content, which may not directly impact your largest business sector but does affect material science. Are you perhaps focusing more on alternatives or replacements for some of your PTFE applications? Additionally, there have been significant changes in other markets, such as EV/HEV. How would you describe the shifts in your focus or resource allocation, including both budget and manpower, over the past 3 to 6 months?

David, it's Colin here. I'll start and then turn it to Griffin. But I've been focusing quite heavily on the PFAS issue. So it's an area that we take quite seriously. We've been engaged from the beginning, back from what happened in Europe and now, of course, paying close attention to how things are evolving in the United States. And we're working very closely with our customers and our suppliers to make sure we understand the landscape and are doing everything possible to make sure we can continue to produce our products safely and efficiently. And in particular with PFAS, it's really the two particular surfactant technologies that are the issue. We don't utilize any of those in our manufacturing facilities, but we're working with our suppliers to make sure we understand everything in terms of the value chain of these products. What we see happening is something that will take an awful long time to develop, but we're acting now to make sure we stay ahead of any regulatory changes that could happen. Our customers are very well aware of what we're doing and are working closely with us on this. And of course, we do have technologies that are non-PTFE; those are the products that we typically use in some of our products. That's a polymer of low concern, but it's still under the PFAS umbrella. So we want to make sure we keep people informed exactly how we participate and what technologies we have that are non-PTFE or technologies that we're developing. So maybe from here, I can turn it over to Griffin.

Yes. Thanks, Colin. I think high level, looking at your question, what has changed since this year in terms of our strategy and portfolio? As I said, we focus on a portfolio with short-, medium-, and long-term projects. So we have a balanced flow of technology. Occasionally, external environment changes will accelerate or bring focus to certain projects, which we have the ability to accelerate or pivot into. We also look at projects that have impact on internal processes, innovation around materials and new applications. So I think on balance, I don't think we've seen a major shift in strategy. And since I've joined, I've been very impressed with the diversification of the technology and portfolio that we have. When we get news either from regulatory agencies or from customers, we certainly react. But I think, as I said, we have a pretty good balance of projects addressing a number of different trends. And from that point of view, I don't see major changes at the beginning of the year.

I'd appreciate if you could discuss the seasonality. You previously mentioned that Q1 would be the low point, while Q3 is usually one of the peak periods alongside Q2. Considering the current developments and the easing of some supply chain challenges in certain areas, do you believe it is possible to maintain that 35% level into Q4? Or should we anticipate more typical seasonal patterns? I understand this is a difficult question to answer, but I am curious about your perspective on how this year may unfold seasonally compared to a typical year.

Let me take that. I'll start with that, and Colin might want to add comments to this if you have a follow-up. Talking about Q3, Q3 is a mixed bag which we know that the ceramic power electronics slowdown we talked about will impact us in the second half of the year; that was more recent development. However, we do see growth in other areas. We do see the seasonality coming through with portable electronics that we usually see. And with the changes we have made to the product cost structure, we feel good about the 35% plus, no, the 35%-plus estimates we have provided, assuming a certain level of top-line sales range. Getting into Q4, you're right; we have seen some fluctuations in Q4, and that's also mostly related to the top line. If you look at Q4 of last year, we had a very steep drop, which we even guided it lower, but the actuals were lower than our guidance. We were expecting some drop there. So once again, the revenue top-line levels remain at that 230-plus level, we feel good about staying at a 35% level for gross margin.

Dan, Collin here. I'll just add from a higher-level perspective, that normalizing the fluctuations in gross margin, how they cycled up and down this first 15 months is one of our key objectives. And we know that it's volume throughput which helps take away some of the absorption headwinds we face when volumes decrease. But we have done a lot of work on operational execution, but there is more to go there. And we think that will also make a big difference. So when you look at how we've worked down our backlog, how we've improved our on-time delivery to performance or, excuse me, to promise or to request and then our improvements in scrap and yield, it's been impressive, but there's more we can do there. And I would say that will also help us get more, I think, stability into the system. It's a key goal from the beginning when we started this journey recovering from the end of the DuPont deal and we've made a lot of progress; but there's still more we can do on that side of things beyond just the volume coming back. I just wanted to put that out there, so that was clear.

Really helpful. And we've covered a lot of ground already. So just maybe a big picture. By all accounts, the EV adoption has slowed, and consumers are opting for ATV alternatives, at least for now. But maybe just can you tell us about the size of the opportunity in ATV relative to EV, whether it be in content terms or TAM or growth rates. If that trend continues over the next 3 to 5 years, how should we think about kind of the relative scale or size of the opportunities?

So we've had a lot of requests in terms of could we share more on content. We haven't done that, but we'll look at ways to share better going forward on that. But at this moment, a general comment would be in terms of EV, we would have the most content in that vehicle across all of our product lines. And for hybrid electric vehicles, we also have a good amount of content as well, but it wouldn't be as much. They still use inverters; they would still need pressure management for the battery. Typically, for lower voltage usages, you would not use a rolling power interconnect business. That business excels when it's high voltage and you need high performance. So when we see that shift to plug-in hybrids versus EV, it does impact content level, but we still see a very good growth level for those types of vehicles. There are certain OEMs that are out there where hybrids have doubled, and we see that pull-through. So it's a balance of our content, which may be a bit less versus full EV, but the growth rates are still quite substantial and well north of 10%. So we don't see much of a falloff should more growth happen in the plug-in hybrid segment versus pure EV.

That was really helpful. You mentioned it briefly, but regarding capital allocation, you have paid off the remaining outstanding debt. You provided an update on internal investment priorities for incremental capital allocation, and I assume there haven't been any significant changes in the M&A pipeline from quarter to quarter. Is there any further discussion on that? Additionally, your stock seems quite attractive compared to your longer-term expectations, even though you don't have specific goals for 2025. So, is the plan to continue buying back stock opportunistically as you have in the past few weeks?

Yes, I can start on M&A. So we're really pleased that our debt has been eliminated. We have a very strong balance sheet and M&A remains one of the four key pillars of our strategy. We haven't had an acquisition since still engineering, which was quite a while ago, and that's still going very well for us. But we are actively in the market. We've got a very rich pipeline of very interesting properties that would fit very well if they would become part of Rogers. It's still, as we've said earlier, not necessarily a buyer's market. People are still waiting for things to turn around a bit more before they would go to market, but we're actively engaged with several targets that would be a great addition to Rogers. We plan on moving as fast as we can in that space, just nothing further in that area to report at this moment. And then in terms of capital allocation regarding share buyback, I think Ram would like to jump in and give his perspective.

Sure. I can comment on that. So Dan, you're right. Going forward, our focus will shift to inorganic growth and opportunistic share buyback. At the end of Q1 2024, we had $24 million remaining from our current repurchase authorization. We have bought back shares in the last few weeks, and we'll continue to do so opportunistically going forward.

There are no further questions at this time. I'd like to turn the floor back over to Colin for closing comments.

With no further questions, I'd just like to say thanks, everyone, for joining, and we look forward to talking to several of you with callback over the next several weeks. Thank you.

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.