Good day. My name is Kathryn, and I will be your conference operator today. At this time, I would like to welcome everyone to the Rogers Corporation Third Quarter 2019 Earnings Call. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions] I would now like to turn the call over to your host Mr.

Steve Haymore, Director of Investor Relations. Sir, you may begin your conference..

Good afternoon everyone, and welcome to the Rogers Corporation Third Quarter 2019 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 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 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.

Also the discussions during this conference call may include certain financial measures that were not prepared in accordance with generally accepted accounting principles.

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 is posted on the Investors section of our website.

Turning to slide 3, with me today is Bruce Hoechner, President and CEO; Mike Ludwig, Senior Vice President and CFO; and Bob Daigle, Senior Vice President and CTO. I will now turn the call over to Bruce..

Thanks, Steve. Good afternoon everyone, and thank you for joining us today. Please turn to slide 4. Before discussing Rogers' third quarter results, I would like provide some context around the business environment in which we are operating and its effect on both our Q3 results and the outlook for the remainder of the year.

Similar to what many other companies have reported in recent weeks, macroeconomic conditions are creating softness in the global economy. In addition, ongoing trade tensions are generating headwinds and in some cases limiting near-term demand visibility.

From a market perspective, industrial and conventional automotive demand which had begun to slow in late Q2, weakened further in the third quarter. These challenges are continuing into Q4 with recent economic data pointing to declining factory activity, lower industrial output and falling auto sales.

In addition, the geopolitical tensions between China and the U.S. which have resulted in trade restrictions on sales to Huawei are impacting 5G demand. While Rogers is able to continue sales to our direct fabricator customers, there is uncertainty regarding Huawei's ability to maintain 5G deployments without certain U.S.

components and whether the performance of its alternative base station design will be acceptable. It is also not clear what impact these factors will have on Huawei's share of the market.

A byproduct of these trade restrictions has led Huawei to consider local sources of supply for high-frequency circuit materials, even though these alternative materials have performance limitations as compared to Rogers' products.

Although these challenges are impacting our near-term results, we continue to see very compelling market opportunities ahead and we remain focused on the key pillars of our strategy to enable our success. With this context in mind, I'll now turn to our results for the quarter.

Rogers achieved Q3 net sales of $222 million and adjusted earnings of $1.51 per share.

Despite the market headwinds I mentioned which tempered our top-line performance, our adjusted earnings exceeded the high-end our guidance as a result of favorable product mix, progress on gross margin improvement efforts, efficient management of operating expenses and a lower effective tax rate.

Demand for Rogers' products remained strong in certain sectors. For example, portable electronics demand was seasonally favorable in Q3 and we achieved sequential revenue growth of approximately 5%. Year-to-date growth has been particularly robust due to our leading product portfolio.

Our results have meaningfully outperformed the overall handset market. Also demand for ADAS applications remained solid year-to-date, despite weakness in global auto sales. The uniqueness of our material solutions combined with the increased market penetration of ADAS is a key enabler of our success.

Growth in the ADAS market is expected to continue driven by an increasing number of new vehicles adopting auto radar systems and as the average number of sensors per vehicle increases with higher levels of autonomy. Finally, aerospace and defense sales were robust in Q3 and year-to-date revenue is up significantly relative to 2018.

Turning to areas where we were impacted by the previously mentioned challenges, Q3 wireless infrastructure sales declined versus Q2 due to lower 4G demand and the collateral effects of ongoing trade tensions already discussed.

Based upon customer and industry analyst inputs, we expect the recent pause in the 5G rollout to continue through the end of the year and believe that China 5G deployments will rebound in the first half of 2020. We anticipate continued weakness in 4G deployments as a result of the Chinese telecoms prioritizing CapEx investments in 5G.

And soft demand for power semiconductor substrates used in industrial power and vehicle electrification applications for conventional automotive also impacted revenue for the quarter. In summary, we saw solid Q3 results in certain market segments tempered by a number of headwinds that we anticipate will continue into Q4.

We are optimistic about the opportunities we have in areas of advanced connectivity and advanced mobility. And as I'll discuss next we are encouraged by a number of recent developments, which point towards significant opportunities for future growth. Please turn to slide 5.

Within Advanced Connectivity we see 5G as a multi-year growth opportunity for Rogers where market indications continue to point towards increased deployments in 2020. At a recent forum, China Mobile increased their target for 5G coverage to 340 cities by the end of next year underscoring their expansion plans.

This followed recent news from Chinese telecoms that advanced subscriptions for 5G service, which is not yet available have already reached approximately 9 million.

Third-party experts expect 2020 5G deployments to be in the range of 600,000 base stations, which at that scale would provide an opportunity for substantial growth in our 5G wireless infrastructure business next year. Low Earth Orbit or LEO is a significant emerging growth opportunity within Advanced Connectivity.

Several companies are competing to deploy large constellations of satellites that would provide high-speed internet to underserved areas.

Rogers is well-positioned to capitalize on this opportunity given our tremendous strength in the materials technologies needed to enable the complex antenna solutions that will be part of the receiver systems located on Earth. We are also encouraged by the progress of some companies in this sector to launch commercial services.

For example, in recent months one leading company announced plans for broadband internet coverage in targeted areas in 2020 with full global coverage by the end of 2021. Looking to advanced mobility, we remain optimistic about the strong opportunities in EV and HEVs.

A recent IHS market report projects that through 2025 sales of EVs and HEVs will increase at a compounded annual growth rate of approximately 30%. These expectations for ambitious growth are underpinned by the plans of leading automakers and reinforce that this is a growing sustainable market for Rogers Power Electronics Solutions.

One example is VW, which recently unveiled the first model in its new all-electric brand that will be delivered to customers early next year. This is the first step in VW's plan to sell up to three million EVs and HEVs annually by 2025.

Additionally, Daimler recently announced that they will discontinue all future development of internal combustion engines further signaling the shift in focus to electric vehicles. By 2022, Daimler is scheduled to bring 10 all-electric vehicles to market and plans to eventually electrify the entire Mercedes Benz portfolio.

Rogers is also targeting EV charging infrastructure which is a related emerging growth opportunity for our Power Electronics Solutions. Please turn to slide 6. ACS third quarter net sales were $79 million a decrease of 15% from the prior quarter and an increase of 10% versus the prior year.

As discussed earlier, this decline is primarily attributed to lower 4G and 5G sales. ADAS demand remained strong in Q3 and year-to-date sales have grown 8% compared to 2018. Aerospace and defense sales increased 17% versus Q2 and year-to-date results are up over 20% versus the prior year.

This market segment is highly program-dependent and while we don't anticipate demand for these applications to grow at the same rate into the future, we do expect stable and consistent high single-digit growth over time. As we look ahead, we anticipate that 4G and 5G demand will continue to be soft through the end of the year.

However, we expect 5G demand to rebound in the first half of 2020 with the next wave of deployments. Turning to slide 7. In Q3, EMS net sales were $95 million, a slight increase compared to Q2. Seasonally strong portable electronics sales drove the sequential increase in revenue.

A decline in demand for general industrial and EV/HEV battery applications partially offset the growth in portable electronics. Year-to-date sales of applications for EV/HEV battery pads and battery pack sealing systems have increased 29% versus the prior year highlighting, the excellent growth opportunity in this area.

The lower Q3 revenue is the result of the recent decline in the China EV market. We are very pleased with the progress we are making towards the new design wins with a number of European and other automakers for EV battery pad solutions. We expect this to continue to be a driver of growth over the next several years.

Looking ahead to the fourth quarter we anticipate total EMS segment sales to decline sequentially in line with normal seasonal patterns. Turning to slide 8, PES third quarter net sales were $43 million a decrease of 17% from Q2.

As we anticipated at the outset of the quarter, sales of power semiconductor substrates in industrial power and vehicle electrification applications for conventional automobiles declined due to weak market demand in Q3.

Sales of power substrates used in EVs and HEVs also declined largely due to the previously mentioned soft China EV market, which primarily uses lower-end solutions. The outlook continues to be strong for our new generation wide band gap semiconductor silicon nitride substrates which are used in high-end EVs and where Rogers has a leading position.

Operational improvements in PES remain a top priority with new leadership in place. We are executing on our performance recovery plan including yield improvements. As we look to Q4, we expect industrial and automotive market demand to be stable as compared to Q3.

Looking ahead in PES the EV/HEV market opportunity is extremely compelling and we firmly believe that we are well-positioned to fully take advantage of this opportunity. Please turn to slide 9.

As I indicated earlier, we like other global companies are facing macro headwinds in both the industrial and conventional automotive markets and feeling the impact of trade tensions. These challenges are having a near-term impact as is the pause in 5G deployments in China.

The achievement of our 2020 vision has always been closely tied to growth in the advanced mobility and advanced connectivity markets, supported by modest growth in the industrial and conventional automotive markets. As I explained, we remain confident in this growth and our ability to succeed in these areas.

However, given the challenging market and global economic conditions, there is an increased uncertainty that we will attain these targets as a run rate as we exit 2020.

Having said that, I want to stress that we continue to believe that there is tremendous opportunity in the advanced connectivity and advanced mobility markets supported by our broader portfolio. We are optimistic about the 5G opportunity with the recovery expected in the first half of 2020 and a further multiyear growth horizon.

The growth opportunity in EV/HEV is equally exciting with opportunities both in power semiconductor substrates and solutions for batteries. All of this gives us confidence in our ability to grow our business and achieve these targets. Now, I'll turn it over to Mike to discuss our Q3 results in more detail..

Thank you, Bruce and good afternoon, everyone. In the slides ahead I'll review our third quarter 2019 results followed by our fourth quarter guidance. Turning to slide 11, we will review the financial results for Q3 2019. Third quarter revenues as previously noted were $221.8 million below our Q3 guidance range of $225 million to $235 million.

Q3 revenues decreased 9% on a sequential basis and 2% compared to the third quarter 2018.

As Bruce noted in his comments, weak demand for products serving the wireless infrastructure market for both 4G and 5G applications, as well as soft demand for power semiconductor substrate used in industrial power and conventional automotive applications are responsible for the lower sequential revenues.

We achieved a gross margin of 35.6% for the third quarter, 30 basis points higher than Q2 and within our guidance range of 35% to 36%, due primarily to a favorable product mix and reduced spending in all of our business segments to react to the softer market demand in Q3 and expected to continue through Q4.

Our gross margin was negatively impacted by lower production volumes and the ongoing pressure from tariffs resulting from the continued trade tensions between the U.S. and China. Adjusted operating income for Q3 2019 was $36.2 million, or 16.3% of revenues, compared to $41.7 million or 17.2% of revenues for Q2.

Adjusted operating expenses decreased by $1.4 million in the third quarter, compared to the second quarter. GAAP EPS of $1.25 per fully diluted share and adjusted EPS of $1.51 per fully diluted share for Q3 2019 were above the upper end of our guidance range for Q3, but below Q2 levels.

The good earnings performance both on a GAAP and an adjusted basis resulted primarily from spending control and a lower than forecasted effective tax rate for the third quarter. The company generated $33.4 million of free cash flow in the third quarter and $76.8 million year-to-date.

The company has paid down $98 million of debt year-to-date and ended the third quarter in a net cash position of $10.3 million. Turning to slide 12, our Q3 2019 revenues of $221.8 million decreased $21.1 million or 9% compared to the second quarter of 2019.

The sequential decrease was experienced in our ACS business segment down 15%; and our PES segment down 17%. The EMS business segment saw its revenues increase slightly over the second quarter. Currency exchange rate negatively impacted 2019 third quarter revenues by $1.6 million compared to Q2.

The decrease at ACS revenues resulted primarily from a slowing 4G demand and a near-term delay in the 5G rollout in China. As a result, our wireless infrastructure revenues declined 35% sequentially.

4G revenues, which were basically flat year-to-date through June compared to the same period in 2018 are now 10% lower year-to-date through September compared to 2018 and are expected to remain soft through Q4. Revenues from aerospace and defense programs were strong in Q3 growing 19% sequentially and are up 17% year-to-date compared to 2018.

ADAS revenues were down 7% sequentially from a strong second quarter, but are up 8% year-to-date compared to 2018 in the face of a weak auto market. Revenues in our EMS segment increased sequentially due to strong demand for portable electronic applications.

The third quarter is typically the strongest quarter for portable electronics revenues, which grew 5% sequentially and 10% compared to Q3 2018 due to our customers' commercialization of new handset and tablet designs.

General industrial application revenues, which comprise close to 40% of the business segment's revenues were down slightly compared to the second quarter and down 5% compared to the third quarter 2018.

As noted in Bruce's remarks, PES experienced weaker demand and lower revenue in Q3 primarily from power semiconductor substrates for general industrial and conventional vehicle electrification applications. Revenues for these applications decreased sequentially by 20% and 13% respectively and decreased 27% and 26% respectively compared to Q3 2018.

For power semiconductor substrate for EV/HEV applications, demand weakened in the third quarter consistent with lower demand for low-end EVs particularly in China. As a result, revenues per EV/HEV applications declined 35% sequentially. However, revenues were up 16% year-to-date.

Turning to slide 13, our gross margin for Q3 2019 was $78.9 million or 35.6% of revenues, 30 basis points higher than our second quarter gross margin of 35.3%. The increase in gross margin percentage was due to a favorable product mix and reduced spending to adjust for the significantly reduced volume.

These benefits were mostly offset by the effects of lower manufacturing volume and the continued impact of tariffs resulting from the ongoing trade tensions between the U.S. and China.

As we expect to see increased demand for the next wave of the 5G rollout, we are intentionally carrying additional manufacturing cost to efficiently address the opportunity reflected as strategic investments.

We were pleased with the increased gross margin percentage from the EMS business in Q3, resulting from a favorable product mix and reduced manufacturing spending to offset lower volumes. We continue to see progress on EMS performance issues related to consolidation and optimization efforts reflected in the company gross margin.

ACS gross margins declined in the third quarter, due to significantly lower volumes mitigated by a favorable product mix compared to Q2. While we reduced our manufacturing cost in the third quarter to reflect lower demand, we did not flex our cost proportionately with the lower manufacturing volumes in the quarter.

We carried additional resources in order to enable our factories to respond to the anticipated increase in 5G demand in the first half of 2020. In the third quarter, the PES gross margin continued to be negatively impacted by the significantly reduced demand for our power semiconductor substrate across all applications.

We continue to execute on our recovery plan and we are encouraged by signs of progress on yield in the third quarter. As we have discussed previously, the recovery plan will require multiple quarters to execute with contributions to overall gross margin beginning in Q4 and accelerating in the first half of 2020.

We continue to address our cost structure in PES to compensate for the lower volume, while still maintaining our ability to support the increasing demand in the wide band gap semiconductor power applications.

Tariffs continued to be a headwind to gross margin in the third quarter, impacting gross margin by approximately $2.3 million or 106 basis points, an increase of 26 basis points compared to Q2. We are working aggressively to leverage our factory footprint and to optimize our supply chain to mitigate the effect of tariffs.

We expect to see the benefits of the actions in the form of lower tariffs as a percent of revenues beginning in the first half of 2020.

Relative to our third quarter gross margin, the path to the higher gross margin is through improved operational execution in PES and EMS contributing 200 basis points to 250 basis points mitigating the impact of tariffs contributing 50 basis points to 100 basis points and increased volume in all our businesses particularly 5G revenues contributing 100 basis points to 200 basis points.

Slide 14 details the changes to adjusted net income for Q3 2019 of $28.2 million compared to adjusted net income for Q2 of $30.7 million. As discussed earlier, the adjusted operating income for Q3 2019 was lower than Q2's adjusted operating income both on a dollar and a percent of revenue basis.

Adjusted operating expenses for Q3 of $42.7 million, or 19.2% of revenues or $1.4 million lower than Q2 adjusted operating expenses of $44.1 million, or 18.2% of revenues. The lower expenses resulted from reduced SG&A cost from spending control measures. Our effective tax rate for Q3 2019 was 18.6% compared to our Q2 effective tax rate of 22.9%.

The lower effective rate for Q3 was primarily due to a geographic profit mix and the reversal of reserves associated with uncertain tax submission. The company expects the 2019 effective tax rate to be 20% to 22% with the fourth quarter effective tax rate of 22% to 24%.

Turning to slide 15, we ended the third quarter 2019 with a cash position of $140.7 million, a decrease of $32.4 million from June 30 and a decrease of $27 million from December 31. In Q3, the company spent $14.8 million on capital expenditures.

We have spent $38.8 million year-to-date and we guide capital spending for the year in the range of $50 million to $55 million. The company paid down $65 million of debt in the quarter and has paid down $98 million of debt in 2019. As of September 30, we are in a net cash position of $10.3 million.

The company generated $48.2 million from operating activities in Q3 including a decrease in working capital of $9.9 million. Through September, the company generated $115.7 million from operating activities, net of an increase in working capital of $4 million, primarily from the increase in inventory with long lead times.

Taking a look at our Q4 guidance on slide 16, we are facing near-term macroeconomic headwinds as well as softness in certain of our markets from ongoing trade tensions that we expect to continue through Q4. In addition, Q4 is a seasonably low quarter for portable electronics.

Therefore, revenues for Q4 are estimated to be in the range of $200 million to $210 million. In response to the market weakness, we will continue to adjust our spending for manufacturing infrastructure, SG&A and capital expenditures. We will also continue our progress addressing yields at PES and optimization at EMS as discussed earlier.

Even with these actions an unfavorable product mix, a meaningful reduction in volume and continued tariff headwinds, will negatively impact our gross margins in Q4. As a result, we are guiding gross margin in the range of 33% to 34% for Q4. As highlighted in our earnings press release, the company terminated a pension plan in the fourth quarter.

The pension plan was adequately funded. Therefore, the company was not required to make additional cash contributions to fund the plan. The company will however take a $52 million to $56 million non-cash charge to income for other accumulated losses for the plan that were recorded as part of our equity.

As a result, we guided GAAP Q4 loss in the range of $1.43 to $1.28 per share. On an adjusted basis, we guide the fully diluted earnings in the range of $1.00 to $1.15 per share for the fourth quarter. I will now turn the call back over to the operator for questions..

[Operator Instructions] And your first question comes from the line of Craig Ellis with B. Riley..

Thanks for taking the question and Bruce thanks for all the help on the different issues that are impacting the business. I wanted to start just by following up on the prepared remarks around the communication infrastructure business and Huawei.

One, can you help us understand the degree to which you got interaction with them and what they're saying about their desire to continue to use Rogers? And if they were in a position where they found a solution that was domestic that they could switch to, what would Rogers do with the capacity that would have otherwise gone to Huawei? How do we think about your capacity flexibility where it goes and the implications for gross margins in that situation?.

Okay. Well, that's quite a question. So let me take us through that.

First, with regard to Huawei and their seeking alternative local supply our view in talking with them is that, while they're evaluating, an alternative our material performance certainly is better, and I think really from their perspective, they're forced to look for that local supply.

Now, that being said, we have a high level of confidence that we will retain significant share at Huawei. The other thing that's happening in the marketplace in China with the OEMs is the share shift among telecom OEMs in China.

So, we would anticipate some share movement between Huawei and some others in China, particularly if the system that Huawei is putting together with local sourced materials has some performance deficiency. So that's under testing as we understand it. So, we don't have very good visibility on that front how that's progressing.

So, overall, I think we're confident as we move forward in retaining significant share across all the OEMs in telecom. In terms of capacity, I'm going to ask Mike to comment a bit more on the capacity plans that we have..

Yeah. So, Craig I think as a result of what Bruce was describing and where we are with respect to bringing – preparing the additional capacity at Price Road or at the Isola Plant that we acquired last year.

We are going to continue – we continue our plans to bring that up to speed in anticipation of the need for that capacity in 2020 at some point in time. And we'll continue to monitor the situation with respect to when we actually bring the capacity online. But we are going to continue our efforts to be ready for that..

That's helpful. The next question is more of a near-term question. Mike, I think the variance between the third quarter's revenue and the midpoint of the fourth quarter guidance is about $17 million. It was helpful to get a lot of color on the sub-segment performance of the business.

But can you just clarify as we look at reconciling that $17 million GAAP quarter-on-quarter, what are the biggest contributors to the sequential decrease on a sub-segment basis for 4Q?.

Well, I would say the biggest contributors first of all are volume, right? And so when you think about the volume and it's particularly around the wireless infrastructure. That is going to be a big challenge as well as another contributing piece of that is in the EMS business with the portable electronics being down quarter-on-quarter.

That's probably, the second piece that's pretty significant. But again, so the volume's impacting it and the mix is impacting it. Those are the two primary areas that are impacting the gross margin decline quarter-on-quarter..

Thanks. And then if I could just sneak in one more, it was helpful to get the reconciliation between I think where we are and the target model with respect to closing gaps with gross margins. It looks like one of the three factors the volume factor is really out of the company's control. The macro will do it.

The macro will do and it's been tough for everybody as you recognized. But two items seemed more in your control PES and EMS performance at 250 basis points and tariffs about 150.

Can you just give us some insight how much progress can you make in those two areas over the next two to four quarters and where do you have greater visibility and greater confidence in making said progress?.

Yeah, I actually think we have – I would say, higher confidence today than we did in the last two quarters with respect to the progress that we make on both EMS and PES. And in fact I believe we've made the majority of the progress that we anticipated making on EMS. PES still has a ways to go.

And as we talked about that's a multi-quarter execution plan. But we've seen some very good signs of progress in the third quarter. So I think we'll start seeing some contribution towards gross margin in the fourth quarter and again as I said accelerating in the first two quarters of 2020.

So I feel very good about, our ability to capture that, call it 200 to 250 basis points. The other one that you had talked about that we had talked about was the impact of tariffs being somewhere around 106 basis points in the third quarter.

And as we've talked about we're working hard to leverage our global footprint as well as looking at changes in our supply chain in order to address that. And I think what we've said, I think in the last quarter and we'll say this quarter I think we can address at least half of that through our actions.

To get the full hundred points, I think we would have to have some benefit with respect to trade tension discussions or trade discussions between U.S. and China over the next several quarters. So that one's a little bit like the market. It's a little bit out of our control. But I think we can at least get half of that..

Thanks guys. I’ll jump back in the queue..

Okay..

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

Good afternoon. Thanks for taking the questions. I wanted to stick with wireless infrastructure. What was the mix of 4G and 5G revenue in Q3 and year-to-date? And clearly, you feel good about the prospect for a recovery in 5G.

What are your growth expectations for 4G as we think about 2020?.

So, the 4G, you're absolutely right. We have first of all in 5G looking into the first half of 2020, we're confident that we'll see the rebound there if things go according to what we've heard from customers from industry experts and so forth. Looking at 4G, we think on that front, certainly, this year we're down probably about 15%.

We think the industry will be down about 15%, and moving into next year probably high single-digits decline. So, again, as we talked about in the prepared remarks, this is a bit of a reallocation of the CapEx by the carriers towards the 5G side of things.

And Mike?.

Yeah, so on the breakdown so, year-to-date 5G is in the ballpark of 25 -- a little less than 25%. So 4G is still 75% of the business year-to-date..

Very helpful. And then auto and industrial, maybe you can talk about the cadence of the decline that's kind of late in Q3 and into the first month so far of Q4. Have things stabilized? Is the guidance predicated on essentially the current run rate of what we saw in October? Any color there would be helpful..

So on the industrial side we think it's kind of -- it will be flat moving from Q3 to Q4. A similar situation with automotive, we think it's relatively stable as it stands today. And so we're viewing Q4 to be similar to Q3 in terms of both of those market segments..

Very helpful. And then lastly from me, just even in the soft environment obviously cash continues to build back to a net cash position. I know M&A is your first priority.

But given you've got plenty of liquidity, are you looking at perhaps alternative opportunities to deploy capital as well?.

No. I think our thoughts on capital deployment are not different than what they've been. We are really using cash for growth. So we'll continue to build a stronger balance sheet and continue to look for opportunities that make sense for us in the M&A space where we can buy things that are strategically important at reasonable prices..

Understood. Okay. I look forward to -- appreciate the color and look forward to catching up next week..

Sure. Thanks Dan..

And you do have a follow-up question from the line of Craig Ellis with B. Riley..

Thanks for taking the follow-ups. So it's really nice to see the strength in the smartphone business and I understand the seasonal dynamics in the fourth quarter.

But as the team looks ahead to 2020 and with such a significant emphasis by industry with 5G unit volumes next year which I think is going to dwarf anything that we saw with 3G or 4G, can you talk about the opportunity that Rogers has as the industry moves from 4G phones to 5G just it expands your SAM in that area and specifically what would it do?.

So, again, this is as we know the time horizon for these designs and implementation of the designs for smartphones, it goes in cycles from six months to 18 months. And so our team is working right now on those new designs and a number of wins are coming in.

But again, that's still out in early to mid-2020 that we would get a much clearer understanding of where those design wins end up for us. But like I said this is very typical of what we've seen historically in the smartphone world in terms of timings..

That's helpful. Thanks Bruce and then the follow-up is related to the ADAS business. Helpful to get the color on the 30% longer-term CAGR. I think as I look at the ecosystem the model year 2021, mid-2020 release vehicles I think they've always been seen as an era where you get more of an inflection in ADAS.

And certainly, we have a lot of radar content as it relates to safety systems. But as you're working with your automotive customers and the automotive supply chain, can you give us some insight as to what you're seeing mid next year for a potential step function change in ADAS content? Thanks..

Go ahead, Bob..

Yeah, so Craig. Yes, we're working with everybody.

And again, I think what we're basically the dynamic that I think we all expect is as you start to shift towards, I think you're referring to the shift towards Level 2, Level 3 autonomy where you basically -- it's mostly a content opportunity at that point where the number of sensors per vehicle goes up. And I think that's the expectation right now.

All the OEMs are really driving towards a higher level of autonomy and most of what we're seeing out there would suggest that means more sensors per vehicle with that dynamic. I don't think that's translated into real projections at this stage.

I think it will be a while before we can actually get a good handle on the scope of the increased opportunity..

Got it. Thanks guys..

Thanks, Craig..

And we have no further questions at this time. I'd like to turn the call back over to Bruce for any closing remarks or comments..

Thank you everyone for joining us on today's call. And have a great afternoon. Bye-bye..

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect..