Rogers (ROG) Q1 2026 Earnings Call Transcript

Image source: The Motley Fool.

DATE

Tuesday, April 28, 2026 at 5 p.m. ET

CALL PARTICIPANTS

• President and Chief Executive Officer — Ali El-Haj
• Chief Financial Officer — Laura Russell

Need a quote from a Motley Fool analyst? Email pr@fool.com

TAKEAWAYS

• Total Sales -- $201 million, rising 5% year over year with $7.9 million attributable to favorable foreign currency movements.
• Adjusted Earnings Per Share (EPS) -- $0.75, marking a 178% increase from the prior year period.
• Adjusted EBITDA -- $32 million, representing a 580 basis point year-over-year margin expansion to 16% of sales.
• Segment Performance — Industrial -- 37% of sales; achieved double-digit growth year over year, driven by improved manufacturing activity in the U.S. and Europe, and share gains with traditional customers.
• Segment Performance — Automotive -- 24% of revenue; sales declined at a high single-digit rate due to reduced global light vehicle production and U.S. EV market weakness, partially offset by new design wins.
• Segment Performance — Electronics and Communications -- 18% of sales; double-digit year-over-year growth led by higher smartphone and wireless infrastructure demand.
• Segment Performance — Aerospace and Defense -- 15% of revenue; saw slight improvement, led by commercial aerospace business.
• Q2 2026 Revenue Guidance -- Expected between $210 million and $220 million, representing a 6% increase at the guidance midpoint.
• Q2 2026 Adjusted EBITDA Guidance -- Forecasted range is $35 million to $41 million, with a 17.7% margin at the midpoint, equating to a 590 basis point improvement over the comparable prior-year period.
• Design Wins -- Important new wins in AES for automotive radar with an Asian OEM, and in AMS for EV battery applications with North American and Asian OEMs, projected to generate revenue starting in Q2.
• R&D Pipeline — Data Center -- Microchannel cooler technology and high-frequency circuit materials for data centers progressed to customer sampling and testing, with limited revenue impact expected in 2026.
• Profitability Initiatives -- German restructuring program remains on track to deliver $13 million in annualized savings by the fourth quarter, with total cumulative cost reductions of $45 million anticipated across all initiatives.
• Operating Cash Flow -- $5.8 million for the quarter, reflecting typical first-quarter working capital patterns versus $46.9 million in the prior sequential quarter.
• Capital Expenditures -- $4.7 million spent in the first quarter; full-year forecast for capital outlays remains $30 million to $40 million.
• Restructuring Charges -- $4.4 million taken for Curamik facility restructuring in Germany in Q1, with a cumulative total of $9.8 million incurred to date versus a $12 million to $13 million estimated program total.
• Tax Rate Guidance -- Non-GAAP effective tax rate projected at 30% for the full year.

SUMMARY

Management reported that all major Q1 financial metrics met or surpassed guided midpoints, highlighting year-over-year sales and margin gains across key end markets. Executives outlined that Q2 is expected to see revenue, gross margin, and profitability improvement, driven by the ramp of new automotive and industrial programs as well as seasonal increases in smartphone demand. Management communicated that capacity is sufficient for expected demand over the next six to eight quarters, noting that forthcoming growth investments are targeted, not broad-based expansion. Executives detailed that new design wins in automotive radar and EV batteries are expected to begin contributing revenue from Q2 through Q4, while R&D offerings in data center cooling technology are expected to yield mostly sampling or prototype-type revenue, not significant, in 2026. No material risks or operational headwinds were introduced for the upcoming quarter, beyond transient Q1 weather and supplier disruptions already accounted for in the outlook.

• Ali El-Haj said, "the majority of these wins will be in production between Q2 and Q4," indicating near-term revenue impact from recent automotive and EV customer awards.
• Cash at quarter-end was $196 million, essentially unchanged from the prior quarter, with Laura Russell highlighting normal inventory and receivable patterns affecting underlying operational cash flow.
• Ali El-Haj explained that the company's "local-for-local strategy" is enabling geographic demand shifts to be met without significant capital investment or capacity constraints.
• Ongoing restructuring at the German Curamik facility is on track, with most remaining charges to be incurred by the end of Q3 and savings realized by year-end.

INDUSTRY GLOSSARY

• Adjusted EBITDA: Earnings before interest, taxes, depreciation, and amortization adjusted for items such as restructuring, stock-based compensation, and other non-recurring items.
• PUR (PMI): Purchasing Managers' Index, a metric indicating the economic health and manufacturing activity levels in a region.
• Curamik: Rogers' specialty brand for advanced ceramic substrate and microchannel cooling products widely used in power electronics and data centers.
• ADAS: Advanced Driver-Assistance Systems, a category of automotive electronic systems that help drivers in driving and parking functions.
• OEM: Original Equipment Manufacturer, referring to companies that produce parts or equipment that may be marketed by another manufacturer.
• IC: Internal Combustion [engine], referencing vehicles powered by traditional gasoline/diesel engines as opposed to electric or hybrid alternatives.
• CapEx: Capital Expenditures, funds used by a company to acquire or upgrade physical assets to sustain or grow its business.

Full Conference Call Transcript

Ali El-Haj: Thanks, Steve, and thank you, everyone, for joining us today. I will begin on Slide 4. In the first quarter, we delivered solid results with all financial metrics meeting or exceeding the midpoint of our guidance for the third consecutive quarter. Q1 sales were $201 million, a 5% increase year-over-year from foreign currency benefits and a higher industrial demand in the U.S. If not for adverse weather conditions and multiple supplier disruptions, which impacted operations at some of our U.S. plants, Q1 sales would have approached the high end of guidance. We achieved a significant year-over-year improvement in profitability. Adjusted EPS more than doubled to $0.75 per share and adjusted EBITDA margins expanded 580 basis points to 16%.

For the second quarter, we are forecasting sales to increase 6% at the midpoint of our guidance. We expect Q2 growth in automotive, industrial and electronics end markets. Adjusted EBITDA margins are projected to increase year-over-year by nearly 600 basis points. The improved Q1 results and stronger Q2 outlook demonstrate the progress we are making on our commercial and profitability initiatives. We are maintaining an intense focus on improving Rogers' multiyear growth outlook. The past quarter, we secured important design wins and continued to gain customer traction through our R&D pipeline. Turning to Slide 5. Beginning this quarter, we streamlined our reporting into 4 primary end markets.

At 37% of sales, the industrial market remains our largest segment and now includes renewable energy and mass transit markets. Q1 industrial sales increased at a double-digit rate compared to the first quarter of 2025. Growth was driven by increased demand aligned with improved manufacturing PMI activity in the U.S. and Europe as well as additional market share wins with Rogers' traditional customers. The automotive market segment, which represented 24% of revenue in Q1, includes EV, HEV, ADAS and all other ICE vehicle applications. Sales declined year-over-year at a high single-digit rate due to lower global light vehicle production and weakness in the U.S. EV market.

However, we are seeing positive design win momentum in automotive, which we expect to translate to robust sales growth in the coming quarters. The electronic and communications market segment includes sales in consumer electronics, semiconductors, wired and wireless infrastructure. Accounting for 18% of sales in the first quarter, this segment increased at a double-digit rate, driven by higher smartphone and wireless infrastructure sales. The improved smartphone sales resulted from higher volume, a favorable mix of higher-end devices and an increased share with existing customers. Lastly, aerospace and defense sales comprised 15% of revenues and improved slightly from last year. The growth was led by commercial aerospace sales in our AMS business.

We expect aerospace and defense to remain a growth area for Rogers. Next, on Slide 6, I will outline our progress toward 2026 priorities. Our objective to grow the top line in 2026 and in the coming years remain our highest priority. We secured several design wins during Q1 in support of that goal. First, in the AES business, our high-frequency circuit material were designed into a new automotive radar application with a leading Asian OEM. Sales are planned to begin in the second quarter. In the AMS business, we were awarded several design wins for EV battery applications with leading OEMs in the United States and Asia. These solutions will be used across different platforms.

We are further encouraged by the progress we continue to make across products in our R&D pipeline. We continue to test and validate our microchannel cooler technology for data centers with multiple customers. Feedback from our customers has been encouraging, and we believe our technology possesses unique capabilities for cooling high-power chips in data centers and AI applications. Development of high-frequency circuit material for data centers is also ongoing. Recent internal testing showed promising results, and we expect customer sampling and testing to begin within the next 2 quarters. While these projects move forward, we are also actively advancing other high potential opportunities. We continue to make progress with our 2026 profitability improvement initiatives.

Across most of our manufacturing operations, we have seen measurable improvement in cost structure and overall operating performance resulting from the focused efforts of our dedicated team. The restructuring initiatives at our German facility remain underway with $13 million of annualized savings still expected by Q4 of this year. We also continue to efficiently manage operating expenses with strong control measures in place. Our capital allocation priorities support both organic and inorganic growth. Accordingly, we have increased our focus on evaluating potential M&A, and we continue to assess opportunities that align with our strategic and financial objectives.

Our organic growth will largely be supported with existing capacity, but we are prepared to allocate capital for CapEx to support opportunities in our R&D pipeline as needed. I will now turn it over to Laura to discuss our Q1 financial performance and Q2 outlook.

Laura Russell: Thank you, Ali. Starting on Slide 7, I'll summarize our first quarter results. Sales, gross margin, adjusted EPS and adjusted EBITDA all met or exceeded the midpoint of our guidance for the first quarter. First quarter sales increased 5% or $10 million, inclusive of foreign currency benefits of $7.9 million. As Ali mentioned, there were weather and supply disruptions specific to several of our U.S. manufacturing locations, which tempered our Q1 sales. AES Q1 revenues increased by 3.4% versus Q1 of '25. By end market, sales increased in the Electronics and Communications segment and the Industrial segment. EMS sales improved by 7% year-over-year. By end market, sales increased in the Industrial, Electronics and Communications and A&D segments.

This was partially offset by lower automotive sales. Adjusted earnings per share were $0.75 in Q1 and increased 178% from the prior year period, resulting from higher gross margin and significant improvements in operating expenses. Foreign currency fluctuations had only a small effect on adjusted EPS as our global operations act as a natural hedge. Turning to Slide 8. Q1 adjusted EBITDA was $32 million and increased 580 basis points year-over-year to 16% of sales. The improvement in adjusted EBITDA was primarily a result of higher sales and improved product mix. Reductions in manufacturing costs, start-up and general and administrative expenses also contributed to the higher adjusted EBITDA.

We continue to ramp our new factory capacity, which resulted in a $1.4 million headwind to EBITDA versus the prior year. However, new factory performance costs decreased versus Q4 of '25. Continuing to Slide 9, I'll discuss cash utilization for the quarter. Cash at the end of Q1 was $196 million and changed only slightly from the end of the fourth quarter. Cash provided by operations was $5.8 million compared to $46.9 million in Q4 of '25. Inventory reductions were a key driver of the much higher operating cash flow in the prior quarter, and this was not expected to repeat in Q1 of '26.

Consistent with typical patterns, accounts receivable increased in Q1 following a large reduction in Q4 of '25. Higher accounts payable partially offset the Q1 increase in AR. Capital expenditures in Q1 were $4.7 million. Our expectation for full year '26 capital expenditures of $30 million to $40 million is unchanged. We did not repurchase shares in the first quarter, and we'll continue to balance returning capital to shareholders with other capital needs. Next, on Slide 10, I'll review our guidance for the second quarter. On a year-over-year basis, we again anticipate improvement in Q2 sales, margin and profitability. We are guiding Q2 revenues to be between $210 million and $220 million.

The midpoint of the range is a 6% increase in sales year-over-year. The guidance includes our expectation for higher automotive sales from the start of new program wins and continuation of existing programs. In addition, smartphone sales should increase from normal seasonal factors with some growth in industrial end markets continuing. We're guiding gross margin in the range of 32.5% to 33.5%. The midpoint of the range is 140 basis points higher than the prior year due to higher volumes and cost structure improvements. We expect Q2 adjusted operating expenses to remain approximately flat to the first quarter. Adjusted EPS is forecast to range from $0.90 to $1.10.

The $1 midpoint compares to adjusted EPS of $0.34 in Q2 of 2025. Adjusted EBITDA is anticipated to range from $35 million to $41 million. This equates to a 17.7% EBITDA margin at the midpoint of the range, which would be a 590 basis points improvement versus the second quarter of 2025. Excluded from adjusted EPS are restructuring costs related to the Curamik actions in Germany. In Q1, we recognized $4.4 million of associated restructuring charges, bringing total restructuring for this program to date to $9.8 million total. This is relative to our total estimated range of $12 million to $13 million. The remaining restructuring costs associated with this action will largely be incurred from Q2 to Q3 of '26.

The program 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 30%. I will now turn the call back over to Ali.

Ali El-Haj: Thanks, Laura. In summary, we had another quarter of solid execution and delivered improved Q1 results. Our second quarter outlook also reflects solid year-over-year improvements and highlights the momentum behind our commercial and profitability initiatives. We remain focused on execution and driving greater value creation. That concludes our prepared remarks. I will now turn the call back to the operator for questions.

Operator: [Operator Instructions] Our first question today is coming from Craig Ellis from B. Riley Securities.

Craig Ellis: Congratulations on the real strong execution, team. Ali, I wanted to start just following up by one of the points you made about calendar '26's focus areas, and you indicated that growth is the highest priority. Can you talk a little bit more about the design wins that were achieved in EV and ADAS and when those wins would convert to revenue? And as the second part of that question, go into a little more detail in terms of what you're seeing with the data center opportunity? How material are the engagements that you have now? And how significant are the things that sound like they're more in the development or pipeline stage?

Ali El-Haj: Okay. As mentioned, regarding the design wins, as we've indicated in the prepared remarks, we had several in the AMS side, mostly related to EV batteries and other applications. And on the AES side, we have, as I mentioned, one for radar applications with an Asian OEM. Both of these or actually, the majority of these wins will be in production between Q2 and Q4 of this year. So we will start seeing revenue out of these wins in Q2, Q3 and Q4 this year. As it relates to the data center, the opportunities are there, as we've been indicating for now the past 2 quarters. For 2026, however, revenue will not be significant.

It will be mostly sampling or prototype type revenue. So it's not as significant as we would like it to be. I've always been indicating that this is probably a Q3, Q4 of 2027 and depending really on how fast our customer will accelerate their development and their qualification and the readiness for the product. But we see opportunities, as I indicated for data centers in all of our product areas, but mainly the highest volume or dollar impact will be out of our microchannels with the Curamik activities and the high-speed digital product lines.

Craig Ellis: That's really helpful. And then I'll ask the follow-up question to you, Laura. Loved the trajectory of gross margin as we start the year. Can you talk a little bit about what's driving the sequential strength? Is it all really volume? Or are there some things happening on the COGS management side that are coming in a little bit better than we might have expected 3 months ago?

Laura Russell: Sure. No problem, Craig. I'll take that. And with regards to the margin, what I would have to say is really a function of all of the above what you mentioned. We've spoke in the past in prior calls about our initiatives and our objectives in managing our operations to ensure that we are doing what we can to minimize yield loss and optimize on our input costs and really be effective in what we're running through our factories. Those initiatives continue and are in flight, and they have some favorable impact, which you see in our EBITDA bridge and some of the transitions that we call out on a quarter-over-quarter basis.

Now with that said, the other thing that's favorable there that we're also discussing is some of the structural changes that we undertook that are in the margins. That's all to say. There's some other puts and takes that go the other way in terms of some transitions in terms of the segments and where we're realizing some of the revenue growth and gains. So there's always some puts and takes across the margin. In general, I would agree with you, Craig, we're making the right progress.

We're keen to continue to make additional inroads and incremental improvements, which are some of the key initiatives that will assist us as we continue to focus on growing the business and the top line.

Operator: Next question is coming from Daniel Moore from CJS Securities.

Dan Moore: I want to start with industrial. It gets a little less attention, that's still a significant portion of your business. It sounds like gradual improvement. Can you maybe just talk about particular end markets within that bucket where things are improving or becoming -- are there any that are becoming more challenging in the current environment?

Ali El-Haj: No, I think really, overall, the whole industrial segment for the business is really growing. Where we see maybe more impact is the semi. So semiconductor industry, as you know, it is growing. So we realized some increase in our revenue in that area. The rest of the economy and that just the manufacturing index here, PMI in the United States and Europe is higher. So we're tracking with that. In addition to some recapturing some market share with some of our existing customers. So kind of if you separate all the growth come from these 3 areas.

One is general economy; one, semiconductor growth, and the third element is recapturing some market share with our existing customers for existing applications or newer applications.

Dan Moore: Helpful. And maybe as a follow-up, just piggybacking on Craig's question on the data center opportunity. You talked in detail on the last call about the sort of specific applications. Maybe just take the opportunity to talk again about whether you would be replacing any existing thermal management technologies or completely complementary? And when might you be in a position to talk a little bit more about TAM and kind of what revenue might look like 2, 3, 5 years from now?

Ali El-Haj: Yes, I'll take it backwards. So with regard to revenue and discussing revenue and potential, probably later this year, as we get -- we have a pretty good idea of the target and the potential. But some of this, as you know, is customer-specific. So we need to be extremely cautious here of what we communicate. With regard to the opportunity itself, it's really a mix. One is we look at the technology that we're providing for a specific solution of difficult issues that exist today. So more of a complementary but really solving serious issues that remains with the current systems today. So we would be -- it's a combination.

We'll be taking some market share of the existing applications as well as solving some difficult issues with existing technologies regarding the thermal management today. So we believe the technology that we're introducing here is more specific, more efficient and will be more cost effective to the end user.

Dan Moore: I know I'm out of questions, but last, if I could sneak it in, Laura. Can you quantify the revenue that slipped from Q1 due to weather and supply disruptions? And how much of that is in your guide for Q2?

Laura Russell: Yes, no problem. So Dan, yes, we did have some disruptions, which we alluded to in our prepared remarks. I would indicate that had we not encountered those disruptions, we probably have been trending more towards the high end of the guidance range that we had set.

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

David Silver: I did just want to level set 1 or 2 things, and then I have a couple of business questions. But I just want to make sure I'm not missing anything regarding your cost saving targets. So as of December 31, I believe you said you had achieved the run rate of $32 million. And in your remarks here, you've discussed the opportunity in Germany to capture an incremental $13 million by year-end. Is that how I should think about the total efforts that you've created? Or might there be another program or 2 that maybe I'm missing?

Laura Russell: David, it's Laura. Let me take that for you. So you're right insofar as what you said about $25 million in '25. However, what I would tell you is that was the savings we realized in calendar '25. But when you annualize that, there's an additional $7 million still to be realized through the P&L. Then when you add to that, the savings that we'll realize, which will be an incremental $13 million on an annualized basis once we're through the restructuring of Curamik facility in Germany, that will bring us to a cumulative savings total of $45 million.

So that just will give you the information that allows you to fully triangulate the savings and where we are today and fully realizing them through the financials.

David Silver: That was the issue, the $25 million versus $32 million, and you read my mind very well there. Ali, I would just say the first quarter results reflect terrific work on the controllable factors. Your sales growth, I think, was modest, excluding the currency benefit, I guess, the currency tailwind. You've cited maybe auto as a softer spot right here, but due to improve. I mean, overall, what are you hearing from your major OEM customers? Are they cautious because of the geopolitical environment? Or what might be holding them back from moving more like this is kind of a more meaningful recovery, I guess, in broad-based demand for your key end markets?

Ali El-Haj: Okay, specifically referring to the automotive industry. Obviously, it's not just geopolitical issues. We've got regulations issues and regulatory changes, especially in the U.S., as you know. So that's really impacted the EV market, especially in North America, specifically the United States. and to a similar extent in Europe. However, Europe is recovering, and we see growth in that market in Europe. It started towards the fourth quarter of 2025, and it continues. So we see a pickup there. China first quarter was very soft. And again, some of the incentives for the EV market in China was taken away or pulled back, and we think some of that will be reinstated.

So that market will turn positive even in China within the next quarter to 2 quarters. So we think EV market is coming back. It's not an issue. We are not severely impacted by the EV market. We're trying to address the whole automotive market and just not just for EV, but whether it's hybrid, whether it's EV, whether it's ICE type applications, we're in. So we're targeting that market very heavily. We're engaged with a lot of the OEMs directly and indirectly as we speak. So we anticipate really continued growth.

As I said, we had several design wins in the fourth quarter of last year, first quarter of this year, and we anticipate that will continue into the balance of 2026. With regard to the other industries, whether it's electronics and portable electronics specifically, we see growth in there for us. The mix of the high end, especially in the first quarter of this year, the mix of -- or the sale of the higher-end mobile phones and cell phones, what that did for us, it provided us higher revenue. We have higher content on those devices than just the standard lower-cost version phones. So that did help our growth, and we expect that also to continue.

So we're capturing more market share, more applications within that market segment. And the mix is helping us also significantly. So we see growth really in all of our areas, and we're targeting every segment of our business for growth for the balance of this year.

David Silver: And maybe just to follow up on your targeting of growth for the balance of the year, maybe going at it from a slightly different angle. But maybe for Laura, but you did highlight the capital expenditure budget, maybe the midpoint at $35 million. I don't think of your company as kind of a capital-intensive one normally. But within that proposed, call it, $35 million plus or minus budget, is there growth or targeted growth investments included in there? And maybe if you wouldn't mind just what areas of your company are you directing kind of some discretionary or growth-oriented CapEx towards?

Laura Russell: Okay. So let me start there, David, and then if needs be Ali can add some additional color. So what I would say in terms of capital intensity, actually at the midpoint at $35 million, the intensity has declined versus where it was in prior year. So in '25, we were at 4%. I think in '24, we were at 7%. And what that's indicative of is as you talked about the capital intensity, we're largely through the investments in our facilities to expand capacity that we've made in the last 3 to 5 years, those investment decisions. So now what we're investing in is, number one, maintaining those facilities and automating as appropriate to improve our operational effectiveness.

And then secondly, looking at the other auxiliary systems and processes that we have and how we can make them more effective and efficient in the business. So that's where we're currently largely investing. But the one thing that I did want to call out is that we also talk repeatedly to you all about the potential and the opportunity for the business. And we continue to evaluate that month-to-month, quarter-to-quarter, and we'll make the appropriate decisions as we keep that based on potential return on any potential investments.

Operator: [Operator Instructions] Our next question is a follow-up from Daniel Moore from CJS Securities.

Dan Moore: Yes. I apologize. I missed a minute or 2 of the call. But on the defense side of aerospace and defense, has your outlook or growth expectations changed at all since the start of the war in Iran, maybe not necessarily for this year, but looking out further just in terms of maybe a restock, et cetera?

Ali El-Haj: No, it has not changed. I think we expect to continue to grow. I think the Q1, we were heavily impacted by actually the commercial aerospace industry, not the defense that was softer. And again, that's just really timing of projects, Dan, as you know, these are projects-driven type activities. Because of the restocking issue that's expected, we expect growth in Q2, Q3 and going forward. That's our expectations right now.

Operator: Our next question is a follow-up from Craig Ellis from B. Riley Securities.

Craig Ellis: I wanted to use Laura's comments on capacity and the investment that has been made so that you do have sufficient capacity and just use that as a jumping off point with something that I see broadly in a lot of the end markets where Rogers materials wind up, and that is we're seeing increasingly tight supply conditions. And in other sectors, we've seen customer order patterns change either with longer-term pipelining and visibility or other things. And so the question to you, Ali, is as we've seemingly gotten into more of a capacity-constrained environment, across the broader supply chain. How do you feel about your capacity? And are you seeing any changes in your customers' order behavior?

Ali El-Haj: No, we don't really have an issue or constraint on capacity. I think what we see in our business is shifting, let's say, geographical demand and needs, where if you remember, we discussed the local-for-local strategy that Rogers has in place. So we've seen this is now playing more of a role in the business today and going forward than our capacity overall. So Rogers capacity overall is sufficient for what we forecast for the next probably 6 to 8 quarters without any concerns with the exception of the additional new R&D projects, new business that we discussed earlier.

But for current business demand, we think we have sufficient capacity However, shift within regions or between regions, something we're looking at. So we may have to rebalance that available capacity in different regions. So it would be more of a rebalancing rather than investing more.

Craig Ellis: And the follow-up to that and the next question is one as a follow-up. Does that present an opportunity for you to do things with pricing in an environment that just seems to be structurally tighter that can benefit what you bring home on the top line and gross margin? And then the next question is related to the tighter segment summary that you presented with auto and industrial, aerospace and defense, et cetera. What catalyzed the more consolidated look at end markets? And what does it do internally for you in terms of how you're running the business?

Ali El-Haj: I don't think it's going to change the way we run the business. I think the business will continue -- the path we started a few quarters ago, I think we're going to continue running the business in the same way. The only thing that I've mentioned is, again, rebalancing this capacity and the availability of production lines where to serve the local geographical needs or serve the OEMs within those geographical areas. So this is something we're going to continue to work on going forward. With regard to pricing, my comments in the past, this is market-driven.

We're going to continue to evaluate and study the market and understand the pricing -- the market tolerance for pricing and those conditions and we'll act accordingly. But we try to mitigate any cost increases internally first before we try to go in and ask our customers for price increases. So we try to do that internally first, mitigate that with our efficiencies, our cost reduction activities first, then last resort will be going back to increasing pricing on customers or for certain customers.

Operator: Thank you. We reached the end of our question-and-answer session. And ladies and gentlemen, that does conclude today's teleconference and webcast. You may disconnect your line at this time, and have a wonderful day. We thank you for your participation today.

This article is a transcript of this conference call produced for The Motley Fool. While we strive for our Foolish Best, there may be errors, omissions, or inaccuracies in this transcript. Parts of this article were created using Large Language Models (LLMs) based on The Motley Fool's insights and investing approach. It has been reviewed by our AI quality control systems. Since LLMs cannot (currently) own stocks, it has no positions in any of the stocks mentioned. As with all our articles, The Motley Fool does not assume any responsibility for your use of this content, and we strongly encourage you to do your own research, including listening to the call yourself and reading the company's SEC filings. Please see our Terms and Conditions for additional details, including our Obligatory Capitalized Disclaimers of Liability.

The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.