4 th Quarter and Full Year 2022 Forward Looking Statements Non-GAAP Disclaimer 2 | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | |--------------|-------|-------|-----------------------------------|---------------------------|-------|-------|-------|---------------------------|-------|------------------------------------------------------------------------------------| | | | | | | | | | | | | | REVENUE ($M) | | | Non-GAAP GROSS PROFIT MARGIN* (%) | ADJUSTED EBIT MARGIN* (%) | | | | Non-GA ...

Part I [Business](index=3&type=section&id=Item%201.%20Business) Knowles is a global provider of advanced micro-acoustic components and solutions for medtech, defense, consumer, and EV markets - Knowles is a **market leader** in advanced micro-acoustic microphones, balanced armature speakers, audio solutions, high-performance capacitors, and RF filtering products[14](index=14&type=chunk) - The company operates through three reportable segments established in Q4 2022: **Precision Devices (PD), Medtech & Specialty Audio (MSA), and Consumer MEMS Microphones (CMM)**[19](index=19&type=chunk) Business Segments and Key Markets | Segment | Products | Key Markets | | :--- | :--- | :--- | | **PD** | High-performance capacitors, RF solutions | Defense, medtech, electric vehicle, industrial | | **MSA** | Balanced armature speakers, microphones | Hearing health, premium audio | | **CMM** | MEMS microphones, audio solutions | Ear, IoT, computing, smartphones | - Revenue from Major Customer (Apple Inc.) Revenue from Major Customer (Apple Inc.) | Year | Percentage of Total Revenue | | :--- | :--- | | 2022 | 15% | | 2021 | 16% | | 2020 | 23% | - As of December 31, 2022, Knowles had approximately **7,000 employees**, with **82% located in Asia** and **71% identifying as female globally**[38](index=38&type=chunk) [Risk Factors](index=8&type=section&id=Item%201A.%20Risk%20Factors) The company faces diverse risks including customer concentration, supply chain dependencies, geopolitical instability, and goodwill impairment - The CMM segment is highly dependent on a few OEM customers. In 2022, its top five customers accounted for approximately **63% of its revenues**, with Apple Inc. representing about **40% of CMM's revenues** and **15% of consolidated company revenues**[57](index=57&type=chunk) - Sales of MEMS microphones accounted for approximately **46% of consolidated revenues in fiscal 2022**. Weak demand in 2022 was driven by a downturn in consumer electronics, COVID-19 shutdowns in China, and excess inventory[58](index=58&type=chunk) - The company relies on highly specialized and sometimes **sole-sourced suppliers**, such as ASIC and MEMS foundry partners, creating a risk of supply disruption[59](index=59&type=chunk) - A significant goodwill balance of **$730.5 million** as of December 31, 2022, is subject to impairment risk. In 2022, the company recorded goodwill impairment charges of **$470.9 million** for the CMM segment[72](index=72&type=chunk) - The **majority of manufacturing operations are in Asia**, exposing the company to risks such as labor unrest, natural disasters, political instability, and trade restrictions, particularly with China[77](index=77&type=chunk)[80](index=80&type=chunk) - The credit agreement contains **financial covenants**, including minimum interest coverage and maximum leverage ratios, which if breached, could result in default[97](index=97&type=chunk) [Unresolved Staff Comments](index=20&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) The company reports that it has no unresolved staff comments from the SEC - None[105](index=105&type=chunk) [Properties](index=20&type=section&id=Item%202.%20Properties) The company's corporate headquarters is in Itasca, Illinois. Its material manufacturing and administrative facilities are primarily located in Suzhou, China; Cebu, the Philippines; and Penang, Malaysia, supporting all three business segments. Additional significant facilities are located in Cazenovia, New York Material Properties | Location | Principal Function(s) | Segment(s) Served | Square Footage (thousands) | | :--- | :--- | :--- | :--- | | Suzhou, China | Manufacturing and administrative | PD, MSA, CMM | 495 | | Cebu, the Philippines | Manufacturing and administrative | MSA | 215 | | Penang, Malaysia | Manufacturing and administrative | MSA, CMM | 187 | | Cazenovia, New York | Manufacturing, R&D, sales, admin | PD | 133 | | Itasca, Illinois | Corp HQ, R&D, sales, admin | MSA, CMM | 95 | [Legal Proceedings](index=20&type=section&id=Item%203.%20Legal%20Proceedings) For discussion of contingencies related to legal proceedings, the company refers to Note 15 of its Consolidated Financial Statements - Information on legal proceedings is detailed in Note 15. Commitments and Contingent Liabilities[107](index=107&type=chunk) [Mine Safety Disclosures](index=21&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - Not applicable[108](index=108&type=chunk) Part II [Market for Registrant's Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities](index=23&type=section&id=Item%205.%20Market%20for%20Registrant's%20Common%20Equity,%20Related%20Stockholder%20Matters,%20and%20Issuer%20Purchases%20of%20Equity%20Securities) Knowles' common stock trades on NYSE; no immediate dividends planned, with **$145.2 million** remaining for share repurchases - The company **does not currently pay cash dividends** and does not anticipate paying them in the immediate future[118](index=118&type=chunk) - A share repurchase program was authorized for up to **$100 million** in February 2020 and increased by an additional **$150 million** in April 2022[121](index=121&type=chunk) - As of December 31, 2022, the remaining amount authorized for share repurchases was **$145.2 million**. No shares were repurchased in the three months ended December 31, 2022[122](index=122&type=chunk) [Reserved](index=24&type=section&id=Item%206.%20%5BReserved%5D) This item is reserved and contains no information [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=25&type=section&id=Item%207.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) In 2022, revenue declined **11.9%** to **$764.7 million** due to CMM downturn and **$470.9 million** goodwill impairment, leading to a **$430.1 million net loss** Key Financial Results (2022 vs. 2021) | Metric (in millions, except per share) | 2022 | 2021 | Change | | :--- | :--- | :--- | :--- | | Revenues | $764.7 | $868.1 | -11.9% | | Gross Profit | $276.3 | $359.5 | -23.1% | | (Loss) Earnings from Continuing Operations | $(430.1) | $150.2 | -486.2% | | Diluted (Loss) Earnings Per Share | $(4.69) | $1.59 | - $6.28 | - The revenue decrease was primarily driven by a **$143.8 million** decline in the CMM segment due to lower demand for MEMS microphones in mobile, computing, and IoT markets, stemming from weak global demand for consumer electronics and COVID-19 shutdowns in China[142](index=142&type=chunk) - The company recorded a goodwill impairment charge of **$470.9 million** for the CMM reporting unit in 2022, which was the primary driver of the significant net loss[151](index=151&type=chunk) - Restructuring charges of **$41.8 million** were recorded in 2022, with **$32.2 million** impacting Gross Profit and **$9.6 million** in Operating Expenses, mainly related to rightsizing the CMM segment[145](index=145&type=chunk) [Results of Operations](index=28&type=section&id=Results%20of%20Operations) In 2022, the company reported a **$430.1 million net loss** due to an **11.9% revenue decline** to **$764.7 million** and a **$470.9 million goodwill impairment** Revenue by Segment (2022 vs 2021) | Segment | 2022 Revenue (M) | 2021 Revenue (M) | Change (M) | | :--- | :--- | :--- | :--- | | CMM | $291.9 | $435.7 | $(143.8) | | MSA | $229.9 | $231.3 | $(1.4) | | PD | $242.9 | $201.1 | $41.8 | - Gross profit margin decreased to **36.1%** in 2022 from **41.4%** in 2021, primarily due to restructuring charges, lower factory utilization in the CMM segment, and lower pricing on mature products[147](index=147&type=chunk) - A goodwill impairment charge of **$470.9 million** was recorded in 2022 related to the CMM reporting unit. No such charge was recorded in 2021[151](index=151&type=chunk) - The effective tax rate was **(2.8)%** in 2022, a significant change from **(43.6)%** in 2021. The change was primarily due to the nondeductible goodwill impairment in 2022 versus a large valuation allowance release in 2021[153](index=153&type=chunk) [Segment Results of Operations](index=34&type=section&id=Segment%20Results%20of%20Operations) In 2022, PD and MSA segments performed well, while CMM revenue plummeted **33.0%** to **$291.9 million**, resulting in a **$504.5 million EBIT loss** due to impairment Segment EBIT (2022 vs 2021) | Segment (in millions) | 2022 EBIT | 2021 EBIT | | :--- | :--- | :--- | | Precision Devices (PD) | $56.1 | $43.7 | | MedTech & Specialty Audio (MSA) | $84.6 | $77.0 | | Consumer MEMS Microphones (CMM) | $(504.5) | $60.0 | - PD segment revenue growth was driven by demand from defense, medtech, communications, and industrial markets, along with the **acquisition of IMC**[168](index=168&type=chunk) - MSA segment EBIT margin improved from **33.3%** to **36.8%** due to higher gross profit margin and reduced legal expenses[177](index=177&type=chunk) - CMM segment's EBIT loss was primarily caused by a **$470.9 million goodwill impairment**, lower revenues, and **$41.2 million** in restructuring charges[182](index=182&type=chunk)[185](index=185&type=chunk) [Liquidity and Capital Resources](index=39&type=section&id=Liquidity%20and%20Capital%20Resources) The company generated **$86.3 million** in operating cash flow in 2022, with **$54.2 million** in free cash flow, ending the year with **$48.2 million** cash Cash Flow Summary (in millions) | Activity | 2022 | 2021 | | :--- | :--- | :--- | | Net cash from Operating activities | $86.3 | $182.1 | | Net cash used in Investing activities | $(32.7) | $(129.6) | | Net cash used in Financing activities | $(73.2) | $(131.4) | Free Cash Flow (in millions) | Metric | 2022 | 2021 | | :--- | :--- | :--- | | Cash flow from operating activities | $86.3 | $182.1 | | Less: Capital expenditures | $(32.1) | $(48.6) | | **Free cash flow** | **$54.2** | **$133.5** | - As of December 31, 2022, cash and cash equivalents totaled **$48.2 million**, with **$40.0 million** held by non-U.S. operations[191](index=191&type=chunk) - In 2022, the company repurchased **2.3 million shares** of common stock for **$44.0 million**[192](index=192&type=chunk) [Critical Accounting Estimates](index=44&type=section&id=Critical%20Accounting%20Estimates) Goodwill impairment is a critical estimate, with **$470.9 million** in CMM charges in 2022, and its **$270.1 million** carrying value remains highly sensitive - Goodwill impairment is a critical estimate. The company recorded **$470.9 million** in goodwill impairment charges for the CMM reporting unit in 2022 due to a decline in demand for global consumer electronics[212](index=212&type=chunk) - As of December 31, 2022, the carrying value of the CMM reporting unit's goodwill (**$270.1 million**) approximates its fair value, indicating a high risk of future impairment if performance or market conditions worsen[215](index=215&type=chunk) CMM Reporting Unit Fair Value Sensitivity | Change in Assumption | Approximate Impairment Charge (in millions) | | :--- | :--- | | 1% increase in WACC | $41.9 | | 1% reduction in revenue growth | $40.2 | | 1% reduction in EBITDA margin | $29.2 | - The fair value of the PD and MSA reporting units exceeded their carrying values by at least **230%**, indicating a low risk of impairment for these segments[217](index=217&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=45&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section incorporates by reference the 'Risk Management' section from Item 7, discussing exposure to market risks including foreign currency, customer concentration, commodity prices, and interest rates - The information required by this item is incorporated by reference from the 'Risk Management' section in Item 7 of the report[221](index=221&type=chunk) [Financial Statements and Supplementary Data](index=46&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section presents audited 2022 financial statements, reflecting a **$430.1 million net loss** due to a **$470.9 million goodwill impairment**, a Critical Audit Matter - The independent auditor, PricewaterhouseCoopers LLP, identified the Goodwill Impairment Assessment for the Consumer MEMS Microphones (CMM) Reporting Unit as a **Critical Audit Matter** due to the significant management judgment and high degree of auditor subjectivity involved[235](index=235&type=chunk)[237](index=237&type=chunk) Consolidated Statements of Earnings Highlights (Year Ended Dec 31, 2022) | Line Item (in millions) | Amount | | :--- | :--- | | Revenues | $764.7 | | Gross Profit | $276.3 | | Impairment Charges | $470.9 | | Operating (Loss) | $(414.8) | | Net (Loss) | $(430.1) | Consolidated Balance Sheets Highlights (As of Dec 31, 2022) | Line Item (in millions) | Amount | | :--- | :--- | | Total Assets | $1,183.9 | | Goodwill | $471.0 | | Total Liabilities | $191.0 | | Total Stockholders' Equity | $992.9 | [Note 4. Impairment Charges](index=60&type=section&id=Note%204.%20Impairment%20Charges) In 2022, **$470.9 million** in goodwill impairment charges were recorded for the CMM unit, triggered by declining consumer electronics demand and rising interest rates - Goodwill impairment charges for the CMM reporting unit totaled **$470.9 million** for the year ended December 31, 2022[292](index=292&type=chunk)[293](index=293&type=chunk) - The impairments were triggered by a **rapid decline in current demand** and a reduction in the expected future growth rate for global consumer electronics, as well as **rising interest rates**[292](index=292&type=chunk)[293](index=293&type=chunk) [Note 10. Restructuring and Related Activities](index=65&type=section&id=Note%2010.%20Restructuring%20and%20Related%20Activities) In 2022, **$41.8 million** in restructuring charges were incurred within the CMM segment to right-size MEMS microphone manufacturing and rationalize Intelligent Audio 2022 Restructuring Charges by Segment (in millions) | Segment | Charge | | :--- | :--- | | Consumer MEMS Microphones | $41.2 | | Corporate | $0.6 | | **Total** | **$41.8** | - The restructuring of the MEMS microphones product line resulted in charges of **$39.0 million**, including **$21.1 million** for supplier obligation settlements and **$13.5 million** in fixed asset write-offs[312](index=312&type=chunk) [Note 12. Borrowings](index=69&type=section&id=Note%2012.%20Borrowings) The company's primary debt is a **$400.0 million** revolving credit facility with **$45.0 million** outstanding, extended to 2028 post-year-end - As of Dec 31, 2022, the company had **$45.0 million** outstanding on its **$400.0 million** revolving credit facility[333](index=333&type=chunk) - The **3.25% convertible senior notes** (**$172.5 million** principal) matured on November 1, 2021, and were settled in cash and stock[341](index=341&type=chunk)[342](index=342&type=chunk) - Subsequent to year-end, on **February 8, 2023**, the company entered into an Amended and Restated Credit Agreement, extending the maturity of its credit facility to February 8, 2028[410](index=410&type=chunk) [Note 18. Segment Information](index=84&type=section&id=Note%2018.%20Segment%20Information) In 2022, CMM was the largest segment by revenue at **$291.9 million**, Asia the largest market at **$471.3 million**, and Apple Inc. accounted for **15%** of total revenues Revenues by Geographic Location (2022) | Region | Revenue (in millions) | | :--- | :--- | | Asia | $471.3 | | United States | $174.3 | | Europe | $104.4 | | Other | $14.7 | | **Total** | **$764.7** | - Apple Inc. accounted for **15% of total revenues** in 2022, down from **16%** in 2021 and **23%** in 2020[407](index=407&type=chunk) - Total assets for the CMM segment decreased from **$1,091.9 million** in 2021 to **$547.3 million** in 2022, primarily due to goodwill impairment[406](index=406&type=chunk) [Controls and Procedures](index=88&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded that disclosure controls and internal control over financial reporting were effective as of December 31, 2022, concurred by auditor - The CEO and CFO concluded that the company's disclosure controls and procedures were **effective** as of December 31, 2022[421](index=421&type=chunk) - Management concluded that the company's internal control over financial reporting was **effective** as of December 31, 2022, an assessment audited and confirmed by PricewaterhouseCoopers LLP[422](index=422&type=chunk)[423](index=423&type=chunk) Part III [Directors, Executive Officers, and Corporate Governance](index=90&type=section&id=Item%2010.%20Directors,%20Executive%20Officers,%20and%20Corporate%20Governance) This section incorporates information on directors, executive officers, and corporate governance from the 2023 Proxy Statement and Part I - Information regarding directors and corporate governance is incorporated by reference from the 2023 Proxy Statement[429](index=429&type=chunk) - Information regarding executive officers is included in Part I of this Form 10-K[430](index=430&type=chunk) [Executive Compensation](index=90&type=section&id=Item%2011.%20Executive%20Compensation) Information regarding executive and director compensation is incorporated by reference from the company's 2023 Proxy Statement - Details on executive compensation will be included in the 2023 Proxy Statement and are incorporated by reference[434](index=434&type=chunk) [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=90&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) This section incorporates security ownership from the 2023 Proxy Statement and details equity compensation plans, with **5.6 million** securities to be issued and **9.0 million** available Equity Compensation Plan Information (as of Dec 31, 2022) | Plan Category | Securities to be Issued Upon Exercise | Weighted-Average Exercise Price | Securities Remaining Available for Future Issuance | | :--- | :--- | :--- | :--- | | Approved by stockholders | 5,641,098 | $16.86 | 9,010,351 | | Not approved by stockholders | — | — | — | | **Total** | **5,641,098** | **$16.86** | **9,010,351** | [Certain Relationships and Related Transactions, and Director Independence](index=91&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions,%20and%20Director%20Independence) Information regarding related person transactions and director independence is incorporated by reference from the company's 2023 Proxy Statement - Details on certain relationships, related transactions, and director independence will be included in the 2023 Proxy Statement and are incorporated by reference[437](index=437&type=chunk) [Principal Accountant Fees and Services](index=91&type=section&id=Item%2014.%20Principal%20Accountant%20Fees%20and%20Services) Information regarding principal accountant fees and services is incorporated by reference from the company's 2023 Proxy Statement, under the proposal for the ratification of the independent registered public accounting firm - Details on principal accountant fees and services will be included in the 2023 Proxy Statement and are incorporated by reference[438](index=438&type=chunk) Part IV [Exhibits and Financial Statement Schedules](index=92&type=section&id=Item%2015.%20Exhibits%20and%20Financial%20Statement%20Schedules) This section lists all documents filed as part of the Form 10-K report, including financial statements, Schedule II, and comprehensive exhibits - The financial statements and Schedule II (Valuation and Qualifying Accounts) are filed as part of this report and located under Item 8[440](index=440&type=chunk) - A list of exhibits is provided, including the Restated Certificate of Incorporation, By-Laws, descriptions of securities, various compensation plans, credit agreements, and required certifications[440](index=440&type=chunk)[441](index=441&type=chunk) [Form 10-K Summary](index=94&type=section&id=Item%2016.%20Form%2010-K%20Summary) The company reports that there is no Form 10-K summary - None[442](index=442&type=chunk)

《《 knowles 3 rd Quarter 2022 Earnings Release Supplemental Information October 27, 2022 Safe Harbor Forward Looking Statements This presentation contains forward-looking statements within the meaning of the safe harbor provisions of the United States Private Securities Litigation Reform Act of 1995, such as statements about our future plans, objectives, expectations, financial performance, and continued business operations. The words "believe," "expect," "anticipate," "project," "estimate," "budget," "conti ...

Knowles Corporation (NYSE:KN) Q3 2022 Earnings Conference Call October 27, 2022 4:30 PM ET Company Participants Sloane Bolun - Investor Relations Jeffrey Niew - President and Chief Executive Officer John Anderson - Senior Vice President and Chief Financial Officer Conference Call Participants Anthony Stoss - Craig-Hallum Bob Labick - CJS Securities Tyler Bomba - Baird Suji Desilva - Roth Capital Christopher Rolland - Susquehanna Group Operator Good afternoon and welcome to the Knowles Corporation Third Qua ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2022. or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number: 001-36102 Knowles Corporation (Exact name of registrant as specified in its charter) (State or other jurisdi ...

《《 knowles Jefferies Industrials Conference August 9, 2022 Safe Harbor Forward Looking Statements This presentation contains forward-looking statements within the meaning of the safe harbor provisions of the United States Private Securities Litigation Reform Act of 1995, such as statements about our future plans, objectives, expectations, financial performance, and continued business operations. The words "believe," "expect," "anticipate," "project," "estimate," "budget," "continue," "could," "intend," "may ...

Start Time: 16:30 January 1, 0000 5:07 PM ET Knowles Corporation (NYSE:KN) Q2 2022 Earnings Conference Call August 02, 2022, 16:30 PM ET Company Participants Jeffrey Niew - President and CEO John Anderson - SVP and CFO Sloane Bolun - IR Conference Call Participants Bob Labick - CJS Securities Suji Desilva - ROTH Capital Christopher Rolland - Susquehanna Tyler Bomba - Robert W. Baird Anthony Stoss - Craig-Hallum Operator Good afternoon and welcome to the Knowles Corporation Second Quarter 2022 Financial Resu ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2022. or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (Exact name of registrant as specified in its charter) For the transition period from to (State or other jurisdiction of incorporation or organization) (I.R.S. Employer Id ...

《《 knowles 2 nd Quarter 2022 Earnings Release Supplemental Information August 2, 2022 Safe Harbor Forward Looking Statements This presentation contains forward-looking statements within the meaning of the safe harbor provisions of the United States Private Securities Litigation Reform Act of 1995, such as statements about our future plans, objectives, expectations, financial performance, and continued business operations. The words "believe," "expect," "anticipate," "project," "estimate," "budget," "continu ...

Knowles Corporation (NYSE:KN) Q1 2022 Earnings Conference Call April 28, 2022 4:30 PM ET Company Participants Sloane Bolun - Investor Relations Jeffrey Niew - President and Chief Executive Officer John Anderson - Senior Vice President and Chief Financial Officer Conference Call Participants Bob Labick - CJS Securities Duksan Jang - Susquehanna Suji Desilva - ROTH Capital Operator Good afternoon and welcome to the Knowles Corporation First Quarter 2022 Financial Results Conference Call. Today’s call is being ...