Knowles Corporation (NYSE:KN) Q4 2020 Earnings Conference Call February 4, 2021 4:30 PM ET Company Participants Mike Knapp - Vice President of Investor Relations Jeffrey Niew - President, Chief Executive Officer John Anderson - Senior Vice President, Chief Financial Officer Conference Call Participants Harsh Kumar - Piper Sandler Anthony Stoss - Craig-Hallum Capital Group Bob Labick - CJS Securities Christopher Rolland - Susquehanna Tristan Gerra - Robert W. Baird & Co. Suji Desilva - Roth Capital Partners ...

《《 knowles February 4, 2021 Q4 2020 Supplemental Information Non-GAAP Disclaimer The financial results disclosed in this presentation include certain measures calculated and presented in accordance with GAAP. In addition to the GAAP results included in this presentation, Knowles has presented supplemental, non-GAAP gross profit, earnings before interest and income taxes, adjusted earnings before interest and income taxes, non-GAAP diluted earnings per share, and free cash flow to facilitate evaluation of Kn ...

Q3 2020 Financial Performance - Revenues for Q3 2020 were $205.8 million, compared to $235.9 million in Q3 2019[2] - Gross profit for Q3 2020 was $75.2 million, compared to $93.5 million in Q3 2019[2] - Non-GAAP gross profit for Q3 2020 was $75.6 million, compared to $94.7 million in Q3 2019[2] - Diluted earnings per share for Q3 2020 was $0.06, compared to $0.27 in Q3 2019[2] - Non-GAAP diluted earnings per share for Q3 2020 was $0.24, compared to $0.38 in Q3 2019[2] Q4 2020 Projections (Non-GAAP) - Revenues are projected to be between $210 million and $225 million[3] - Gross margin is projected to be between 36% and 38%[3] - EPS (diluted) is projected to be between $0.27 and $0.33[3] Free Cash Flow - Cash flow provided by operating activities in Q3FY20 was $27.6 million[10] - Capital expenditures in Q3FY20 were $5.8 million[10] - Free cash flow in Q3FY20 was $21.8 million[10]

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 Commission File Number: 001-36102 Knowles Corporation (Exact name of registrant as specified in its charter) Delaware 90-1002689 (State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.) 1151 Maplewood Drive, Itasca, IL (Address of Principal Executive Of ices) For the quarterly period e ...

《《 knowles July 29, 2020 Q2 2020 Supplemental Information Non-GAAP Disclaimer The financial results disclosed in this presentation include certain measures calculated and presented in accordance with GAAP. In addition to the GAAP results included in this presentation, Knowles has presented supplemental, non-GAAP gross profit, earnings before interest and income taxes, adjusted earnings before interest and income taxes, non-GAAP diluted earnings per share, and free cash flow to facilitate evaluation of Knowl ...

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, 2020. 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) Delaware 90-1002689 (State or other jurisdicti ...

[PART I — FINANCIAL INFORMATION](index=4&type=section&id=PART%20I%20%E2%80%94%20FINANCIAL%20INFORMATION) [Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) The unaudited consolidated financial statements for Q1 2020 and 2019 provide a comprehensive view of the company's financial performance and position Consolidated Statements of Earnings (Q1 2020 vs Q1 2019) | (in millions, except per share amounts) | Three Months Ended March 31, 2020 | Three Months Ended March 31, 2019 | | :--- | :--- | :--- | | **Revenues** | $163.1 | $179.8 | | **Gross profit** | $56.2 | $68.5 | | **Operating (loss) earnings** | $(9.6) | $4.4 | | **Loss from continuing operations** | $(12.8) | $(2.7) | | **Net loss** | $(9.1) | $(2.7) | | **Diluted loss per share from continuing operations** | $(0.14) | $(0.03) | | **Diluted net loss per share** | $(0.10) | $(0.03) | Consolidated Balance Sheets (as of March 31, 2020) | (in millions) | March 31, 2020 | December 31, 2019 | | :--- | :--- | :--- | | **Total current assets** | $443.0 | $388.4 | | **Total assets** | $1,696.8 | $1,654.6 | | **Total current liabilities** | $132.9 | $151.5 | | **Long-term debt** | $258.8 | $156.8 | | **Total liabilities** | $443.0 | $339.1 | | **Total stockholders' equity** | $1,253.8 | $1,288.5 | Consolidated Statements of Cash Flows (Q1 2020 vs Q1 2019) | (in millions) | Three Months Ended March 31, 2020 | Three Months Ended March 31, 2019 | | :--- | :--- | :--- | | **Net cash used in operating activities** | $(1.5) | $(11.2) | | **Net cash used in investing activities** | $(7.8) | $(26.5) | | **Net cash provided by financing activities** | $78.9 | $5.3 | | **Net increase (decrease) in cash and cash equivalents** | $69.4 | $(32.2) | [Notes to Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements%20(unaudited)) Detailed explanations supporting the financial statements cover the business, COVID-19 impact, acquisitions, and segment performance [Note 1. Basis of Presentation](index=10&type=section&id=1.%20Basis%20of%20Presentation) The company operates as a global solutions provider, acknowledges COVID-19's impact on estimates, and initiated a now-suspended share repurchase program - Knowles is a global provider of advanced micro-acoustic, audio processing, and precision device solutions for various markets including mobile consumer electronics, communications, and medtech[20](index=20&type=chunk) - The Board of Directors authorized a share repurchase program of up to **$100 million**, and during Q1 2020, the company repurchased 996,109 shares for **$15.0 million** before temporarily suspending the program due to the COVID-19 pandemic[23](index=23&type=chunk) - Management acknowledges that the COVID-19 pandemic's duration and impact cannot be reasonably estimated, which could adversely affect future estimates regarding the recoverability of goodwill, long-lived assets, and deferred tax assets[22](index=22&type=chunk) [Note 3. Disposed and Discontinued Operations](index=11&type=section&id=3.%20Disposed%20and%20Discontinued%20Operations) Discontinued operations include the sold Timing Device Business, which generated a **$3.7 million** tax benefit in Q1 2020 - The company recorded earnings from discontinued operations of **$3.7 million** in Q1 2020, which was entirely due to a tax benefit from a refund related to the previously sold Timing Device Business[32](index=32&type=chunk)[33](index=33&type=chunk) [Note 4. Acquisitions](index=13&type=section&id=4.%20Acquisitions) The company acquired the ASIC Design Business for **$57.9 million** and allocated the purchase price primarily to developed technology and goodwill - Acquired the ASIC Design Business from ams AG for **$57.9 million** on December 20, 2019, which includes intellectual property and an assembled workforce and is part of the Audio segment[37](index=37&type=chunk) ASIC Design Business Purchase Price Allocation | (in millions) | Amount | | :--- | :--- | | Developed technology | $33.3 | | In-process research and development | $3.7 | | Goodwill | $18.8 | | **Total purchase price** | **$57.9** | [Note 8. Restructuring and Related Activities](index=17&type=section&id=8.%20Restructuring%20and%20Related%20Activities) Restructuring charges in Q1 2020 totaled **$5.3 million**, primarily for workforce rationalization in the Audio segment - Q1 2020 restructuring charges of **$5.3 million** were primarily for actions to rationalize the Audio segment workforce, including fixed asset write-offs[56](index=56&type=chunk) Restructuring Charges by Segment | (in millions) | Q1 2020 | Q1 2019 | | :--- | :--- | :--- | | Audio | $4.1 | $1.8 | | Precision Devices | — | $0.3 | | Corporate | $1.2 | $0.2 | | **Total** | **$5.3** | **$2.3** | [Note 9. Borrowings](index=18&type=section&id=9.%20Borrowings) Total debt increased to **$258.8 million** following a **$100.0 million** draw on the revolving credit facility, with all covenants in compliance Borrowings Summary | (in millions) | March 31, 2020 | December 31, 2019 | | :--- | :--- | :--- | | 3.25% convertible senior notes | $158.8 | $156.8 | | Revolving credit facility | $100.0 | — | | **Total long-term debt** | **$258.8** | **$156.8** | - As of March 31, 2020, the company was in compliance with its debt covenants, which include interest coverage and leverage ratios[76](index=76&type=chunk) [Note 11. Income Taxes](index=22&type=section&id=11.%20Income%20Taxes) The Q1 2020 effective tax rate was a **20.8%** provision, favorably impacted by tax holidays in Malaysia - The effective tax rate from continuing operations was a **20.8% provision** for Q1 2020, compared to a 2,600.0% provision in Q1 2019, with the high 2019 rate driven by a near break-even loss[83](index=83&type=chunk) - Tax holidays in Malaysia provided a benefit of approximately **$1.3 million** ($0.01 per share) in Q1 2020 and are effective through December 31, 2021[84](index=84&type=chunk) [Note 12. Equity Incentive Program](index=22&type=section&id=12.%20Equity%20Incentive%20Program) Stock-based compensation expense decreased to **$3.5 million** in Q1 2020, with **$39.9 million** in total unrecognized expense remaining - Total stock-based compensation expense was **$3.5 million** for Q1 2020, compared to $6.7 million for Q1 2019[85](index=85&type=chunk) - As of March 31, 2020, unrecognized compensation expense related to unvested RSUs and PSUs was **$32.1 million** and **$7.8 million**, respectively[90](index=90&type=chunk)[96](index=96&type=chunk) [Note 15. Segment Information](index=26&type=section&id=15.%20Segment%20Information) The Audio segment's revenue declined while the Precision Devices segment grew, with Asia remaining the largest geographic market Revenues by Segment (Q1 2020 vs Q1 2019) | (in millions) | Q1 2020 | Q1 2019 | | :--- | :--- | :--- | | Audio | $120.1 | $139.1 | | Precision Devices | $43.0 | $40.7 | | **Total revenues** | **$163.1** | **$179.8** | Earnings (Loss) from Continuing Operations before Interest and Income Taxes by Segment | (in millions) | Q1 2020 | Q1 2019 | | :--- | :--- | :--- | | Audio | $(6.1) | $11.8 | | Precision Devices | $7.1 | $7.5 | | **Total segments** | **$1.0** | **$19.3** | Revenues by Geographic Location (Q1 2020 vs Q1 2019) | (in millions) | Q1 2020 | Q1 2019 | | :--- | :--- | :--- | | Asia | $109.7 | $121.1 | | United States | $29.3 | $32.2 | | Europe | $22.4 | $23.8 | | **Total** | **$163.1** | **$179.8** | [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=29&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Q1 2020 revenue decreased **9.3%** year-over-year due to COVID-19's impact on the Audio segment, prompting cost-saving and liquidity measures [COVID-19 Impact](index=29&type=section&id=COVID-19%20Impact) The pandemic disrupted operations and demand, leading to mitigation efforts and an expectation of lower full-year 2020 financial results - The company has taken several actions to mitigate the negative impacts of COVID-19, including suspending employee travel, implementing remote work, suspending the share repurchase program, and reducing employee salaries and board compensation[113](index=113&type=chunk) - While the full impact is uncertain, the company currently expects that **full-year revenues, net income, and cash flow for 2020 will be lower than in 2019**[114](index=114&type=chunk) [Results of Operations (Q1 2020 vs Q1 2019)](index=31&type=section&id=Results%20of%20Operations%20for%20the%20Three%20Months%20Ended%20March%2031%2C%202020%20compared%20with%20the%20Three%20Months%20Ended%20March%2031%2C%202019) Revenues fell **9.3%** to **$163.1 million** and gross margin declined to **34.5%**, resulting in a **$12.8 million** loss from continuing operations - Revenues decreased by **9.3% YoY to $163.1 million**, primarily due to the impacts of the COVID-19 pandemic causing lower demand for hearing health products and MEMS microphones in the Audio segment, particularly in China[120](index=120&type=chunk) - Gross profit margin decreased to **34.5% from 38.1% YoY**, due to lower Audio revenue volumes, lower pricing on mature products, and disruptions from the COVID-19 pandemic that negatively impacted plant productivity and capacity utilization[124](index=124&type=chunk) - **Non-GAAP diluted EPS from continuing operations was $0.03**, down from $0.13 in Q1 2019, mainly driven by lower Adjusted EBIT[138](index=138&type=chunk) [Segment Results of Operations](index=37&type=section&id=Segment%20Results%20of%20Operations%20for%20the%20Three%20Months%20Ended%20March%2031%2C%202020%20compared%20with%20the%20Three%20Months%20Ended%20March%2031%2C%202019) The Audio segment's revenue and profit fell sharply due to COVID-19, while the Precision Devices segment saw revenue growth but slightly lower income - **Audio Segment:** Revenue decreased **13.7% YoY to $120.1 million** due to COVID-19 impacts on demand and lower pricing; Adjusted EBIT margin fell to **3.3% from 13.2%** due to lower demand, manufacturing disruptions, and higher legal expenses[146](index=146&type=chunk)[148](index=148&type=chunk) - **Precision Devices Segment:** Revenue increased **5.7% YoY to $43.0 million**, driven by higher shipments to defense, automotive, and medtech markets; Adjusted EBIT margin decreased to **18.6% from 23.8%** due to higher product costs and factory overhead to support expansion[151](index=151&type=chunk)[153](index=153&type=chunk) [Liquidity and Capital Resources](index=39&type=section&id=Liquidity%20and%20Capital%20Resources) Cash increased to **$147.8 million**, bolstered by a **$100.0 million** credit facility draw, while operating cash flow improved due to working capital changes - Cash and cash equivalents increased to **$147.8 million** as of March 31, 2020, from $78.4 million at year-end 2019, with **$58.7 million** held by non-U.S. operations[160](index=160&type=chunk) - In Q1 2020, financing activities provided **$78.9 million** in cash, primarily from a **$100.0 million** borrowing under the revolving credit facility, partially offset by a **$15.0 million** share repurchase[166](index=166&type=chunk) - Cash used in operating activities improved to **$1.5 million** in Q1 2020 from $11.2 million in Q1 2019, mainly due to favorable changes in receivables and accrued compensation[163](index=163&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=43&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) There were no material changes to the company's market risk exposure during the first quarter of 2020 - There were no material changes to the information on market risk exposure during Q1 2020[175](index=175&type=chunk) [Controls and Procedures](index=43&type=section&id=Item%204.%20Controls%20and%20Procedures) The company's CEO and CFO concluded that disclosure controls and procedures were effective as of March 31, 2020 - Management, including the CEO and CFO, concluded that as of March 31, 2020, the company's disclosure controls and procedures were effective[176](index=176&type=chunk) - No material changes to the company's internal control over financial reporting occurred during the first quarter of 2020[177](index=177&type=chunk) [PART II — OTHER INFORMATION](index=43&type=section&id=PART%20II%20%E2%80%94%20OTHER%20INFORMATION) [Legal Proceedings](index=43&type=section&id=Item%201.%20Legal%20Proceedings) No material developments occurred in the company's legal proceedings during the quarter - For details on legal proceedings, the report refers to Note 14; there have been no material developments in legal proceedings during the quarter[179](index=179&type=chunk)[180](index=180&type=chunk) [Risk Factors](index=44&type=section&id=Item%201A.%20Risk%20Factors) Risk factors are updated to include the adverse impacts of the COVID-19 pandemic on demand, operations, and liquidity - The company's financial condition and results are expected to be **adversely impacted by the COVID-19 pandemic**[182](index=182&type=chunk) - Specific pandemic-related risks include lower product demand, business restrictions from government mandates, potential supply chain disruptions, increased costs for safety measures, and heightened liquidity risks[183](index=183&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=45&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company repurchased **$15.0 million** of shares before suspending its **$100 million** repurchase program due to the pandemic - The company announced a **$100 million** share repurchase program on February 24, 2020, and has temporarily suspended it due to the COVID-19 pandemic[184](index=184&type=chunk) Share Repurchases (Q1 2020) | Period | Total Number of Shares Purchased | Average Price Paid per Share | Approximate Dollar Value Remaining Under Program | | :--- | :--- | :--- | :--- | | February 2020 | 91,500 | $16.39 | $98.5M | | March 2020 | 904,609 | $14.92 | $85.0M | | **Total** | **996,109** | **$15.06** | **$85.0M** | [Exhibits](index=46&type=section&id=Item%206.%20Exhibits) Filed exhibits include amended executive compensation plans and required CEO and CFO certifications - Filed exhibits include amended and restated executive compensation and incentive plans, and CEO/CFO certifications[187](index=187&type=chunk)

Revenue and Sales Performance - The Audio segment accounted for 80% of consolidated revenues for fiscal 2019, with the top five customers contributing approximately 49% of Audio's revenues [46]. - Sales of MEMS microphones represented about 57% of consolidated revenues for fiscal 2019, indicating a strong reliance on this product line [47]. - The mobile handset market contributed approximately 27% to consolidated revenues for fiscal 2019, highlighting its significance to overall performance [48]. - The company's consolidated revenues for 2019 were $854.8 million, an increase of 3.5% from $826.9 million in 2018 [243]. - Revenues from discontinued operations were $92.2 million in 2017, with a gross profit of $30.2 million for that year [298]. - Revenues from continuing operations for 2018 were reported at $826.9 million, a 11.1% increase from $744.2 million in 2017 [318]. Financial Results and Earnings - Gross profit for 2019 was $328.0 million, slightly up from $322.6 million in 2018, indicating a stable gross margin [243]. - Operating earnings increased to $81.2 million in 2019, compared to $77.8 million in 2018, reflecting a growth of 4.4% [243]. - Net earnings for 2019 were $49.1 million, down from $67.7 million in 2018, representing a decline of 27.4% [243]. - Earnings per share from continuing operations were $0.55 for 2019, compared to $0.73 in 2018, a decrease of 24.7% [243]. - The total comprehensive earnings for 2019 were $48.1 million, down from $56.7 million in 2018 [245]. - The company recorded total impairment charges of $21.3 million in 2017, with $16.2 million related to intangible assets [320]. Assets and Liabilities - As of December 31, 2019, the balance of goodwill, other intangible assets, and long-lived assets was $1.2 billion, while the total market value of the Company's outstanding shares was $1.9 billion [83]. - Total current assets increased to $388.4 million in 2019 from $365.0 million in 2018, representing a growth of 6.8% [247]. - Total assets rose to $1,654.6 million in 2019, compared to $1,547.9 million in 2018, reflecting an increase of 6.9% [247]. - The company reported a total long-term debt of $156.8 million in 2019, slightly down from $158.1 million in 2018 [247]. - Total liabilities decreased from $34.3 million in 2018 to $29.9 million in 2019, primarily due to a reduction in long-term finance leases from $10.1 million to $6.9 million [333]. Research and Development - Research and development expenses for 2019 were $96.8 million, a decrease from $100.6 million in 2018 [243]. - The company is heavily reliant on technological and product innovations, with intense competition for experienced technical personnel, particularly in China, California, and India [62]. - The Company expects the in-process research and development project to be completed in 2021, after which it will be amortized over its estimated useful life [305]. Risks and Challenges - Global economic conditions, particularly in China, have adversely affected sales, with potential for continued impact from economic slowdowns [55]. - Changes in U.S. trade policy and tariffs could negatively affect the company's operations and financial condition [56]. - The company faces risks from customers potentially developing in-house solutions due to restrictive export laws, which could affect market share [59]. - The company faces reputational harm risks due to associations with customers under U.S. regulatory scrutiny, potentially leading to loss of investors and customers [60]. - The competitive landscape necessitates significant investment in new product development, with no guarantee of sales success [52]. Acquisitions and Investments - The company acquired the ASIC Design Business for a net consideration of $58 million, which included a developed technology intangible asset valued at $33 million [237]. - The Company acquired the MEMS Microphone ASIC Design Business on December 20, 2019, enhancing its product offerings in audio processing [254]. - The Company acquired DITF for $11.1 million, generating revenues of $8.9 million and earnings before income taxes of $0.3 million from the acquisition date through December 31, 2019 [311]. Tax and Financial Regulations - The effective tax rate may fluctuate due to geographic earnings composition and changes in tax regulations, impacting future financial results [67]. - The Company recorded a pre-tax unrealized gain of $0.2 million on cash flow hedges for foreign exchange contracts in 2019, compared to a loss of $(2.5) million in 2018 [353]. Stockholder and Market Information - The Company has experienced substantial stock price volatility, with a range from $22.74 to $12.38 per share during 2019 [93]. - The conversion of outstanding Notes could dilute the ownership interests of existing stockholders and potentially depress the price of common stock [87]. - The Company issued $172.5 million in 3.25% convertible senior notes in May 2016, with interest payable semiannually, and the initial conversion price set at $18.4250 per share [357].

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, 2019. or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE 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 jurisdiction of incorporation ...

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, 2019. 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 jurisdiction of incorporation ...