Knowles(KN) - 2025 Q2 - Quarterly Results

Executive Summary & Outlook Q2 2025 Financial Highlights Knowles Corporation delivered strong Q2 2025 performance, exceeding the high end of guidance for revenue and cash flow from operating activities, with non-GAAP diluted EPS above the midpoint of guidance; the company repurchased $30 million of stock - Q2 2025 revenue and cash flow from operating activities exceeded the high end of guidance, with non-GAAP diluted EPS above the midpoint of guidance[3] - The company repurchased $30 million of stock in Q2[2][3] | Metric (Millions USD) | Q2-25 | Q1-25 | Q2-24 | | :---------------- | :---- | :---- | :---- | | Revenue (Millions USD) | $145.9 | $132.2 | $135.2 | | Gross Profit (Millions USD) | $60.6 | $53.3 | $57.8 | | (as % of Revenue) | 41.5% | 40.3% | 42.8% | | Non-GAAP Gross Profit (Millions USD) | $64.5 | $55.0 | $59.8 | | (as % of Revenue) | 44.2% | 41.6% | 44.2% | | Diluted (Loss) EPS (USD) | $0.09 | $— | $0.05 | | Non-GAAP Diluted EPS (USD) | $0.24 | $0.18 | $0.20 | | Net Cash Provided by Operating Activities (Millions USD) | $36.4 | $1.3 | $24.9 | Management Commentary Knowles' President and CEO, Jeffrey Niew, expressed satisfaction with Q2 performance, noting increased order activity in Precision Devices and consistent performance in MedTech and Specialty Audio, anticipating continued sequential and year-over-year growth - Precision Devices segment experienced continued increases in order activity and backlog, covering a broad range of end markets[4] - MedTech and Specialty Audio businesses performed as expected[4] - Anticipates continued sequential and year-over-year growth for Q3 and the remainder of 2025, driven by strong secular growth trends in MedTech, defense, and industrial markets, and a differentiated product portfolio to fuel revenue growth beyond 2025[4] Q3 2025 Outlook The company provided Q3 2025 financial guidance, projecting revenue between $144 million and $154 million, non-GAAP diluted EPS of $0.29 to $0.33, and cash flow from operating activities of $20 million to $30 million | Metric | GAAP (Millions USD) | Adjustments (Millions USD) | Non-GAAP (Millions USD) | | :----------------------- | :---------------- | :---------------- | :---------------- | | Revenue from Continuing Operations (Millions USD) | $144 to $154 | — | $144 to $154 | | Diluted EPS from Continuing Operations (USD) | $0.18 to $0.22 | $0.11 | $0.29 to $0.33 | | Net Cash Provided by Operating Activities (Millions USD) | $20 to $30 | — | $20 to $30 | - Q3 2025 GAAP results are expected to include approximately $0.06 per share for stock-based compensation, $0.04 per share for intangible asset amortization, and $0.01 per share for production transfer costs, which will be excluded from non-GAAP results[7] Company Information About Knowles Knowles Corporation is a leading manufacturer of specialized electronic components, designing and producing mission-critical products for MedTech, defense, and industrial markets, known for high reliability, custom engineering, and scalable manufacturing - Knowles is a leading manufacturer of specialized electronic components, designing unique mission-critical parts for innovative technologies[11] - The company enables success in the most demanding applications within MedTech, defense, and industrial markets through high reliability, custom engineering, and scalable manufacturing[11] - Key products include high-performance capacitors, RF and microwave filters, advanced MedTech microphones, balanced armature speakers, and miniaturized products[12] - Founded in 1946, headquartered in Itasca, Illinois, with operations in 11 countries[12] Non-GAAP Financial Measures Knowles uses non-GAAP financial measures to supplement GAAP results, assessing core operating performance and enabling consistent comparisons across reporting periods by excluding items like stock-based compensation, intangible asset amortization, and restructuring costs - Non-GAAP results are not in accordance with GAAP and should be considered a supplement to, not a substitute for, GAAP financial statements[8] - Knowles uses non-GAAP measures to evaluate operating performance and financial results, serving as a primary basis for business planning by eliminating items not reflective of core operating performance[8] - Common non-GAAP adjustments include stock-based compensation, certain intangible asset amortization expense, impairment charges, restructuring, production transfer costs, and other expenses management deems outside of core operating results[8] Consolidated Financial Statements Consolidated Statements of Earnings Knowles Corporation's consolidated statements of earnings present the company's financial performance for quarterly and six-month periods, including revenue, gross profit, operating earnings, and net earnings from continuing operations Quarterly Performance In Q2 2025, the company reported revenue of $145.9 million, gross profit of $60.6 million, net earnings from continuing operations of $7.8 million, and diluted EPS of $0.09 | Metric (Millions USD) | Q2-25 | Q1-25 | Q2-24 | | :---------------- | :---- | :---- | :---- | | Revenue (Millions USD) | $145.9 | $132.2 | $135.2 | | Cost of Goods Sold (Millions USD) | $81.7 | $78.4 | $77.1 | | Impairment Charges (Millions USD) | $3.6 | — | — | | Gross Profit (Millions USD) | $60.6 | $53.3 | $57.8 | | Research and Development Expenses (Millions USD) | $10.0 | $9.7 | $9.6 | | Selling and Administrative Expenses (Millions USD) | $35.9 | $37.2 | $35.6 | | Operating Earnings (Millions USD) | $14.7 | $4.0 | $12.7 | | Earnings from Continuing Operations (Millions USD) | $7.8 | $(0.4) | $4.8 | | Net Earnings (Loss) (Millions USD) | $7.8 | $(2.0) | $(259.3) | | Diluted EPS from Continuing Operations (USD) | $0.09 | $— | $0.05 | Six-Month Performance For the six months ended June 30, 2025, the company reported revenue of $278.1 million, gross profit of $113.9 million, net earnings from continuing operations of $7.4 million, and diluted EPS of $0.08 | Metric (Millions USD) | As of June 30, 2025 | As of June 30, 2024 | | :---------------- | :----------------- | :----------------- | | Revenue (Millions USD) | $278.1 | $268.5 | | Cost of Goods Sold (Millions USD) | $160.1 | $156.2 | | Impairment Charges (Millions USD) | $3.6 | — | | Gross Profit (Millions USD) | $113.9 | $111.0 | | Research and Development Expenses (Millions USD) | $19.7 | $19.0 | | Selling and Administrative Expenses (Millions USD) | $73.1 | $72.9 | | Operating Earnings (Millions USD) | $18.7 | $17.7 | | Earnings from Continuing Operations (Millions USD) | $7.4 | $3.8 | | Net Earnings (Loss) (Millions USD) | $5.8 | $(256.8) | | Diluted EPS from Continuing Operations (USD) | $0.08 | $0.04 | Consolidated Balance Sheets As of June 30, 2025, Knowles reported total assets of $1,088.3 million, total liabilities of $342.0 million, and stockholders' equity of $746.1 million, with a decrease in cash and cash equivalents and a slight increase in inventories compared to December 31, 2024 | Metric (Millions USD) | June 30, 2025 | December 31, 2024 | | :---------------- | :------------ | :------------- | | Cash and Cash Equivalents (Millions USD) | $103.2 | $130.1 | | Accounts Receivable, Net (Millions USD) | $101.1 | $105.0 | | Inventories (Millions USD) | $119.7 | $118.0 | | Total Current Assets (Millions USD) | $334.8 | $361.4 | | Property, Plant and Equipment, Net (Millions USD) | $127.2 | $130.1 | | Goodwill (Millions USD) | $270.1 | $269.8 | | Intangible Assets, Net (Millions USD) | $149.3 | $157.4 | | Total Assets (Millions USD) | $1,088.3 | $1,118.2 | | Total Current Liabilities (Millions USD) | $167.2 | $197.6 | | Long-Term Debt (Millions USD) | $119.0 | $134.0 | | Total Liabilities (Millions USD) | $342.0 | $362.2 | | Total Stockholders' Equity (Millions USD) | $746.1 | $756.0 | Consolidated Statements of Cash Flows For the six months ended June 30, 2025, Knowles reported net cash provided by operating activities of $37.7 million, net cash used in investing activities of $8.6 million, and net cash used in financing activities of $56.5 million, resulting in a net decrease in cash and cash equivalents of $26.9 million | Metric (Millions USD) | As of June 30, 2025 | As of June 30, 2024 | | :---------------- | :----------------- | :----------------- | | Net Cash Provided by Operating Activities (Millions USD) | $37.7 | $42.2 | | Net Cash Used in Investing Activities (Millions USD) | $(8.6) | $0.6 | | Net Cash Used in Financing Activities (Millions USD) | $(56.5) | $(46.0) | | Effect of Exchange Rate Changes (Millions USD) | $0.5 | $(0.1) | | Net Decrease (Increase) in Cash and Cash Equivalents (Millions USD) | $(26.9) | $(3.3) | | Cash and Cash Equivalents at End of Period (Millions USD) | $103.2 | $84.0 | - Cash flow from operating activities is primarily influenced by adjustments for net earnings, depreciation and amortization, stock-based compensation, and deferred income taxes[37] - Cash outflow from financing activities primarily due to repayment of revolving credit facility, repurchase of common stock, and tax payments for vested restricted stock and performance share units[37] GAAP to Non-GAAP Reconciliations Income Statement Reconciliations Knowles provides detailed reconciliations of GAAP to non-GAAP income statement items to illustrate core financial performance by excluding specific non-core operating items such as stock-based compensation, intangible asset amortization, impairment charges, and restructuring costs | Metric (Millions USD) | Q2-25 | Q1-25 | Q2-24 | As of June 30, 2025 | As of June 30, 2024 | | :---------------- | :---- | :---- | :---- | :----------------- | :----------------- | | GAAP Gross Profit (Millions USD) | $60.6 | $53.3 | $57.8 | $113.9 | $111.0 | | Stock-Based Compensation Expense (Millions USD) | 0.3 | 0.5 | 0.4 | 0.8 | 0.8 | | Impairment Charges (Millions USD) | 3.6 | — | — | 3.6 | — | | Non-GAAP Gross Profit (Millions USD) | $64.5 | $55.0 | $59.8 | $119.5 | $117.7 | | Non-GAAP Gross Profit as % of Revenue | 44.2% | 41.6% | 44.2% | 43.0% | 43.8% | | GAAP Operating Expenses (Millions USD) | $45.9 | $49.3 | $45.1 | $95.2 | $93.3 | | Stock-Based Compensation Expense (Millions USD) | (6.0) | (9.7) | (5.5) | (15.7) | (10.2) | | Intangible Asset Amortization Expense (Millions USD) | (4.1) | (4.0) | (4.2) | (8.1) | (8.6) | | Non-GAAP Operating Expenses (Millions USD) | $36.2 | $33.1 | $33.9 | $69.3 | $68.6 | | Adjusted EBITDA (Millions USD) | $32.7 | $26.7 | $30.3 | $59.4 | $58.8 | | Adjusted EBITDA as % of Revenue | 22.4% | 20.2% | 22.4% | 21.4% | 21.9% | | GAAP Net Earnings from Continuing Operations (Millions USD) | $7.8 | $(0.4) | $4.8 | $7.4 | $3.8 | | Non-GAAP Diluted EPS (USD) | $0.24 | $0.18 | $0.20 | $0.41 | $0.38 | - Non-GAAP adjustments include stock-based compensation expense, intangible asset amortization expense, impairment charges, restructuring charges, production transfer costs, acquisition-related costs, and transition service credits[32] Cash Flow Reconciliations Knowles provides reconciliations of GAAP cash flow metrics to non-GAAP adjusted free cash flow, better measuring cash generated from continuing operations available for debt repayment, acquisitions, and share repurchases | Metric (Millions USD) | Q2-25 | Q1-25 | Q2-24 | As of June 30, 2025 | As of June 30, 2024 | | :---------------- | :---- | :---- | :---- | :----------------- | :----------------- | | Net Cash Provided by Operating Activities (Millions USD) | $36.4 | $1.3 | $24.9 | $37.7 | $42.2 | | Less: Amounts used in discontinued operations (Millions USD) | 8.3 | 21.0 | 1.3 | 29.3 | 0.2 | | Non-GAAP Net Cash from Continuing Operations (Millions USD) | $44.7 | $22.3 | $26.2 | $67.0 | $42.4 | | Capital Expenditures (Millions USD) | $(5.1) | $(4.0) | $(3.2) | $(9.1) | $(6.6) | | Less: Capital expenditures from discontinued operations (Millions USD) | — | — | 0.2 | — | 0.7 | | Non-GAAP Capital Expenditures from Continuing Operations (Millions USD) | $(5.1) | $(4.0) | $(3.0) | $(9.1) | $(5.9) | | Adjusted Free Cash Flow (Millions USD) | $39.6 | $18.3 | $23.2 | $57.9 | $36.5 | | Adjusted Free Cash Flow as % of Revenue | 27.1% | 13.8% | 17.2% | 20.8% | 13.6% | - Adjusted free cash flow is defined as non-GAAP net cash from continuing operations less non-GAAP capital expenditures from continuing operations[39] Additional Information Webcast and Conference Call Information Knowles provides details for investors to access the company's quarterly financial conference call webcast and replay, including timing, access links, and conference ID - Investors can listen to the company's quarterly financial conference call live or via replay at **http://investor.knowles.com**[9](index=9&type=chunk) - The live webcast begins at 3:30 p.m. Central Time, with a replay available after 7:00 p.m. Central Time[9] - Conference call replay is available by dialing (800) 770-2030 or (609) 800-9909, conference ID 8193117, valid until July 31[10] Forward-Looking Statements This press release contains forward-looking statements, as defined by the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, based on current information and management's expectations, forecasts, and assumptions, involving risks and uncertainties that could cause actual results to differ materially from expectations - Forward-looking statements are based on currently available information and management's expectations, forecasts, and assumptions, involving risks and uncertainties that could cause actual results to differ materially from expectations[15] - Risks and uncertainties include, but are not limited to: failure to realize strategic and financial benefits from the CMM divestiture, stock price volatility, fluctuations in operating results and cash flows, product quality issues, inventory risks, global economic instability (inflation, rising interest rates, geopolitical uncertainties), changes in laws and regulations, ability to reduce operating expenses, customer qualifications, intellectual property, cybersecurity incidents, raw material costs and availability, new product introductions, reliance on a few large customers, increased competition, trade tensions, financial risks (currency fluctuations, credit risk, commodity price fluctuations), and changes in tax laws[15] - Knowles assumes no intention or obligation to update or revise any forward-looking statements, unless required by law[15]