Knowles(KN) - 2025 Q2 - Quarterly Report

PART I — FINANCIAL INFORMATION This section encompasses the company's unaudited consolidated financial statements, management's discussion and analysis, market risk disclosures, and controls and procedures Item 1. Financial Statements This section presents the unaudited consolidated financial statements of Knowles Corporation, including statements of earnings, comprehensive earnings, balance sheets, stockholders' equity, and cash flows, along with detailed notes explaining the basis of presentation, recent accounting standards, discontinued operations, and other financial details Consolidated Statements of Earnings (unaudited) This statement presents the company's revenues, gross profit, operating earnings, and net earnings for the specified periods | Metric | Three Months Ended June 30, 2025 (in millions) | Three Months Ended June 30, 2024 (in millions) | Six Months Ended June 30, 2025 (in millions) | Six Months Ended June 30, 2024 (in millions) | | :----------------------------------- | :--------------------------------------------- | :--------------------------------------------- | :-------------------------------------------- | :-------------------------------------------- | | Revenues | $ 145.9 | $ 135.2 | $ 278.1 | $ 268.5 | | Gross profit | $ 60.6 | $ 57.8 | $ 113.9 | $ 111.0 | | Operating earnings | $ 14.7 | $ 12.7 | $ 18.7 | $ 17.7 | | Earnings from continuing operations | $ 7.8 | $ 4.8 | $ 7.4 | $ 3.8 | | Net earnings (loss) | $ 7.8 | $ (259.3) | $ 5.8 | $ (256.8) | | Diluted EPS from continuing operations | $ 0.09 | $ 0.05 | $ 0.08 | $ 0.04 | | Diluted Net EPS (loss) | $ 0.09 | $ (2.88) | $ 0.07 | $ (2.84) | Consolidated Statements of Comprehensive Earnings (unaudited) This statement details net earnings and other comprehensive earnings, leading to total comprehensive earnings for the periods | Metric | Three Months Ended June 30, 2025 (in millions) | Three Months Ended June 30, 2024 (in millions) | Six Months Ended June 30, 2025 (in millions) | Six Months Ended June 30, 2024 (in millions) | | :-------------------------------- | :--------------------------------------------- | :--------------------------------------------- | :-------------------------------------------- | :-------------------------------------------- | | Net earnings (loss) | $ 7.8 | $ (259.3) | $ 5.8 | $ (256.8) | | Other comprehensive earnings (loss), net of tax | $ 6.6 | $ (4.0) | $ 9.3 | $ (7.6) | | Comprehensive earnings (loss) | $ 14.4 | $ (263.3) | $ 15.1 | $ (264.4) | Consolidated Balance Sheets (unaudited) This statement provides a snapshot of the company's assets, liabilities, and stockholders' equity at specific dates | Metric | June 30, 2025 (in millions) | December 31, 2024 (in millions) | | :-------------------------------- | :---------------------------- | :------------------------------ | | Total current assets | $ 334.8 | $ 361.4 | | Total assets | $ 1,088.3 | $ 1,118.2 | | Total current liabilities | $ 167.2 | $ 197.6 | | Total liabilities and stockholders' equity | $ 1,088.3 | $ 1,118.2 | | Total stockholders' equity | $ 746.1 | $ 756.0 | Consolidated Statements of Stockholders' Equity (unaudited) This statement tracks changes in total stockholders' equity, including net earnings, stock repurchases, and stock-based compensation | Metric | Balance at March 31, 2025 (in millions) | Balance at June 30, 2025 (in millions) | | :-------------------------------- | :-------------------------------------- | :------------------------------------- | | Total Stockholders' Equity | $ 755.8 | $ 746.1 | | Net earnings | $ 7.8 | $ 7.8 | | Repurchase of common stock | $ (30.0) | $ (30.0) | | Stock-based compensation expense | $ 6.3 | $ 6.3 | | Metric | Balance at December 31, 2024 (in millions) | Balance at June 30, 2025 (in millions) | | :-------------------------------- | :--------------------------------------- | :------------------------------------- | | Total Stockholders' Equity | $ 756.0 | $ 746.1 | | Net earnings | $ 5.8 | $ 5.8 | | Repurchase of common stock | $ (35.0) | $ (35.0) | | Stock-based compensation expense | $ 16.5 | $ 16.5 | Consolidated Statements of Cash Flows (unaudited) This statement summarizes cash flows from operating, investing, and financing activities for the specified periods | Activity | Six Months Ended June 30, 2025 (in millions) | Six Months Ended June 30, 2024 (in millions) | | :------------------------------------------ | :--------------------------------------------- | :--------------------------------------------- | | Net cash provided by operating activities | $ 37.7 | $ 42.2 | | Net cash (used in) provided by investing activities | $ (8.6) | $ 0.6 | | Net cash used in financing activities | $ (56.5) | $ (46.0) | | Net decrease in cash and cash equivalents | $ (26.9) | $ (3.3) | | Cash and cash equivalents at end of period | $ 103.2 | $ 84.0 | Notes to Consolidated Financial Statements (unaudited) This section provides detailed explanations and disclosures supporting the consolidated financial statements 1. Basis of Presentation This note outlines the company's business focus, recent divestitures, and accounting adjustments - Knowles Corporation is a leading manufacturer of specialty electronic components, focusing on medtech, defense, and industrial markets after divesting its Consumer MEMS Microphones (CMM) segment[22][100] - The company completed the sale of its CMM segment to Syntiant Corp. on December 27, 2024, reclassifying CMM's results as discontinued operations[25][99] - The company identified and corrected errors related to stock-based compensation expense and the gain on disposal of the CMM business, which were deemed immaterial[26][27][28] - The Board of Directors authorized an increase of up to $150.0 million in additional aggregate value for the share repurchase program on February 13, 2025, with $159.0 million remaining at June 30, 2025[35][36][170] 2. Recent Accounting Standards This note discusses the adoption and evaluation of new accounting standards and their expected impact - The company retroactively adopted ASU 2023-07 (segment disclosure) for annual reporting in 2024 and interim reporting in Q1 2025[39] - ASU 2023-09 (income tax disclosures) is effective for the company's annual reporting for the year ended December 31, 2025, with no significant expected impact[40] - ASU 2024-03 (expense categories) is effective for annual reporting in 2027 and interim reporting in Q1 2028, and the company is currently evaluating its impact[41] 3. Discontinued Operations This note details the sale of the CMM segment, related financial adjustments, and impairment charges - The CMM segment was sold to Syntiant for approximately $141.9 million, comprising $63.6 million cash, $77.2 million in Syntiant Series D-2 preferred stock, and $1.1 million for purchase price adjustments[42] - Post-transaction adjustments resulted in net adjustments of $1.6 million to the loss on disposal of the CMM business during the six months ended June 30, 2025[43] - The company recorded goodwill impairment charges of $249.4 million for CMM during the three and six months ended June 30, 2024[46] | Metric | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :---------------------------------- | :----------------------------- | :----------------------------- | :----------------------------- | :----------------------------- | | Revenues | $ — | $ 71.1 | $ — | $ 136.1 | | Loss from discontinued operations, net | $ — | $ (264.1) | $ (1.6) | $ (260.6) | 4. Inventories This note provides a breakdown of inventory components and associated reserves | Component | June 30, 2025 (in millions) | December 31, 2024 (in millions) | | :---------------- | :---------------------------- | :------------------------------ | | Raw materials | $ 99.4 | $ 94.2 | | Work in progress | $ 28.3 | $ 26.1 | | Finished goods | $ 38.9 | $ 35.5 | | Subtotal | $ 166.6 | $ 155.8 | | Less reserves | $ (46.9) | $ (37.8) | | Total | $ 119.7 | $ 118.0 | 5. Property, Plant, and Equipment, net This note details the composition of property, plant, and equipment, including depreciation and impairment charges | Component | June 30, 2025 (in millions) | December 31, 2024 (in millions) | | :-------------------------- | :---------------------------- | :------------------------------ | | Land | $ 14.3 | $ 14.1 | | Buildings and improvements | $ 99.2 | $ 117.2 | | Machinery, equipment, and other | $ 276.3 | $ 276.7 | | Subtotal | $ 389.8 | $ 408.0 | | Less accumulated depreciation | $ (262.6) | $ (277.9) | | Total | $ 127.2 | $ 130.1 | - The company recorded an impairment charge of $3.6 million for certain machinery and equipment during the three and six months ended June 30, 2025[52] 6. Goodwill and Other Intangible Assets This note presents the balances and amortization of goodwill and other intangible assets by segment and component | Segment | Balance at December 31, 2024 (in millions) | Foreign currency translation (in millions) | Balance at June 30, 2025 (in millions) | | :------------------------ | :--------------------------------------- | :----------------------------------------- | :------------------------------------- | | Precision Devices | $ 132.1 | $ 0.3 | $ 132.4 | | MedTech & Specialty Audio | $ 137.7 | $ — | $ 137.7 | | Total | $ 269.8 | $ 0.3 | $ 270.1 | | Component | June 30, 2025 Gross Carrying Amount (in millions) | June 30, 2025 Accumulated Amortization (in millions) | December 31, 2024 Gross Carrying Amount (in millions) | December 31, 2024 Accumulated Amortization (in millions) | | :---------------------- | :------------------------------------------------ | :--------------------------------------------------- | :---------------------------------------------------- | :---------------------------------------------------- | | Amortized intangible assets: | | | | | | Trademarks | $ 15.2 | $ 2.3 | $ 15.2 | $ 1.7 | | Customer relationships | $ 118.5 | $ 33.4 | $ 118.5 | $ 27.3 | | Developed technology | $ 26.3 | $ 7.4 | $ 26.3 | $ 6.0 | | Other | $ 0.8 | $ 0.4 | $ 0.8 | $ 0.4 | | Total | $ 160.8 | $ 43.5 | $ 160.8 | $ 35.4 | | Unamortized intangible assets: | | | | | | Trademarks | $ 32.0 | | $ 32.0 | | | Total intangible assets, net | $ 149.3 | | $ 157.4 | | - Amortization expense for the three months ended June 30, 2025, was $4.1 million (vs. $4.2 million in 2024), and for the six months, it was $8.1 million (vs. $8.6 million in 2024)[55] 7. Restructuring and Related Activities This note outlines restructuring charges incurred, primarily due to headcount reductions - The company recorded $2.9 million in restructuring charges during the six months ended June 30, 2025, primarily for headcount reductions post-CMM business sale[57] - No restructuring charges were recorded for the three months ended June 30, 2025[57] | Segment | 3 Months Ended June 30, 2025 (in millions) | 3 Months Ended June 30, 2024 (in millions) | 6 Months Ended June 30, 2025 (in millions) | 6 Months Ended June 30, 2024 (in millions) | | :------------------------ | :--------------------------------------------- | :--------------------------------------------- | :-------------------------------------------- | :-------------------------------------------- | | Precision Devices | $ — | $ 0.2 | $ 1.4 | $ 2.7 | | MedTech & Specialty Audio | $ — | $ — | $ 0.3 | $ — | | Corporate | $ — | $ — | $ 1.2 | $ — | | Total | $ — | $ 0.2 | $ 2.9 | $ 2.7 | 8. Borrowings This note details the company's revolving credit facility and seller note, along with compliance with debt covenants | Type | June 30, 2025 (in millions) | December 31, 2024 (in millions) | | :-------------------------- | :---------------------------- | :------------------------------ | | $400.0 million Revolving Credit Facility | $ 119.0 | $ 134.0 | | Seller Note | $ 71.0 | $ 68.5 | | Total | $ 190.0 | $ 202.5 | | Less current maturities of Seller Note | $ 71.0 | $ 68.5 | | Total long-term debt | $ 119.0 | $ 134.0 | - The company was in compliance with all debt covenants (Interest Coverage Ratio, Total Net Leverage Ratio, Senior Secured Net Leverage Ratio) as of June 30, 2025[65] - The weighted-average interest rate on the Credit Facility decreased to 6.18% for the six months ended June 30, 2025, from 7.22% in the prior year[67] - The remaining $72.7 million balance of the Seller Note is due on November 1, 2025[68] 9. Other Comprehensive Earnings This note presents the components of other comprehensive earnings and changes in accumulated other comprehensive loss | Period | 2025 (in millions) | 2024 (in millions) | | :----------------------------- | :----------------- | :----------------- | | Three Months Ended June 30, | $ 6.6 | $ (4.0) | | Six Months Ended June 30, | $ 9.3 | $ (7.6) | - Accumulated other comprehensive loss improved from $(138.1) million at December 31, 2024, to $(128.8) million at June 30, 2025[71] 10. Income Taxes This note provides effective tax rates and explains the primary drivers of changes in income tax provision | Period | 2025 ETR | 2024 ETR | | :----------------------------- | :------- | :------- | | Three Months Ended June 30, | 31.0% | 38.5% | | Six Months Ended June 30, | 38.8% | 56.8% | - The change in ETR was primarily due to the mix of earnings and losses by taxing jurisdictions and net discrete items, mainly attributable to stock-based compensation[73] 11. Equity Incentive Program This note details stock-based compensation expense and unrecognized compensation expense for equity awards | Period | 2025 (in millions) | 2024 (in millions) | | :----------------------------- | :----------------- | :----------------- | | Three Months Ended June 30, | $ 6.3 | $ 5.9 | | Six Months Ended June 30, | $ 16.5 | $ 11.0 | - At June 30, 2025, $23.9 million of unrecognized compensation expense related to RSUs is expected to be recognized over 1.9 years[78] - At June 30, 2025, $12.7 million of unrecognized compensation expense related to PSUs is expected to be recognized over 1.7 years[81] 12. Earnings per Share This note presents basic and diluted earnings per share from continuing and discontinued operations | Metric | 3 Months Ended June 30, 2025 (in millions, except per share amounts) | 3 Months Ended June 30, 2024 (in millions, except per share amounts) | 6 Months Ended June 30, 2025 (in millions, except per share amounts) | 6 Months Ended June 30, 2024 (in millions, except per share amounts) | | :---------------------------------- | :------------------------------------------------------------------- | :------------------------------------------------------------------- | :------------------------------------------------------------------ | :------------------------------------------------------------------ | | Earnings from continuing operations | $ 7.8 | $ 4.8 | $ 7.4 | $ 3.8 | | Loss from discontinued operations, net | $ — | $ (264.1) | $ (1.6) | $ (260.6) | | Net earnings (loss) | $ 7.8 | $ (259.3) | $ 5.8 | $ (256.8) | | Basic EPS from continuing operations | $ 0.09 | $ 0.05 | $ 0.08 | $ 0.04 | | Diluted EPS from continuing operations | $ 0.09 | $ 0.05 | $ 0.08 | $ 0.04 | | Basic weighted-average shares outstanding | 86.9 | 89.4 | 87.3 | 89.5 | | Diluted weighted-average shares outstanding | 87.6 | 89.9 | 88.3 | 90.4 | 13. Commitments and Contingent Liabilities This note discusses the company's involvement in legal proceedings and contractual indemnities - The company is involved in various legal proceedings and claims, primarily related to commercial, warranty, employment, and intellectual property matters[83] - Management believes the disposition of these legal proceedings will not have a material adverse effect on cash flow, results of operations, or financial condition[83] - The company provides contractual indemnities for intellectual property infringement claims, but historically has not made significant payments under such arrangements[85] 14. Segment Information This note provides financial information for the Precision Devices and MedTech & Specialty Audio segments, including revenues and adjusted EBIT - The company's two reportable segments are Precision Devices (PD) and MedTech & Specialty Audio (MSA)[86] | Segment | 3 Months Ended June 30, 2025 (in millions) | 3 Months Ended June 30, 2024 (in millions) | 6 Months Ended June 30, 2025 (in millions) | 6 Months Ended June 30, 2024 (in millions) | | :------------------------ | :--------------------------------------------- | :--------------------------------------------- | :-------------------------------------------- | :-------------------------------------------- | | Precision Devices | $ 78.5 | $ 74.1 | $ 151.0 | $ 148.4 | | MedTech & Specialty Audio | $ 67.4 | $ 61.1 | $ 127.1 | $ 120.1 | | Total | $ 145.9 | $ 135.2 | $ 278.1 | $ 268.5 | | Segment | 3 Months Ended June 30, 2025 (in millions) | 3 Months Ended June 30, 2024 (in millions) | 6 Months Ended June 30, 2025 (in millions) | 6 Months Ended June 30, 2024 (in millions) | | :------------------------ | :--------------------------------------------- | :--------------------------------------------- | :-------------------------------------------- | :-------------------------------------------- | | Precision Devices | $ 13.9 | $ 11.8 | $ 24.6 | $ 21.6 | | MedTech & Specialty Audio | $ 26.1 | $ 25.1 | $ 47.4 | $ 48.9 | | Total | $ 40.0 | $ 36.9 | $ 72.0 | $ 70.5 | | Region | 3 Months Ended June 30, 2025 (in millions) | 3 Months Ended June 30, 2024 (in millions) | 6 Months Ended June 30, 2025 (in millions) | 6 Months Ended June 30, 2024 (in millions) | | :-------------- | :--------------------------------------------- | :--------------------------------------------- | :-------------------------------------------- | :-------------------------------------------- | | United States | $ 58.7 | $ 57.9 | $ 114.0 | $ 116.3 | | Asia | $ 58.5 | $ 43.3 | $ 106.5 | $ 85.8 | | Europe | $ 24.0 | $ 26.9 | $ 48.2 | $ 53.1 | | Other Americas | $ 2.5 | $ 2.5 | $ 4.9 | $ 5.1 | | Other | $ 2.2 | $ 4.6 | $ 4.5 | $ 8.2 | | Total | $ 145.9 | $ 135.2 | $ 278.1 | $ 268.5 | Forward-Looking Statements This section highlights that the report contains forward-looking statements based on current expectations and estimates, which are subject to risks and uncertainties that could cause actual results to differ materially - The report contains forward-looking statements subject to risks and uncertainties that could cause actual outcomes to differ materially from projections[92] - Key risks include the ability to achieve strategic benefits from the CMM divestiture, fluctuations in stock price and operating results, global economic instability, and increasing competition[94] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on the company's financial condition and results of operations, including an overview of the business, recent developments, a detailed analysis of financial performance for the three and six months ended June 30, 2025 and 2024, and discussions on liquidity, capital resources, and accounting estimates Overview This section provides a general description of Knowles' business and market focus - Knowles is a leading manufacturer of specialty electronic components for medtech, defense, and industrial markets[96] - The company sells products directly to OEMs, contract manufacturers, suppliers, and distributors globally[97] Recent Developments This section highlights recent events such as new tariffs, the CMM business divestiture, and increased bookings in Precision Devices - New U.S. tariffs of 10% plus country-specific tariffs were announced on April 2, 2025, but are not anticipated to have a material impact on operations[98] - The sale of the CMM business to Syntiant Corp. for approximately $150.0 million in total consideration was completed on December 27, 2024, supporting Knowles' transformation into an industrial technology company[99][100] - The Precision Devices segment has experienced increased bookings and backlog for capacitor products for the past three quarters due to normalizing inventory levels in industrial markets[101] Non-GAAP Financial Measures This section explains the purpose and utility of non-GAAP financial measures in supplementing GAAP results - Non-GAAP measures are used to supplement GAAP results, evaluate business aspects, and compare performance consistently by removing items not reflecting core operating performance[102][103] Results of Operations for the Three Months Ended June 30, 2025 compared with the Three Months Ended June 30, 2024 This section analyzes the company's financial performance for the three-month period, comparing current and prior year results Revenues This section details the revenue performance for the period, highlighting segment-specific drivers | Period | 2025 (in millions) | 2024 (in millions) | Change (in millions) | % Change | | :----------------------------- | :----------------- | :----------------- | :------------------- | :------- | | Three Months Ended June 30, | $ 145.9 | $ 135.2 | $ 10.7 | 7.9% | - MSA revenues increased by $6.3 million due to higher shipping volumes of metal cans to Syntiant and increased demand in specialty audio and hearing health markets[106] - PD revenues increased by $4.4 million due to higher demand in electrification and defense markets and higher average pricing[106] Cost of Goods Sold This section analyzes the changes in cost of goods sold and their contributing factors for the period | Period | 2025 (in millions) | 2024 (in millions) | Change (in millions) | % Change | | :----------------------------- | :----------------- | :----------------- | :------------------- | :------- | | Three Months Ended June 30, | $ 81.7 | $ 77.1 | $ 4.6 | 6.0% | - Increase driven by higher shipping volumes, unfavorable product mix, production inefficiencies in the CD business, and unfavorable inventory reserve adjustments[107] Impairment Charges This section reports impairment charges recorded during the period - An impairment charge of $3.6 million was recorded in Q2 2025 for certain machinery and equipment[108] Restructuring Charges This section outlines restructuring charges incurred or not incurred during the period - No restructuring charges were recorded in Q2 2025[109] - In Q2 2024, $0.3 million in restructuring charges (Gross profit) and a $0.1 million credit (Operating expenses) were recorded in the PD segment[109] Gross Profit and Non-GAAP Gross Profit This section presents gross profit and non-GAAP gross profit, along with margin analysis for the period | Metric | 2025 (in millions) | 2024 (in millions) | Change (in millions) | % Change | | :---------------- | :----------------- | :----------------- | :------------------- | :------- | | Gross Profit | $ 60.6 | $ 57.8 | $ 2.8 | 4.8% | | Gross Profit Margin | 41.5% | 42.8% | -1.3% | | | Non-GAAP Gross Profit | $ 64.5 | $ 59.8 | $ 4.7 | 7.9% | | Non-GAAP Gross Profit Margin | 44.2% | 44.2% | 0.0% | | - Gross profit margin decreased due to impairment charges, unfavorable product mix, inventory reserve adjustments, and CD business production inefficiencies[110] Research and Development Expenses This section details research and development expenses and their percentage of revenues for the period | Period | 2025 (in millions) | 2024 (in millions) | Change (in millions) | % Change | | :----------------------------- | :----------------- | :----------------- | :------------------- | :------- | | Three Months Ended June 30, | $ 10.0 | $ 9.6 | $ 0.4 | 4.2% | | As % of Revenues | 6.9% | 7.1% | -0.2% | | Selling and Administrative Expenses This section presents selling and administrative expenses and their percentage of revenues for the period | Period | 2025 (in millions) | 2024 (in millions) | Change (in millions) | % Change | | :----------------------------- | :----------------- | :----------------- | :------------------- | :------- | | Three Months Ended June 30, | $ 35.9 | $ 35.6 | $ 0.3 | 0.8% | | As % of Revenues | 24.6% | 26.3% | -1.7% | | Interest Expense, net This section reports net interest expense for the period | Period | 2025 (in millions) | 2024 (in millions) | Change (in millions) | | :----------------------------- | :----------------- | :----------------- | :------------------- | | Three Months Ended June 30, | $ 2.5 | $ 4.6 | $ (2.1) | Other Expense, net This section details other net expenses for the period | Period | 2025 (in millions) | 2024 (in millions) | Change (in millions) | | :----------------------------- | :----------------- | :----------------- | :------------------- | | Three Months Ended June 30, | $ 0.9 | $ 0.3 | $ 0.6 | Provision for Income Taxes and Non-GAAP Provision for Income Taxes This section provides GAAP and non-GAAP effective tax rates for the period | Period | 2025 ETR | 2024 ETR | | :----------------------------- | :------- | :------- | | Three Months Ended June 30, | 31.0% | 38.5% | | Non-GAAP ETR | 15.9% | 10.7% | Earnings from Continuing Operations This section presents earnings from continuing operations for the period | Period | 2025 (in millions) | 2024 (in millions) | Change (in millions) | | :----------------------------- | :----------------- | :----------------- | :------------------- | | Three Months Ended June 30, | $ 7.8 | $ 4.8 | $ 3.0 | Earnings and Adjusted Earnings from Continuing Operations Before Interest and Income Taxes This section details GAAP and adjusted EBIT and their margins for the period | Metric | 2025 (in millions) | 2024 (in millions) | Change (in millions) | | :---------------- | :----------------- | :----------------- | :------------------- | | EBIT | $ 13.8 | $ 12.4 | $ 1.4 | | EBIT Margin | 9.5% | 9.2% | 0.3% | | Adjusted EBIT | $ 27.7 | $ 25.2 | $ 2.5 | | Adjusted EBIT Margin | 19.0% | 18.6% | 0.4% | Loss from Discontinued Operations, net This section reports the loss from discontinued operations for the period, including primary drivers - No activity for Q2 2025[122] - Q2 2024 loss of $264.1 million was primarily due to goodwill impairment and CMM business sale expenses[122] Diluted Earnings per Share from Continuing Operations and Non-GAAP Diluted Earnings per Share from Continuing Operations This section presents GAAP and non-GAAP diluted EPS from continuing operations for the period | Metric | 2025 | 2024 | Change | | :----------------------------- | :----- | :----- | :----- | | Diluted EPS (GAAP) | $ 0.09 | $ 0.05 | $ 0.04 | | Diluted EPS (Non-GAAP) | $ 0.24 | $ 0.20 | $ 0.04 | Results of Operations for the Six Months Ended June 30, 2025 compared with the Six Months Ended June 30, 2024 This section analyzes the company's financial performance for the six-month period, comparing current and prior year results Revenues This section details the revenue performance for the period, highlighting segment-specific drivers | Period | 2025 (in millions) | 2024 (in millions) | Change (in millions) | % Change | | :----------------------------- | :----------------- | :----------------- | :------------------- | :------- | | Six Months Ended June 30, | $ 278.1 | $ 268.5 | $ 9.6 | 3.6% | - MSA revenues increased by $7.0 million due to higher shipping volumes of metal cans to Syntiant and increased demand in specialty audio and hearing health markets[127] - PD revenues increased by $2.6 million due to higher demand from medtech and electrification markets and higher average pricing, partially offset by lower demand from industrial and defense markets[127] Cost of Goods Sold This section analyzes the changes in cost of goods sold and their contributing factors for the period | Period | 2025 (in millions) | 2024 (in millions) | Change (in millions) | % Change | | :----------------------------- | :----------------- | :----------------- | :------------------- | :------- | | Six Months Ended June 30, | $ 160.1 | $ 156.2 | $ 3.9 | 2.5% | - Increase driven by higher shipping volumes, unfavorable product mix, production inefficiencies in the CD business, and unfavorable inventory reserve adjustments[128] Impairment Charges This section reports impairment charges recorded during the period - An impairment charge of $3.6 million was recorded in the six months ended June 30, 2025, for certain machinery and equipment[129] Restructuring Charges This section outlines restructuring charges incurred during the period for headcount reductions - Restructuring charges of $2.9 million were recorded in the six months ended June 30, 2025, for headcount reductions[130] - In the six months ended June 30, 2024, $2.7 million in restructuring charges were recorded for facility transfers and headcount reductions in the PD segment[131] Gross Profit and Non-GAAP Gross Profit This section presents gross profit and non-GAAP gross profit, along with margin analysis for the period | Metric | 2025 (in millions) | 2024 (in millions) | Change (in millions) | % Change | | :---------------- | :----------------- | :----------------- | :------------------- | :------- | | Gross Profit | $ 113.9 | $ 111.0 | $ 2.9 | 2.6% | | Gross Profit Margin | 41.0% | 41.3% | -0.3% | | | Non-GAAP Gross Profit | $ 119.5 | $ 117.7 | $ 1.8 | 1.5% | | Non-GAAP Gross Profit Margin | 43.0% | 43.8% | -0.8% | | - Gross profit margin decreased due to impairment charges, unfavorable product mix, inventory reserve adjustments, and CD business production inefficiencies[132] Research and Development Expenses This section details research and development expenses and their percentage of revenues for the period | Period | 2025 (in millions) | 2024 (in millions) | Change (in millions) | % Change | | :----------------------------- | :----------------- | :----------------- | :------------------- | :------- | | Six Months Ended June 30, | $ 19.7 | $ 19.0 | $ 0.7 | 3.7% | | As % of Revenues | 7.1% | 7.1% | 0.0% | | Selling and Administrative Expenses This section presents selling and administrative expenses and their percentage of revenues for the period | Period | 2025 (in millions) | 2024 (in millions) | Change (in millions) | % Change | | :----------------------------- | :----------------- | :----------------- | :------------------- | :------- | | Six Months Ended June 30, | $ 73.1 | $ 72.9 | $ 0.2 | 0.3% | | As % of Revenues | 26.3% | 27.2% | -0.9% | | Interest Expense, net This section reports net interest expense for the period | Period | 2025 (in millions) | 2024 (in millions) | Change (in millions) | | :----------------------------- | :----------------- | :----------------- | :------------------- | | Six Months Ended June 30, | $ 5.2 | $ 9.0 | $ (3.8) | Other Expense (Income), net This section details other net expenses or income for the period | Period | 2025 (in millions) | 2024 (in millions) | Change (in millions) | | :----------------------------- | :----------------- | :----------------- | :------------------- | | Six Months Ended June 30, | $ 1.4 | $ (0.1) | $ 1.5 | Provision for Income Taxes and Non-GAAP Provision for Income Taxes This section provides GAAP and non-GAAP effective tax rates for the period | Period | 2025 ETR | 2024 ETR | | :----------------------------- | :------- | :------- | | Six Months Ended June 30, | 38.8% | 56.8% | | Non-GAAP ETR | 15.4% | 10.4% | Earnings from Continuing Operations This section presents earnings from continuing operations for the period | Period | 2025 (in millions) | 2024 (in millions) | Change (in millions) | | :----------------------------- | :----------------- | :----------------- | :------------------- | | Six Months Ended June 30, | $ 7.4 | $ 3.8 | $ 3.6 | Earnings and Adjusted Earnings from Continuing Operations Before Interest and Income Taxes This section details GAAP and adjusted EBIT and their margins for the period | Metric | 2025 (in millions) | 2024 (in millions) | Change (in millions) | | :---------------- | :----------------- | :----------------- | :------------------- | | EBIT | $ 17.3 | $ 17.8 | $ (0.5) | | EBIT Margin | 6.2% | 6.6% | -0.4% | | Adjusted EBIT | $ 49.4 | $ 48.5 | $ 0.9 | | Adjusted EBIT Margin | 17.8% | 18.1% | -0.3% | Loss from Discontinued Operations, net This section reports the loss from discontinued operations for the period, including primary drivers | Period | 2025 (in millions) | 2024 (in millions) | Change (in millions) | | :----------------------------- | :----------------- | :----------------- | :------------------- | | Six Months Ended June 30, | $ 1.6 | $ 260.6 | $ (259.0) | - The 2025 loss was primarily due to unfavorable working capital adjustments, while the 2024 loss was driven by goodwill impairment and CMM business sale expenses[143] Diluted Earnings per Share from Continuing Operations and Non-GAAP Diluted Earnings per Share from Continuing Operations This section presents GAAP and non-GAAP diluted EPS from continuing operations for the period | Metric | 2025 | 2024 | Change | | :----------------------------- | :----- | :----- | :----- | | Diluted EPS (GAAP) | $ 0.08 | $ 0.04 | $ 0.04 | | Diluted EPS (Non-GAAP) | $ 0.41 | $ 0.38 | $ 0.03 | Reconciliation of GAAP Financial Measures to Non-GAAP Financial Measures This section provides detailed reconciliations between GAAP and non-GAAP financial measures | Adjustment | 3 Months Ended June 30, 2025 (in millions) | 3 Months Ended June 30, 2024 (in millions) | 6 Months Ended June 30, 2025 (in millions) | 6 Months Ended June 30, 2024 (in millions) | | :---------------------------------- | :--------------------------------------------- | :--------------------------------------------- | :-------------------------------------------- | :-------------------------------------------- | | Gross profit (GAAP) | $ 60.6 | $ 57.8 | $ 113.9 | $ 111.0 | | Stock-based compensation expense | $ 0.3 | $ 0.4 | $ 0.8 | $ 0.8 | | Impairment charges | $ 3.6 | $ — | $ 3.6 | $ — | | Restructuring charges | $ — | $ 0.3 | $ 0.5 | $ 1.3 | | Production transfer costs | $ 0.2 | $ 0.7 | $ 0.3 | $ 1.5 | | Acquisition-related costs | $ — | $ 0.6 | $ — | $ 2.0 | | Transition services credit | $ (0.2) | $ — | $ (0.4) | $ — | | Other | $ — | $ — | $ 0.8 | $ 1.1 | | Non-GAAP gross profit | $ 64.5 | $ 59.8 | $ 119.5 | $ 117.7 | | Adjustment | 3 Months Ended June 30, 2025 (in millions) | 3 Months Ended June 30, 2024 (in millions) | 6 Months Ended June 30, 2025 (in millions) | 6 Months Ended June 30, 2024 (in millions) | | :---------------------------------------------------------------- | :--------------------------------------------- | :--------------------------------------------- | :-------------------------------------------- | :-------------------------------------------- | | Earnings from continuing operations before interest and income taxes (GAAP) | $ 13.8 | $ 12.4 | $ 17.3 | $ 17.8 | | Stock-based compensation expense | $ 6.3 | $ 5.9 | $ 16.5 | $ 11.0 | | Intangibles amortization expense | $ 4.1 | $ 4.2 | $ 8.1 | $ 8.6 | | Impairment charges | $ 3.6 | $ — | $ 3.6 | $ — | | Restructuring charges | $ — | $ 0.2 | $ 2.9 | $ 2.7 | | Production transfer costs | $ 0.2 | $ 0.8 | $ 0.4 | $ 1.6 | | Acquisition-related costs | $ 0.2 | $ 2.0 | $ 0.7 | $ 6.2 | | Transition services credit | $ (0.5) | $ — | $ (1.2) | $ — | | Other | $ — | $ (0.3) | $ 1.1 | $ 0.6 | | Adjusted earnings from continuing operations before interest and income taxes | $ 27.7 | $ 25.2 | $ 49.4 | $ 48.5 | Segment Results of Operations for the Three Months Ended June 30, 2025 compared with the Three Months Ended June 30, 2024 This section analyzes the financial performance of the Precision Devices and MedTech & Specialty Audio segments for the three-month period Precision Devices This section details the revenue and adjusted EBIT performance of the Precision Devices segment for the period | Metric | 2025 (in millions) | 2024 (in millions) | Change (in millions) | % Change | | :---------------- | :----------------- | :----------------- | :------------------- | :------- | | Revenues | $ 78.5 | $ 74.1 | $ 4.4 | 5.9% | | Adjusted EBIT | $ 13.9 | $ 11.8 | $ 2.1 | 17.8% | | Adjusted EBIT Margin | 17.7% | 15.9% | 1.8% | | - Revenue increase driven by higher demand in electrification and defense markets and higher average pricing[152] - Adjusted EBIT increase due to higher non-GAAP gross profit from higher shipping volumes, increased factory capacity utilization, product cost reductions, and higher average pricing[154] MedTech & Specialty Audio This section details the revenue and adjusted EBIT performance of the MedTech & Specialty Audio segment for the period | Metric | 2025 (in millions) | 2024 (in millions) | Change (in millions) | % Change | | :---------------- | :----------------- | :----------------- | :------------------- | :------- | | Revenues | $ 67.4 | $ 61.1 | $ 6.3 | 10.3% | | Adjusted EBIT | $ 26.1 | $ 25.1 | $ 1.0 | 4.0% | | Adjusted EBIT Margin | 38.7% | 41.1% | -2.4% | | - Revenue increase primarily due to higher shipping volumes of metal cans to Syntiant and increased demand in specialty audio and hearing health markets[156] - Adjusted EBIT margin decrease due to lower average pricing on mature products, unfavorable product mix, higher factory costs, and impact of higher shipping volumes of lower margin metal can products to Syntiant[158] Segment Results of Operations for the Six Months Ended June 30, 2025 compared with the Six Months Ended June 30, 2024 This section analyzes the financial performance of the Precision Devices and MedTech & Specialty Audio segments for the six-month period Precision Devices This section details the revenue and adjusted EBIT performance of the Precision Devices segment for the period | Metric | 2025 (in millions) | 2024 (in millions) | Change (in millions) | % Change | | :---------------- | :----------------- | :----------------- | :------------------- | :------- | | Revenues | $ 151.0 | $ 148.4 | $ 2.6 | 1.8% | | Adjusted EBIT | $ 24.6 | $ 21.6 | $ 3.0 | 13.9% | | Adjusted EBIT Margin | 16.3% | 14.6% | 1.7% | | - Revenue increase driven by higher demand from medtech and electrification markets and higher average pricing, partially offset by lower demand from industrial and defense markets[160] - Adjusted EBIT increase due to higher non-GAAP gross profit from product cost reductions, increased factory capacity utilization, and higher average pricing[162] MedTech & Specialty Audio This section details the revenue and adjusted EBIT performance of the MedTech & Specialty Audio segment for the period | Metric | 2025 (in millions) | 2024 (in millions) | Change (in millions) | % Change | | :---------------- | :----------------- | :----------------- | :------------------- | :------- | | Revenues | $ 127.1 | $ 120.1 | $ 7.0 | 5.8% | | Adjusted EBIT | $ 47.4 | $ 48.9 | $ (1.5) | -3.1% | | Adjusted EBIT Margin | 37.3% | 40.7% | -3.4% | | - Revenue increase primarily due to higher shipping volumes of metal cans to Syntiant and increased demand in specialty audio and hearing health markets[164] - Adjusted EBIT decrease due to lower non-GAAP gross profit from lower average pricing on mature products, unfavorable product mix, higher factory costs, and impact of higher shipping volumes of lower margin metal can products to Syntiant[166] Liquidity and Capital Resources This section discusses the company's cash position, expected cash generation, and capital allocation strategies - The company expects to generate positive cash flow from operations and has access to capital markets and a revolving line of credit for liquidity[167] | Period | June 30, 2025 (in millions) | December 31, 2024 (in millions) | | :-------------------------- | :---------------------------- | :------------------------------ | | Total Cash and Cash Equivalents | $ 103.2 | $ 130.1 | | Non-U.S. Operations Cash | $ 31.8 | $ 92.4 | - The company has $159.0 million remaining under its share repurchase program as of June 30, 2025[170] | Activity | Six Months Ended June 30, 2025 (in millions) | Six Months Ended June 30, 2024 (in millions) | | :------------------------------------------ | :--------------------------------------------- | :--------------------------------------------- | | Operating activities | $ 37.7 | $ 42.2 | | Investing activities | $ (8.6) | $ 0.6 | | Financing activities | $ (56.5) | $ (46.0) | | Net decrease in cash and cash equivalents | $ (26.9) | $ (3.3) | | Metric | Six Months Ended June 30, 2025 (in millions) | Six Months Ended June 30, 2024 (in millions) | | :------------------------------------------ | :--------------------------------------------- | :--------------------------------------------- | | Adjusted free cash flow | $ 57.9 | $ 36.5 | | Adjusted free cash flow as a % of revenues | 20.8% | 13.6% | - The increase in adjusted free cash flow in 2025 was primarily due to customer prepayments of $19.8 million and lower incentive compensation payments, partially offset by higher restructuring payments[177] Contingent Obligations This section refers to legal contingencies and confirms no new material information - Legal contingencies are discussed in Note 13, with no new material information provided in this section[178] Critical Accounting Estimates This section confirms no material changes to critical accounting estimates from the prior annual report - No material changes to critical accounting estimates from the Annual Report on Form 10-K for the year ended December 31, 2024[180] Recent Accounting Standards This section states that recent accounting standards are not expected to significantly impact financial results - Recent accounting standards are not expected to have a significant impact on revenue, earnings, or liquidity[181] Item 3. Quantitative and Qualitative Disclosures About Market Risk This section states that there were no material changes to the market risk exposure information previously disclosed in the company's Annual Report on Form 10-K - No material changes to market risk exposure from the Annual Report on Form 10-K for the year ended December 31, 2024[182] Item 4. Controls and Procedures This section details the evaluation of the company's disclosure controls and procedures, confirms no material changes in internal control over financial reporting, and acknowledges the inherent limitations of control systems Evaluation of Disclosure Controls and Procedures This section confirms the effectiveness of disclosure controls and procedures as of June 30, 2025 - CEO and CFO concluded that disclosure controls and procedures were effective as of June 30, 2025[183] Changes in Internal Control Over Financial Reporting This section reports no material changes in internal control over financial reporting during the quarter - No material changes in internal control over financial reporting occurred during Q2 2025[184] Inherent Limitations on Effectiveness of Controls This section acknowledges the inherent limitations of control systems, including human error and fraud - Control systems provide reasonable, not absolute, assurance and are subject to inherent limitations like human error, fraud, collusion, or management override[185] PART II — OTHER INFORMATION This section covers legal proceedings, risk factors, equity security sales, other information, and exhibits Item 1. Legal Proceedings This section refers to Note 13 for a discussion of legal proceedings and confirms that there have been no material developments since the last annual report - Legal proceedings are discussed in Note 13, with no material developments noted[186][187] Item 1A. Risk Factors This section states that there have been no material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K - No material changes to risk factors from the Annual Report on Form 10-K for the year ended December 31, 2024[188] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section provides details on the company's share repurchase program, including recent authorization increases and a summary of shares repurchased during the second quarter of 2025 - The Board of Directors authorized an additional $150.0 million for the share repurchase program on February 13, 2025[189] | Period | Total Number of Shares Purchased | Average Price Paid per Share | Approximate Dollar Value of Shares That May Yet Be Purchased Under The Program (in millions) | | :--------- | :------------------------------- | :--------------------------- | :--------------------------------------------------------------------------------------- | | April 2025 | 702,765 | $ 14.23 | $ 179.0 | | May 2025 | 514,416 | $ 16.68 | $ 170.4 | | June 2025 | 664,513 | $ 17.19 | $ 159.0 | | Total | 1,881,694 | $ 15.94 | | Item 5. Other Information This section states that no director or officer adopted, modified, or terminated any Rule 10b5-1 trading arrangement during the quarter ended June 30, 2025 - No director or officer adopted, modified, or terminated Rule 10b5-1 trading arrangements in Q2 2025[191] Item 6. Exhibits This section lists all exhibits filed with the Form 10-Q, including various certifications and financial information presented in Inline XBRL format - Exhibits include CEO and CFO certifications (31.1, 31.2, 32.1), financial statements in Inline XBRL (101), and the cover page in Inline XBRL (104)[192] SIGNATURES This section contains the official signatures certifying the accuracy and completeness of the report - The report was signed by John S. Anderson, Senior Vice President & Chief Financial Officer, on July 29, 2025[194]