Summary of Knowles (NYSE:KN) FY Conference Call Company Overview - Knowles operates in two distinct segments: - **Precision Devices**: Approximately 54% of revenues in 2024, expected to rise to 56-57% in 2025. This segment includes high-performance capacitors and RF filters [3][4]. - **Microphones and Receivers (MSA)**: Primarily focused on hearing health, with about 80% of this segment related to hearing aids [4]. Financial Performance - Historical revenue CAGR from 2017 to 2024 is about 8%, with half from organic growth and half from acquisitions [9]. - EBITDA CAGR during the same period is approximately 11%, driven by margin expansion and operating leverage [9]. - Current EBITDA margins are around 24%, with a target of 30% over the next three to five years [8][11]. Market Segmentation - **Med Tech**: Accounts for about 50% of the business, including hearing health [4]. - **Defense**: Represents about 21% of revenues, with increasing defense budgets globally [4][14]. - **Industrial**: Comprises the remaining third, including energy and electrification applications [4]. Growth Strategy - Focus on organic growth supplemented by M&A opportunities, particularly in the Precision Devices segment, which is highly fragmented [6][17]. - Recent acquisition of Cornell Dubilier for $265 million, enhancing the capacitor business [7]. - Anticipated revenue growth of 8-10% annually, with 4-6% from organic growth and 4% from acquisitions [10][17]. Key Trends and Opportunities - Aging population driving demand for hearing aids, with Knowles holding a 60% market share in this segment [12]. - Increased demand for energy solutions, particularly in alternative energy, supported by AI and automation trends [12][26]. - Significant order of $75 million from a customer in the alternative energy sector, expected to contribute $25 million in growth [12][13][26]. Capital Allocation - Capital investments typically range from 3-5% of revenues, expected to be higher this year due to the energy order [20][21]. - Share buybacks are a priority, with $55 million repurchased this year and over $200 million in the last couple of years [21][22]. - M&A remains a focal point, with a disciplined approach to ensure high returns on investments [22][23]. Challenges and Considerations - The company has exited lower-margin businesses, including a consumer electronics segment heavily reliant on Apple, to focus on higher-margin opportunities [5][6]. - The hearing aid market faces challenges with customer satisfaction and product effectiveness, impacting potential growth [27][28][29]. Conclusion - Knowles is positioned for growth with a strong balance sheet, a focus on high-margin markets, and a disciplined approach to capital allocation and acquisitions. The company is optimistic about its growth prospects, both organically and through strategic acquisitions [30][31].

Core Insights - The company has confirmed its financial guidance for 2025, expecting organic revenue growth to range from -2% to +2%, an EBITA margin of 11% to 13%, and free cash flow of approximately DKK 800 million [2][7]. Hearing Division - The hearing aid market is projected to grow at 4-6% in volume, with GN expecting organic revenue growth of 5% to 9% in 2025, although it may be at the lower end due to a slower market growth assumption [3]. - The Hearing division achieved 7% organic revenue growth in the recent quarter, driven by strong sales of ReSound Vivia, resulting in a divisional profit margin of 34% [7]. Enterprise Division - The Enterprise division is facing challenges due to uncertainties in the trade environment, with expected organic revenue growth of -8% to 0% for 2025 [4]. - Despite these challenges, the division experienced positive sell-out growth outside of Europe, but organic revenue growth ended at -4% due to market uncertainties in Europe [7]. Gaming Division - The Gaming division is also affected by changes in the trade environment and weak consumer sentiment, with expected organic revenue growth of -6% to +2% for 2025 [5]. - The division delivered 3% organic growth in the recent quarter, achieving a profit margin of 9% despite tariff costs [7]. EBITA Margin and Financial Performance - The company has implemented significant actions to protect profitability, including diversifying the manufacturing footprint and adjusting prices in the U.S. [6]. - The reported EBITA for the quarter was DKK 435 million, resulting in an EBITA margin of 11%, reflecting revenue developments and strong cost control [7]. - Free cash flow, excluding M&A, was DKK 410 million, with net interest-bearing debt at DKK 9.4 billion, indicating a reported leverage of 4.0x [7][8].

Core Insights - Cearvol showcased innovative hearing solutions at EUHA 2025, emphasizing smart, stylish, and integrated designs that appeal to both professionals and consumers [1][14] - The new Aquarius Hearing Glasses and Liberte Open-Ear Hearing Aids received positive feedback for their comfort, aesthetics, and advanced audio technology [3][5] Product Highlights - The Aquarius Hearing Glasses combine fashion with audio enhancement, allowing users to stay connected without compromising style [3] - Liberte open-ear model features a lightweight design that blends environmental sounds with conversations, catering to users seeking a natural hearing experience [5] - Cearvol's AI-powered hearing aids, including Wave, Wave Lite, and Nano, offer intuitive controls and features like remote microphone capabilities for enhanced usability [7][8] User Experience - Attendees praised the ease of use of Cearvol's products, highlighting the modern touchscreen controls and the absence of complicated menus [8][10] - Wave Lite provides up to 40 dB gain, making it suitable for users who prioritize comfort and versatility in a discreet design [10] - Nano's all-in-one case management allows users to adjust settings without needing an app, promoting convenience and hygiene with its UV charging case [11] Company Vision - Cearvol aims to ensure equality in health and technology for individuals with hearing loss, focusing on how their products enhance confidence and connectivity [12] - The strong interest at EUHA indicates a positive reception of Cearvol's innovations, with plans to expand these solutions to more global markets [14][15]

Core Insights - Cearvol is set to showcase its innovative hearing solutions at EUHA 2025, including the flagship Wave model and other products like Wave Lite and Nano, emphasizing a new era in hearing technology [1][8] Product Innovations - The Wave model, built on Cearvol AI 2.0, features advanced noise spectrum analysis and directional microphones, providing professional-grade sound clarity and effective noise reduction in busy environments [3] - Wave Lite offers a stylish earbud-like design with Bluetooth streaming capabilities, catering to users who prioritize both sound quality and connectivity [4] - The Nano model is designed to be nearly invisible and user-friendly, aiming to facilitate natural conversations without the stigma associated with traditional hearing aids [4] Company Vision and Mission - Cearvol's vision is "Technology Reshaping Confidence," focusing on ensuring equality in health, technology, and accessibility for individuals with hearing loss [6] - The company's mission extends beyond improving hearing; it aims to help users regain confidence and live life on their own terms through stylish and effective hearing solutions [6][9] Event Participation - Cearvol invites media representatives, distributors, and hearing care professionals to visit their booth at the Nuremberg Exhibition Center from October 22 to 24, 2025, to experience their latest technologies firsthand [8]

Core Insights - Cearvol has launched Wave, a next-generation hearing solution aimed at addressing the needs of over 50 million Americans with hearing loss, of which fewer than 20% currently use hearing aids [1][24] - The device combines AI-powered audio technology with a touchscreen charging case, enhancing user experience by providing seamless transitions between conversations, music, and calls [3][20] Product Features - Wave features advanced AI-powered DNN technology for noise suppression and voice enhancement, providing up to 40 dB gain suitable for users with mild to moderately severe hearing loss [11][22] - The device includes a touchscreen charging case that allows users to adjust settings such as volume and background noise reduction with ease [8][9] - It offers a dual-functionality as both a hearing aid and a Bluetooth audio hub, enabling users to connect to multiple devices and stream audio directly [20][21] Design and Usability - The design philosophy of Cearvol emphasizes stylish, lightweight, and durable hearing aids that enhance users' confidence and lifestyle [5][15] - Wave's charging case provides up to 22 hours of use, with quick charging capabilities, ensuring convenience for daily activities [15] - The device includes a built-in AUX-IN port for direct audio connection from TVs and other devices, enhancing the listening experience [18][20] Market Positioning - Cearvol aims to redefine the hearing aid market by offering over-the-counter solutions that are elegant, reliable, and affordable, moving away from traditional medicalized hearing aids [5][24] - The company has a strong background in the acoustics industry, having transitioned from headphones to hearing aids, focusing on technology that transforms lives [4][24] Community Engagement - The launch of Wave on a crowdfunding platform invites early supporters to participate in the development of this innovative hearing solution, fostering a community around clarity, style, and control [23][24]

Core Insights - Cearvol has launched a new hearing aid called Nano, designed to be compact and nearly invisible, addressing the discomfort associated with traditional bulky devices [1][14] - The company's mission focuses on blending smart technology with human-centered design to enhance accessibility and improve the quality of life for individuals with hearing loss [3][19] - Nano features user-friendly controls located on the charging case, allowing for easy adjustments without the need for fiddly buttons on the device itself [8][17] Product Features - Nano offers three tailored hearing levels for different degrees of hearing loss, with a maximum amplification of 30dB, ensuring a natural listening experience [11] - The device includes advanced noise reduction and feedback suppression technologies, making conversations clearer in various environments [11] - A quick 15-minute charge provides 3 hours of use, while a full charge lasts 17 hours, extendable to over 54 hours with the charging case [9] Market Positioning - Cearvol's Nano targets users who prefer a discreet and simple hearing solution, contrasting with its previously launched Wave Lite, which is more feature-rich and connected [18] - The company emphasizes the importance of user experience, aiming to restore not just sound but also confidence and connection for users [10][14] - As an FDA-registered over-the-counter hearing aid, Nano assures families of its safety and reliability, making it an appealing choice for first-time users [14]

Core Insights - The company has confirmed its financial guidance for 2025, narrowing organic revenue growth expectations to a range of -2% to +2% [8][12] - The Hearing division is expected to contribute organic revenue growth of 5% to 9%, but due to lower market growth assumptions, it is now anticipated to grow at the lower end of that range [5][4] - The Enterprise division is facing challenges due to market uncertainty, with expected organic revenue growth of -8% to 0% [6] - The Gaming division is also impacted by trade environment changes, with organic revenue growth now expected in the upper half of the range of -6% to +2% [7] Financial Performance - Group reported EBITA increased by 46% to DKK 546 million, with an EBITA margin of 13% [8] - Free cash flow excluding M&A was DKK 353 million, reflecting a positive earnings profile and working capital impact [8] - The Hearing division achieved 8% organic revenue growth, while the Enterprise division saw a decline of -7% [8][10] Market Conditions - The hearing aid market is projected to grow at 4-6% in volumes, driven by favorable demographic trends, but is expected to grow slower than its structural trend in 2025 [4] - The company is actively diversifying its manufacturing footprint and implementing price adjustments to mitigate impacts from the changing trade environment [6][9] - The overall impact of tariffs is expected to reduce the group EBITA margin by approximately -1% in 2025 [10]

Financial Data and Key Metrics Changes - The company reported Q1 2025 revenue of $132 million, at the high end of the guided range, with EPS of $0.18, also at the midpoint of guidance [11][19] - Gross margins for the MedTech and Specialty Audio segment were 48.7%, down 450 basis points year-over-year, primarily due to a supply agreement impacting margins [19] - Precision Devices segment revenues were $73 million, flat compared to Q4, with gross margins at 35.7%, unchanged from the previous year [13][20] Business Line Data and Key Metrics Changes - MedTech and Specialty Audio revenue was $60 million, slightly up year-over-year but seasonally down from Q4 [11][19] - Precision Devices segment saw a flat revenue performance, with production challenges in the specialty film line being addressed [13][20] - The company expects year-over-year revenue growth to accelerate in Q2 2025, driven by strong demand in MedTech and Specialty Audio [12][17] Market Data and Key Metrics Changes - The company estimates that less than 5% of revenue is subject to current tariffs, with less than 3% of cost of goods sold impacted [7][8] - Inventory levels at distributors have normalized to 3-3.5 months, indicating increased order activity [34][52] - The company is seeing strong bookings trends across most end markets, particularly in Precision Devices [15][52] Company Strategy and Development Direction - The company is focused on growth in 2025, with strong design wins and increasing backlog across its product portfolio [17] - There is an emphasis on exploring acquisition opportunities while maintaining manageable debt levels [16][22] - The upcoming Investor Day will detail future growth plans and competitive advantages [17][60] Management's Comments on Operating Environment and Future Outlook - Management remains cautious about the tariff environment but believes the company is well-positioned for growth despite potential impacts [5][10] - The outlook for the MedTech and defense sectors remains strong, with essential devices expected to maintain demand [32][33] - Management anticipates a stronger second half of 2025, driven by improved capacity utilization and demand recovery [41][42] Other Important Information - The company repurchased $5 million in shares and reduced debt by $15 million in Q1 2025 [16][22] - Capital spending is projected to be $7 million in Q2, with full-year capital spending expected to be 5% of revenues [24] Q&A Session Summary Question: Overall end market customer exposure and outlook - Management indicated no change in demand and higher expectations for Q2, particularly in essential devices like pacemakers and hearing aids [31][32] Question: Updates on the $75 million capacitor order - A substantial prepayment was received, indicating strong customer commitment with no expected delivery impacts [37] Question: Gross margin trajectory for Q2 and Q4 - Management expects significant sequential improvement in gross margins, projecting an exit range of 45% to 47% by year-end [40][44] Question: Potential for gaining market share from competitors - Management noted increased inquiries from customers considering switching suppliers due to tariff impacts, particularly in the industrial space [46][47] Question: Commentary on bookings and receivables - Bookings were strong, with inventory levels at distributors decreasing, indicating rising demand [52][56]