Knowles(KN) - 2023 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company reported Q4 revenue of $215 million, an increase of 9% year-over-year, and EPS of$ 0.28, which was within guidance but $0.05 below prior year levels [6][14] - Cash from operations was$ 60 million, exceeding the high end of the guided range [6][19] - Full year free cash flow was $106 million, representing 15% of revenues [19][27] Business Segment Data and Key Metrics Changes - Medtech & Specialty Audio segment revenue was$ 67 million, up 9% year-over-year, with gross margins at 54.2%, an increase of 260 basis points [15] - Precision Device segment revenue increased by 10% to $70 million, but gross margins decreased by 13 percentage points to 35.4% due to lower factory capacity utilization [16] - Consumer MEMS Microphone revenue was$ 78 million, up 8% year-over-year, with gross margins at 24.7%, 70 basis points higher than the previous year [17] Market Data and Key Metrics Changes - The Hearing Health market is expected to see strong growth in the first half of 2024, driven by aging populations and increased penetration of hearing aids [7] - Demand in the Precision Device segment remains stable despite high channel inventory, particularly in industrial and distribution markets [8][30] Company Strategy and Development Direction - The company is focused on transforming its business towards higher-value products and markets, aiming to drive long-term shareholder value [12][26] - The acquisition of Cornell is expected to provide synergies higher than initially anticipated, with a focus on cost controls and capacity optimization [9][44] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism for growth across all business units in 2024, despite a challenging 2023 [12][64] - The company anticipates modest revenue growth in 2024, with a focus on managing costs and optimizing operations until market recovery occurs [32][63] Other Important Information - The company ended 2023 with $271 million in debt and a net leverage ratio of 1.3x 2023 EBITDA [20] - For Q1 2024, revenue is expected to be between$ 190 million and $200 million, reflecting a 35% increase year-over-year [21] Q&A Session Summary Question: Can you elaborate on the excess channel inventory and its impact on future revenues? - Management acknowledged significant inventories in industrial and distribution channels, impacting the Precision Device segment, but noted strong organic growth in other areas [30][31] Question: What are the sequential changes by segment and EPS guidance? - Management provided insights on expected strong year-over-year growth in the Consumer MEMS Microphone business and seasonal declines in the Medtech & Specialty Audio segment [35][39] Question: What is the revenue contribution from Cornell in Q4 and Q1 guidance? - The revenue from Cornell in Q4 was approximately$ 20 million, with expectations for a slightly higher run rate in Q1 [74][72]