Knowles(KN)2023-11-04 14:35Financial Data and Key Metrics Changes - The company reported Q3 revenues of 0.31, 0.01 above the high end of guidance [5][28] - Cash and cash equivalents totaled 40 million, exceeding guidance [35][28] - The company expects to exit 2023 with approximately 57 million, up 20% year-over-year as demand returned to normalized levels [4][67] - Consumer MEMS Microphone revenues were 50 million, down 22% from the prior year due to weak demand and excess channel inventory [47][31] - The company expects Q4 to be the peak quarter for CMM, driven by strong shipments to mobile [32][45] Market Data and Key Metrics Changes - The company noted robust secular trends in defense, medtech, and EV markets, which are expected to support growth [2][30] - The Precision Devices segment saw a book-to-bill ratio of 1.2 for Q3, indicating improved ordering trends [47][31] - The company anticipates that the consumer electronics markets have stabilized, with expectations for year-over-year revenue growth in 2024 [32][45] Company Strategy and Development Direction - The company is focused on balancing organic investment in R&D and CapEx with accretive M&A, as evidenced by the acquisition of Cornell Dubilier [1][42] - The strategic actions taken are aimed at transforming the company into an industrial technology firm, with a focus on high-growth markets [42][46] - Future guidance will include revenue, EPS, and cash from operations metrics that reflect the Cornell Dubilier acquisition [3][49] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in a return to growth in Precision Devices, supported by positive ordering trends and a book-to-bill ratio above one for the first time in six quarters [31][2] - The company expects significant growth in Q1 2024, aided by easy comparisons from a weak Q1 2023 [15][57] - Management highlighted that while 2023 has been challenging, the second half of the year has shown improved performance [68][67] Other Important Information - SG&A expenses were 1 million lower than the prior year, driven by lower sales commissions and incentive compensation costs [5] - The company repurchased approximately 900,000 shares at a total cost of 15 million during the quarter [35] - The company plans to hold a virtual Investor Day to provide updates on midterm financial targets and long-term strategy [71] Q&A Session Summary Question: What is the expected revenue contribution from Cornell Dubilier? - The company anticipates roughly 20 million in revenue from Cornell Dubilier for the quarter, as it was only owned for about two months [38] Question: How does the company view the inventory situation in Precision Devices? - Management indicated that inventory is being worked down, and they feel positive about growth for 2024 in the PD business [55] Question: What are the expectations for the CMM business in Q4? - Management expects Q4 to be strong for the CMM business, with significant year-over-year growth anticipated due to a weak Q1 of 2023 [15][32] Question: How is the integration process of Cornell Dubilier progressing? - The company is making progress on the integration process and expects to see revenue synergies starting in the back half of 2024 [72][74] Question: What is the outlook for pricing and order trends in the MSA business? - Management noted that pricing has been stable in the MSA business, and they are optimistic about growth in 2024 due to strong market demand [75]