KN — Knowles Corporation

Summary of Knowles Corporation Q3 2025 Earnings Call

1. Key Financial Results and Metrics:

• Revenue: $153 million, up 7% year-over-year.
• Earnings Per Share (EPS): $0.33, a 22% increase year-over-year.
• Cash from Operations: $29 million, exceeding guidance.
• Medtech & Specialty Audio Revenue: $65 million, up 2% year-over-year.
• Precision Devices Revenue: $88 million, up 12% year-over-year.
• Gross Margins: Medtech & Specialty Audio at 53%, Precision Devices at 41.5%.
• R&D Expenses: $9 million, flat year-over-year.
• SG&A Expenses: $26 million, up $2 million year-over-year.
• Debt: $176 million with a net leverage ratio of 0.6x.

2. Strategic Updates and Business Highlights:

• Continued focus on leveraging unique technologies for custom-engineered solutions.
• Strong performance in the Precision Devices segment, particularly in defense applications.
• Robust design wins and customer intimacy driving growth across all end markets.
• Successful share buyback of $20 million and reduction of bank borrowings by $15 million.
• Positive trends in specialty film production, with a backlog of $25-$30 million expected to ramp up in 2026.

3. Forward Guidance and Outlook:

• Q4 Revenue Guidance: Expected between $151 million and $161 million, up 9% year-over-year at the midpoint.
• EPS Guidance for Q4: Projected between $0.33 and $0.37 per share.
• Full Year 2025 Organic Growth Rate: Anticipated at the high end of 4% to 6%.
• Specialty Film Revenue: Expected to reach $55-$60 million in 2026, driven by new orders and capacity expansion.

4. Bad News, Challenges, or Points of Concern:

• Specialty film segment faced higher production costs and lower-than-expected yields during ramp-up.
• Potential impact from rising palladium prices, though current exposure is managed through prebuys.
• Tariff exposure remains low, but ongoing monitoring is necessary as conditions evolve.
• Some uncertainty regarding inventory levels in the industrial and distribution segments, though overall inventory is reported to be normalized.

5. Notable Q&A Insights:

• Management expressed confidence in the specialty film segment, citing a backlog and anticipated growth.
• Design activity across various sectors is robust, with expectations for Precision Devices to exceed the high end of the 6%-8% growth range.
• The M&A environment is improving, but management is focused on disciplined acquisitions that align with strategic goals.
• Book-to-bill ratio in Precision Devices was reported at 1 for the quarter, indicating strong order activity, particularly in defense.

Overall, Knowles Corporation reported strong financial results for Q3 2025, with positive growth trends and a solid outlook for the remainder of the year, despite some challenges in production and cost management.