KN — Knowles Corporation

Summary of Knowles Corporation Q1 2026 Earnings Call

1. Key Financial Results and Metrics

• Revenue: $153 million, up 16% year-over-year, at the high end of guidance.
• Earnings Per Share (EPS): $0.27, a 50% increase year-over-year, exceeding guidance.
• Cash Utilization: $1 million used in operations, within guided range.
• Segment Performance:
  • Medtech & Specialty Audio (MSA): Revenue of $68 million, up 14% year-over-year.
  • Precision Devices (PD): Revenue of $85 million, up 17% year-over-year.
• Gross Margins: MSA at 53.5%, up 480 basis points; PD at 39.2%, up 350 basis points.
• Book-to-Bill Ratio: 1.19, marking the sixth consecutive quarter above 1.

2. Strategic Updates and Business Highlights

• Knowles is focusing on leveraging unique technologies to create custom-engineered solutions for blue-chip customers in high-growth markets.
• The company is experiencing strong organic growth, particularly in the defense and industrial sectors.
• Anticipated growth in the hearing health market, with expectations to increase content per device in next-generation products.
• The Precision Devices segment is expected to benefit from increasing demand driven by defense and industrial applications.

3. Forward Guidance and Outlook

• Q2 2026 Revenue Guidance: Expected between $152 million and $162 million, representing an 8% year-over-year increase at the midpoint.
• EPS Guidance: Projected between $0.28 and $0.32, up 25% year-over-year at the midpoint.
• Full-Year 2026 Revenue Growth: Expected to exceed the high end of the previous organic growth target of 4% to 6%.
• Capital Spending: Anticipated to be around 4% to 5% of revenues, focusing on capacity expansion.

4. Bad News, Challenges, or Points of Concern

• The hearing health market is expected to grow at historical rates, limiting growth potential in that segment to 2% to 4% for the full year.
• Rising input costs, particularly for resin-based products, could pose challenges, although transportation costs remain low.
• The company is ramping up production for a significant energy order, which is currently weighing on margins but is expected to improve in the second half of 2026.

5. Notable Q&A Insights

• Design Wins: The company is seeing broad-based design wins across various sectors, including medical and defense, with a focus on customized solutions.
• Pricing Power: Pricing strategy is becoming increasingly important, particularly in the PD segment, with expected annual price increases of 2% to 4%.
• Energy Order: The ramp-up for the energy order is on track, with expectations for improved margins as production scales.
• Long-Term Agreements (LTAs): Discussions about larger, multi-year orders are increasing, particularly in the defense sector, indicating a shift towards securing longer-term capacity commitments.

Overall, Knowles Corporation reported strong financial results for Q1 2026, driven by growth in both the Medtech & Specialty Audio and Precision Devices segments. The company is optimistic about future growth, although it faces challenges related to market growth rates and input costs.