KN — Knowles Corporation

Knowles Corporation (KN) Q1 2026 Earnings Call Summary

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 Utilized in Operations: $1 million, within guidance.
• Medtech & Specialty Audio (MSA) Revenue: $68 million, up 14% year-over-year.
• Precision Devices Revenue: $85 million, up 17% year-over-year.
• Gross Margins: MSA at 53.5% (up 480 basis points), Precision Devices 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

• The company is leveraging unique technologies to provide custom-engineered solutions for blue-chip customers in high-growth markets.
• Strong growth in both MSA and Precision Devices segments, with notable demand in defense, industrial, and medical markets.
• The MSA segment is expected to grow within a 2% to 4% range for the full year, while Precision Devices is projected to exceed the 6% to 8% organic growth target.
• Significant progress in ramping up production for a $75 million energy order, expected to contribute positively to margins in the second half of 2026.

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 for Q2: Projected between $0.28 and $0.32, a 25% year-over-year increase at the midpoint.
• Full Year 2026 Revenue Growth: Anticipated to be above the high end of the previously guided organic revenue target of 4% to 6%.
• Long-term Outlook: Confidence in sustained organic growth and margin expansion, supported by a healthy backlog and strong order activity.

4. Bad News, Challenges, or Points of Concern

• The hearing health end market is expected to grow at historical rates, limiting growth in the MSA segment to the 2% to 4% range for 2026.
• While there are positive trends in demand, there are potential headwinds from input cost increases, particularly in resin-based products.
• The company is cautious about pricing power in the MSA segment, where margins are expected to remain flat rather than expand.

5. Notable Q&A Insights

• Design Wins: The company is seeing broad-based design wins across various markets, particularly in medical and defense, with expectations for increased demand in 2027.
• Gross Margin Drivers: Pricing strategies are being evaluated, particularly in the Precision Devices segment, where there is potential for further margin expansion.
• Energy Order Ramp: The ramp-up for the energy order is on track, with no significant technical hurdles anticipated.
• Long-term Agreements: Increased discussions around long-term orders in the defense sector, indicating a shift towards securing capacity for future demand.
• RF Products: The company has some exposure to satellite business but prefers to focus on high-margin, specialized products rather than commoditized offerings.

This summary encapsulates the key points from Knowles Corporation's Q1 2026 earnings call, reflecting both the positive momentum and the challenges faced by the company.