KN — Knowles Corporation

Summary of Knowles Corporation Q2 2026 Earnings Call

1. Key Financial Results and Metrics

• Revenue: $167 million, up 14% year-over-year, exceeding guidance.
• Earnings Per Share (EPS): $0.33, a 38% increase year-over-year, also above guidance.
• Cash from Operations: $28 million, near the high end of guidance.
• Medtech & Specialty Audio Revenue: $69 million, up 2% year-over-year.
• Precision Devices Revenue: $98 million, up 25% year-over-year.
• Gross Margins:
  • Medtech & Specialty Audio: 53.1%, up 250 basis points.
  • Precision Devices: 40.1%, up 140 basis points.
• Book-to-Bill Ratio: 1.4 for Precision Devices, marking the seventh consecutive quarter above 1.

2. Strategic Updates and Business Highlights

• Continued strong organic growth across core products and markets.
• Positive momentum in new growth platforms, particularly in Medtech and Precision Devices.
• Anticipated growth in the Hearing Health market and next-generation designs for MEMS microphones and balanced armature speakers.
• Strong demand in the defense sector, with multiyear orders expected to secure capacity.
• Notable design wins in various sectors, including industrial applications and medical devices.

3. Forward Guidance and Outlook

• 2026 Revenue Growth: Expected between 10% and 12%, significantly above the previous target of 4% to 6%.
• Q3 2026 Revenue Guidance: Projected between $167 million and $177 million, reflecting a 12.5% year-over-year increase at the midpoint.
• EPS Guidance for Q3: Expected between $0.34 and $0.38, a 9% year-over-year increase at the midpoint.
• Full-Year Capital Spending: Anticipated to be approximately 5% of revenues to support increased customer demand.

4. Bad News, Challenges, or Points of Concern

• Potential headwinds in the Medtech & Specialty Audio segment, with growth expected to be slower in Q4 due to inventory adjustments.
• The Hearing Health market may face uncertainties based on recent data, which could impact growth projections.
• There is a reliance on multiyear orders in the defense sector, which may introduce risks if demand fluctuates.

5. Notable Q&A Insights

• Management acknowledged that while the Precision Devices segment is expected to continue strong growth, the Medtech & Specialty Audio segment may experience a slowdown in Q4.
• There is a strong demand in the passive components market, with pricing power expected to improve, especially in the second half of the year.
• The company remains open to M&A opportunities but is being selective, focusing on deals that would complement existing operations.
• Visibility in the defense sector is increasing, with expectations of significant volume increases over the next 24 to 36 months, driven by government spending and replenishment needs.

This summary encapsulates the key aspects of Knowles Corporation's Q2 2026 earnings call, highlighting both the positive performance and the challenges ahead.