Knowles Corp Q4 FY2024 earnings call

• Q4 revenue of $143 million was within guided range; non-GAAP diluted EPS of $0.27 was within guided range; cash from operations of $35 million inclusive of CMM.
• Revenue and earnings shortfall in Q4 due to plant consolidation and ramping issues in specialty film capacitor line, not lack of shippable orders.
• 2024 continuing operations revenue grew 21% and non-GAAP diluted EPS grew 32% driven by MedTech and specialty audio strength and Cornell acquisition.
• MedTech and specialty audio continuing to drive growth by partnering with customers and leveraging fixed overhead; Precision Device segment had acceleration in orders from Q3 in medical and defense, with distribution book-to-bill trend positive in Q4.
• Strong cash generation; board authorized additional $150 million for share buyback; fluid tariff situation with ~5% of 2024 continuing operations revenue subject to tariffs.

In Q4, MedTech and specialty audio revenue grew 9% sequentially and was flat year-over-year. 2024 revenues grew by 8% and adjusted EBIT by 13% from 2023 levels. For the Precision Device segment, Q4 revenues grew 4% year over year. Challenges with shipments in specialty film capacitor products resulted in a greater than $3 million shortfall in shipment plans. On a full-year basis, revenue for Precision Devices grew 36% compared to 2023 due to the addition of Cornell, and MedTech and specialty audio revenue grew 8% from 2023.

• Q1 2025 revenues expected between $124 million and $134 million.
• R&D expenses expected between $8 million and $9 million; selling and administrative expenses within $23 million to $25 million (down $2M Y/Y).
• Adjusted EBIT margin for Q1 expected 16% to 18%; interest expense estimated $2M to $3M; effective tax rate 13% to 17%; EPS expected $0.16 to $0.20 per share.
• Cash utilized in operating activities projected $15 million to $5 million; capital spending expected $4 million.

• Fluid tariff situation with ~5% of 2024 continuing operations revenue subject to tariffs on importing goods from China or Mexico.
• Challenges in plant consolidation for specialty film capacitors leading to shipment shortfalls in Q4; production transfer took longer than expected, and order book had numerous new custom products ramping at once.

Q: Anthony Stoss asked about pricing pressure across segments and inventory levels.

A: Jeffrey Niew said pricing pressure in Precision Device segment net-net is positive; $5-$6M pricing increase from Cornell acquisition expected in 2025, and ~$2-$3M more; MSA business had some pricing pressure on mature products. John Anderson clarified inventory at customers (distributors/OEMs) was 6 months at end of Q3, down to 4-4.5 months at end of Q4.

Q: Bob Labick asked about industrial end markets, specialty film products, and R&D.

A: Jeffrey Niew said industrial end markets have many smaller customers, and bookings are stabilizing; specialty film products are for pulse power applications, with a $75M+ order in energy sector starting shipments in 2026; John Anderson mentioned R&D investments in various areas including automation, HVAC, downhole pumps, semiconductor equipment