Knowles Corp Q1 FY2025 earnings call

• Tariff Discussion: Less than 5% of revenue is subject to current tariffs, less than 3% of COGS is impacted by raw material tariffs. Markets like medtech, defense are insulated, while industrial inventory is normalizing. - Q1 Results: Started 2025 on solid footing with revenue of $132M, EPS of $0.18, and cash from operations exceeding guidance. Medtech and Specialty Audio backlog is strong for Q2; Precision Device has strong booking trends with inventory normalizing. - Financial Actions: Purchased $5M in shares and reduced debt by $15M; expects robust cash flow in 2025, exploring acquisition opportunities. - Investor Day: Will be hosted on May 13 to detail future growth plans.

Medtech and Specialty Audio: Q1 revenue was $60 million, up slightly year-over-year. Revenue contribution is approximately 45.45% of the total $132 million. Q1 gross margins were 48.7%, down 450 basis points year-over-year, impacted by a supply agreement and customer mix. Precision Device: Q1 revenue was $73 million, flat to Q4. Revenue contribution is approximately 55.3% of the total $132 million. Segment gross margins were 35.7%, flat from Q1 2024, affected by factory inefficiencies in the specialty film line but with improving yields.

• Q2 2025 revenues expected to be between $135 million and $145 million. - R&D expenses expected to be between $8 million and $10 million. - Selling and administrative expenses within $23 million to $25 million. - Adjusted EBIT margin expected to be within 19% to 21%. - EPS expected to be within $0.21 to $0.25 per share. - Cash generated by operating activities expected to be within $10 million to $20 million. - Capital spending expected to be $7 million, with full-year capital spending at 5% of revenues.

• Tariff uncertainty impacting revenue, raw materials, and customer demand, particularly in the industrial sector.

Q: Bob Labick asked about end market exposure and the $75 million plus capacitor order.

A: Medtech and defense are insulated; industrial inventory is normalizing; the $75 million order has a prepayment and shipments are expected in 2026.

Q: Anthony Stoss asked about gross margin trajectory.

A: Sequential improvement with mix and capacity utilization driving, expecting higher gross margins in Q4.

Q: Christopher Rolland asked about bookings and inorganic growth.

A: PD book-to-bill above 1.15, organic growth from new products; inorganic opportunities discussed at the Investor Day.