• Q4 Revenue: $143 million, within the guided range.
• Q4 Non-GAAP Diluted EPS: $0.27, within the guided range.
• Cash from Operations (Q4): $35 million.
• Full-Year Revenue Growth (2024): 21% increase from 2023.
• Full-Year Non-GAAP Diluted EPS Growth (2024): 32% increase from 2023.
• Med Tech and Specialty Audio Revenue (Q4): $70 million, flat year-over-year.
• Med Tech and Specialty Audio Full-Year Revenue Growth (2024): 8% increase from 2023.
• Precision Devices Revenue (Q4): $73 million, up 4% year-over-year.
• Precision Devices Full-Year Revenue Growth (2024): 36% increase from 2023.
• Q4 Gross Margin: 51.4%, down 130 basis points year-over-year.
• Precision Devices Segment Gross Margin (Q4): 38%, up 240 basis points year-over-year.
• R&D Expense (Q4): $9 million, up $1 million year-over-year.
• SG&A Expenses (Q4): $26 million, up $1 million year-over-year.
• Interest Expense (Q4): $3 million, flat year-over-year.
• Cash from Operations (Full-Year 2024): $130 million.
• Share Repurchase (Q4): 1.3 million shares at $24 million.
• Debt Reduction (Q4): $23 million.
• Cash Balance (End of Q4): $130 million.
• Debt Balance (End of Q4): $203 million.
• Net Leverage Ratio: 0.6 times trailing 12 months adjusted EBITDA.
• Q1 2025 Revenue Guidance: $124 million to $134 million.
• Q1 2025 EPS Guidance: $0.16 to $0.20 per share.
• Q1 2025 Cash Utilized in Operating Activities Guidance: $15 million to $5 million.

• Warning! GuruFocus has detected 5 Warning Signs with KN.

Release Date: February 13, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Knowles Corp (NYSE:KN) reported a 21% revenue growth and a 32% increase in non-GAAP diluted EPS for the full year 2024, driven by strength in med tech and specialty audio.
• The company completed the sale of its Consumer MEMS microphone business, which is expected to streamline operations and focus on core business areas.
• Knowles Corp (NYSE:KN) has a strong backlog of orders, particularly in the specialty film capacitor product line, which is expected to drive significant growth in 2025 and beyond.
• The Board authorized an additional $150 million for share repurchases, indicating confidence in the company's financial health and future prospects.
• The company has reduced its exposure to tariffs by minimizing its manufacturing footprint in China, with only about 5% of revenue potentially subject to tariffs.

Negative Points

• Challenges in plant consolidation and production ramp-up for new products in the specialty film capacitor line led to a revenue shortfall in Q4 2024.
• Pricing pressure was noted in the Medtech and Specialty Audio segment, particularly on mature products, which could impact future margins.
• The ramp-up of the specialty film product line is taking longer than expected, with full resolution anticipated by the end of the first half of 2025.
• Gross margins in Q4 2024 were down 130 basis points year-over-year due to lower average pricing on mature products and higher factory costs.
• The company expects to utilize cash in operating activities in Q1 2025, partly due to settling supplier obligations related to the Consumer MEMS microphone business.

Q & A Highlights

Q: Jeff, can you elaborate on the pricing pressure you mentioned? Is it specific to any segment? A: Jeffrey Niew, President and CEO: The pricing pressure is mainly in the Medtech and Specialty Audio (MSA) business, particularly on mature products, not new ones. In the Precision Device segment, pricing is generally positive, with expected increases from the Cornell acquisition. Overall, we remain confident in maintaining gross margins above 50% for the MSA business.

Q: Can you provide an update on inventory levels and how they are trending? A: Jeffrey Niew, President and CEO: At the end of Q3, there was about six months' worth of inventory in the distribution channel, which has now decreased to about four to four and a half months by the end of Q4. We aim to reduce this to below three months. Recent strong bookings in Q4 and January give us confidence in continued growth for 2025.

Q: Regarding the specialty film business, how long do you expect it will take to resolve the current issues? A: Jeffrey Niew, President and CEO: We anticipate sequential improvement in output, but it will likely take until the end of the first half of 2025 to fully catch up. We have a significant backlog of orders, and a $75 million order in Q1 with shipments starting in 2026, which is promising for future growth.

Q: Can you break down the industrial segment and its trends? A: Jeffrey Niew, President and CEO: The industrial segment is diverse, with over 30,000 customers and no single large market. We are seeing stabilization and sequential growth in Q1. Key areas include automation, HVAC, downhole pumps, and semiconductor equipment.

Q: Could you provide more details on the new specialty film products and the focus of R&D investments? A: Jeffrey Niew, President and CEO: The specialty film products are used in pulse power applications, requiring significant energy release in a short time. We are ramping up production for smaller customers and a major order for 2026. R&D investments focus on these innovative solutions to drive future growth.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.