Q4 ’14 Supplemental Information February 12, 2015
Non-GAAP Disclaimer The financial results disclosed in this presentation include certain measures calculated and presented in accordance with GAAP. In addition to the GAAP results included in this presentation, Knowles has presented supplemental, non-GAAP gross profit, earnings before interest and income taxes, adjusted earnings before interest and income taxes and non-GAAP diluted earnings per share to facilitate evaluation of Knowles’ operating performance. These non-GAAP financial measures exclude certain amounts that are included in the most directly comparable GAAP measure. In addition, these non-GAAP financial measures do not have standard meanings and may vary from similarly titled non- GAAP financial measures used by other companies. Knowles uses non-GAAP measures as supplements to its GAAP results of operations in evaluating certain aspects of its business, and its Board of Directors and executive management team focus on non-GAAP items as key measures of Knowles’ performance for business planning purposes. These measures assist Knowles in comparing its performance between various reporting periods on a consistent basis, as these measures remove from operating results the impact of items that, in Knowles’ opinion, do not reflect its core operating performance. Knowles believes that its presentation of these non-GAAP financial measures is useful because it provides investors and securities analysts with the same information that Knowles uses internally for purposes of assessing its core operating performance. For a reconciliation of these non-GAAP financial measures to the most directly comparable GAAP financial measures, see the reconciliation tables included in the fourth quarter 2014 earnings release. 2
Q4 ‘14 Financial Results Quarter over year ago period Q4FY14 Q4FY13 Revenue $286.1million $330.4 million Gross Profit $63.6 million $114.2 million Non-GAAP Gross Profit $70.3 million $125.1 million (Loss) Earnings Before Interest and Income Taxes $(1.2) million $41.0 million Adjusted Earnings Before Interest and Income Taxes $17.6 million $63.4 million Diluted (loss) earnings per share $(0.01) $0.39 Non-GAAP Diluted earnings per share $0.14 $0.62 3
$330.4 $273.4 $281.0 $300.8 $286.1 $0 $60 $120 $180 $240 $300 $360 Q4FY13 Q1FY14 Q2FY14 Q3FY14 Q4FY14 Revenue $ M il li o n s 4
Adjusted EBIT $ Mi ll io n s $63.4 $32.1 $21.5 $42.2 $17.6 $0 $20 $40 $60 $80 Q4FY13 Q1FY14 Q2FY14 Q3FY14 Q4FY14 5
Revenue by Segment (% of revenue) Mobile Consumer 66% Specialty Components 34% Q4 2014 Q4 2013 Mobile Consumer 60% Specialty Components 40% 6
Q1 ‘15 Projections (non-GAAP)* 7 Q1FY15E Revenue $225 million - $245 million Gross Margin 25 percent - 27 percent Adjusted EBIT Margin 1 percent – 4 percent EPS (diluted) $0.01 - $0.07 Shares Outstanding (diluted) 85.7 million *Projections as of 2/12/15; Q1 2015 GAAP results are expected to include $10.8 million in amortization of intangibles, $7 million to $8 million in production transfer related costs, approximately $3.5 million in stock based compensation, $2 million in restructuring costs, and related tax effects on these items.
Historical Segment Data 8 (in $ millions) December 31, 2014 September 30, 2014 June 30, 2014 March 31, 2014 December 31, 2013 December 31, 2014 September 30, 2014 June 30, 2014 March 31, 2014 December 31, 2013 Revenues 170.9$ 182.5$ 166.7$ 164.0$ 217.9$ 115.2$ 118.3$ 114.3$ 109.4$ 112.4$ Gross Profit 22.2$ 10.6$ (4.8)$ 41.9$ 72.1$ 41.6$ 41.6$ 38.5$ 41.3$ 41.5$ Stock-Based Compensation Expense - - - - - 0.2 0.1 0.1 - - Fixed Asset and Related Inventory Charges (1.0) 13.9 25.8 0.8 6.0 - - - - - Restructuring Charges 0.6 1.5 13.5 - - 1.6 3.2 2.9 - 1.0 Production Transfers Costs 2.9 5.4 2.4 1.7 1.4 2.3 3.0 3.4 3.4 2.4 Other - 15.0 - - - - - - - - Non-GAAP Gross Profit 24.7$ 46.4$ 36.9$ 44.4$ 79.5$ 45.7$ 47.9$ 44.9$ 44.7$ 44.9$ Non-GAAP Gross Profit as % of Revenues 14.5% 25.4% 22.1% 27.1% 36.5% 39.7% 40.5% 39.3% 40.9% 39.9% Research and Development Expenses 14.3$ 14.1$ 14.4$ 12.3$ 13.9$ 6.8$ 6.9$ 7.3$ 6.9$ 6.7$ Stock-Based Compensation Expense 0.1 (0.2) (0.1) - - - - (0.1) - - Non-GAAP Research and Development Expenses 14.4$ 13.9$ 14.3$ 12.3$ 13.9$ 6.8$ 6.9$ 7.2$ 6.9$ 6.7$ Non-GAAP Research and Development Expenses as % of Revenues 8.4% 7.6% 8.6% 7.5% 6.4% 5.9% 5.8% 6.3% 6.3% 6.0% Selling and Administrative Expenses 17.7$ 18.4$ 23.8$ 23.2$ 21.8$ 16.1$ 16.4$ 15.7$ 17.5$ 16.8$ Stock-Based Compensation Expense (0.4) (0.4) (0.4) (0.2) - (0.3) (0.4) (0.3) (0.2) - Intangibles Amortization Expense (7.7) (7.7) (8.0) (7.6) (7.6) (2.8) (2.9) (2.7) (3.1) (2.9) Production Transfers Costs - - - - - - - - (0.7) (0.1) Non-GAAP Selling and Administrative Expenses 9.6$ 10.3$ 15.4$ 15.4$ 14.2$ 13.0$ 13.1$ 12.7$ 13.5$ 13.8$ Non-GAAP Selling and Administrative Expenses as % of Revenues 5.6% 5.6% 9.2% 9.4% 6.5% 11.3% 11.1% 11.1% 12.3% 12.3% Operating Expenses 32.7$ 33.6$ 42.8$ 35.5$ 35.7$ 22.9$ 23.3$ 22.7$ 24.6$ 23.9$ Stock-Based Compensation Expense (0.3) (0.6) (0.5) (0.2) - (0.3) (0.4) (0.4) (0.2) - Intangibles Amortization Expense (7.7) (7.7) (8.0) (7.6) (7.6) (2.8) (2.9) (2.7) (3.1) (2.9) Restructuring Charges (0.7) (1.1) (4.6) - - - - 0.3 (0.2) (0.4) Production Transfers Costs - - - - - - - - (0.7) (0.1) Non-GAAP Operating Expenses 24.0$ 24.2$ 29.7$ 27.7$ 28.1$ 19.8$ 20.0$ 19.9$ 20.4$ 20.5$ Non-GAAP Operating Expenses as % of Revenues 14.0% 13.3% 17.8% 16.9% 12.9% 17.2% 16.9% 17.4% 18.6% 18.2% Operating (Loss) Earnings (10.5)$ (23.0)$ (47.6)$ 6.4$ 36.4$ 18.7$ 18.3$ 15.8$ 16.7$ 17.6$ Other Expense (Income), net 1.7 (1.3) (0.1) (0.4) (0.1) 0.2 (2.2) 1.0 1.0 0.3 (Loss) Earnings Before Interest and Income Taxes (12.2) (21.7) (47.5) 6.8 36.5 18.5 20.5 14.8 15.7 17.3 Stock-Based Compensation Expense 0.3 0.6 0.5 0.2 - 0.5 0.5 0.5 0.2 - Intangibles Amortization Expense 7.7 7.7 8.0 7.6 7.6 2.8 2.9 2.7 3.1 2.9 Fixed Asset and Related Inventory Charges (1.0) 13.9 25.8 0.8 6.0 - - - - - Restructuring Charges 1.3 2.6 18.1 - - 1.6 3.2 2.6 0.2 1.4 Production Transfers Costs 2.9 5.4 2.4 1.7 1.4 2.3 3.0 3.4 4.1 2.5 Other - 15.0 - - - - - - - - Adjusted (Loss) Earnings Before Interest and Income Taxes (1.0)$ 23.5$ 7.3$ 17.1$ 51.5$ 25.7$ 30.1$ 24.0$ 23.3$ 24.1$ Adjusted (Loss) Earnings Before Interest and Income Taxes as % of Revenues -0.6% 12.9% 4.4% 10.4% 23.6% 22.3% 25.4% 21.0% 21.3% 21.4% Mobile Consumer Electronics Quarter Ended Specialty Components Quarter Ended
Reconciliation of Segment EBIT to Consolidated Net Earnings 9 (in $ millions) December 31, 2014 September 30, 2014 June 30, 2014 March 31, 2014 December 31, 2013 (Loss) earnings before interest and income taxes Mobile Consumer Electronics (12.2)$ (21.7)$ (47.5)$ 6.8$ 36.5$ Specialty Components 18.5 20.5 14.8 15.7 17.3 Total segments 6.3 (1.2) (32.7) 22.5 53.8 Corporate expense / other 7.5 12.9 11.3 11.7 12.8 Interest expense, net 2.1 2.0 1.8 0.7 5.8 (Loss) earnings before income taxes (3.3) (16.1) (45.8) 10.1 35.2 (Benefit from) provision for income taxes (2.2) (1.5) 33.1 2.5 2.3 Net (loss) earnings (1.1)$ (14.6)$ (78.9)$ 7.6$ 32.9$ Quarter Ended
