Earnings call transcript Q4 2022

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Operator

Good afternoon, and welcome to the Knowles Corporation Fourth Quarter and Full Year 2022 Financial Results Conference Call. My name is Tamiya and I'll be your Operator for today.

With that said, here with opening remarks is Knowles Vice President of Investor Relations, Patton Hofer. Please, go ahead.

Patton Hofer

Thank you, Tamiya, and welcome to our Q4 2022 earnings call. President Relations. Vice Hofer, Patton of Investor I'm And Jeffrey and Niew, me on John today are the call CFO. our and our Vice presenting Senior with Anderson, President President and CEO,

which about today call plans for for provisions Safe will of remarks under securities constitute Our future applicable statements forward-looking federal include and expectations, prospects the Harbor purposes Knowles, laws.

involve risks company include company products, Forward-looking uncertainties for sales, and cause statements to demand expenses in actual of comments differ current this about a profits, that could materially and call and expectations. trends and number will results anticipated from

The December company with but in statements, not review as XXXX, disclaims risks from and filed forward-looking call XX, the are uncertainties made on today's of risks in including duty the the of to, and any law. for the to annual and report statements periodic identified reports except this urges uncertainties earnings. the investors required to such date by limited All as Knowles the Form time-to-time filings, SEC ended company's and year SEC XX-K the update fiscal

in and to the press our on any directly pursuant Reg found financial posted most to today including GAAP referenced release Form today's in comparable with knowles.com our addition filed conference current can website reconciliation X-K be non at during on call GAAP SEC, a In measures G, our report measure. the

the information a in Investor will in our on we've call on non continuing can financial financial All indicated. this of which section be webcast unless available be Also, website. operation GAAP references made Relations selective slides, found basis, otherwise

who the some call that, results. on provide With will Jeff? details me over to our turn Jeff, let

Jeffrey Niew

for all Thanks, of today. joining And Patton. to us thanks you

is segmentation into dive this during we introduced in we new the company prepared investor that everyone Before remarks. will wanted the the in November, discussing results, update refresh as call how be the our I on to we QX

in -- into segments in two. audio our two separate We

The Hearing acoustic MSA, MedTech Specialty the & or first called market. Audio, primarily Health which segment into includes sold is solutions

The focused into consumer ear, smartphone Microphones second or segment, sold and IoT, microphones markets. which compute is is the MEMS our CMM, on

and operates & under begin MEMS results. of segments, that, our consumer Audio With Microphones. with MedTech Precision Specialty me and Devices, let a now Knowles three reports summary their QX

We pleased above for at we ranges of and high issues gross guided margins in report; market electronics were related margins, and backdrop EBIT adjusted to flow, delivered cash or results the our free a COVID China. the challenging consumer in despite end

generated primarily down $XXX prior revenue, adjustments XX% consumer customers MEMS year, was consumer inventory market electronics demand the In of the million which & Specialty and Knowles Audio. in MedTech versus driven quarter by and weak and

XX% was Devices In down revenue versus to robust versus of Consumer demand see in Precision down year X% prior Audio and growth & contrast, prior MedTech medtech, Specialty XX%. industrial was end year as EV MEMS and mics markets. levels, levels, delivered continue defense, we

guidance; range; free of million and of just margins gross of which per line with our guidance -- $X.XX, was high our our the high cash expectation. deliver the in the we earnings guided $XX of of We above end flow, share at in with end XX.X%, generate shy

have margins and demonstrate the and profit flow. our focus that paying results markets price advantages we these believe our is I particularly on where competitive dividends, cash significant

segments market like current and would to performance a highlight dynamics. their For take full year each individually minute to XXXX, I

prior XX% an million finished at and revenue, delivered XX%, XX%, year. gross adjusted Devices, increased First Revenue prior gross margins. basis at in Precision EBIT points we versus the versus finished XXX to Adjusted $XX margins margins grew EBIT year and grew levels. record

capacitors, Both of and strong going our driven and advantage high performance forward high-single-digits in by to a Knowles providing superior EV to product continue we competitive in defense, organic medtech, markets continue growth for technical We serve. filters mid demonstrate market. our see categories, to capabilities, the our

delivered our the in with Health Audio offset and adjustments the & Second, year end MedTech first half. in strong the margins Revenue prior in year. Hearing and record softer Specialty levels half market customer market gross demand and growth EBIT was a second by was inventory flat adjusted in

Gross Adjusted increase XX% margins at prior points finished levels. increase million, finished at XX%, over XXXX. a XXX basis versus EBIT $XX

revenues. market for we’re able double-digit and growth to the slightly segment, deteriorated Although condition deliver earnings flat

term, near end inventory adjustments the software we see and customer In continue market demand. to

confidence QX revenue this resilience for see and of as the strong profitability we trends, inventories We to sequential have customers in in XXXX and bookings growth expect market day normalized. time

MEMS our severely versus around of a market customer segment electronics business. was in prior consumer difficult adjustments, levels. consumer down the Now Revenue million China impacted and XXXX end for demand, as impact year globe in COVID was this line. segment inventory onto the top lockdowns microphone $XXX the

away conditions diversify delivering In to commodity Today, to actions actions to pleased of our than and been August, strategy place dynamics we all million accelerate $XX in savings. I'm to annualized our put confirm market greater announced address microphones. from current the restructuring have

In XX% the QX, market QX, geographies, will demand impacting continue headwinds in PCs Because smartphones. capacity markets our we less demand, margins. These end continue negatively utilization and operate across are to adjustments weak including by customers. than and to gross of in in see inventory most weak end we

recovery expect sequential on term customers' new and we near beginning market improvement China products. the these in Despite revenues QX and for profitability, our of headwinds, and

in and due the they summary, further normally COVID-related inventory lowered company, by demand, economy. China reopen seasonality, impacted but is for In as the weak consumer been sequentially it's their challenges QX to in channel

to employees, to the the has of continue our cash in face us of substantial headwinds. proud execution allowed generate which by I'm

we with As we segments are and anticipating revenue QX QX, to contributing. XX% beyond look growth three XX% sequential all

free a acquisitions. to have until internal flow. our million Lastly, significant $X liquidity the facility This cash generate growth the I would also credit to and with expectations to secured provides an balance reflects of strength we supplement extension highlight revolving like XXXX. It our of sheet substantial

let over call me John that, quarter. our to John? turn detail to the With

John Anderson

revenues and Thanks, by partially driven lower quarter down year million, shipment ago mics higher driven device the delivered reported offset audio, revenues by fourth segment period, million, precision medtech by X% defence Jeff. of The and in $XX and of consumer from specialty volumes growth XX% end and We EV, medtech, prior MEMS revenues up and the $XXX year, precision From devices. industrial markets.

COVID X%. growth our all end in at the driven For XX% Full completed record XX% PD markets. and revenues XX% was audio, our were customers half as difficult $X inventory full prior down as and In and benefited year from an second the medtech which levels year, specialty versus acquisition was the including XXXX fourth of demand segment XXXX quarter increased year we reduced revenues faced XXXX. across and levels revenue organic comparables recovery. strong strong of million, by from year-over-year

levels. For flat MSA with prior year the revenue was year, full

down in Consumer million COVID was versus year, by mic China. $XX revenues prior of inventory MEMS driven adjustments demand related electronics, global and XX% weak the issues consumer channel for

the down markets XX%, by year, weak full revenue and end adjustments For consumer driven was inventory demand in geographies. and most

did period basis inventory from were in adjustments margins our XXX above points high a not the down Precision prior a slightly that margins repeat. Fourth same QX year range XX.X%, end XXXX gross to guidance XXX XX.X%, the segment were basis ago. devices and down quarter the favorable of from gross year profit points due

by finished and of acquisition record at and gross For points driven gross audio of the we product improvements by the a Medtech half first year, full versus segment product prior favorable foreign points basis high the XXX over up specialty factory mix, year, and basis year margins XXXX. completed driven currency margins productivity prior and XX.X% mix levels, XXX XX.X%, up in were favorable benefits. customer the and

were than Consumer year, by unfavorable half significantly year. related XX.X%, basis mix, utilization, the up offset delivered down year prior XX quarter driven percentage improvements of fourth margins record factory in and driven For productivity implemented for the capacity gross foreign XXX the favorable restructuring the pricing lower points to by of MEMS microphone benefits versus MSA margins partially the to over prior gross product benefits mix, points and the by second levels, XX.X%, exchange. year, actions more full

from XX.X%, and mix, announced benefits in driven product year, year, August. points actions For restructuring the prior the full basis XXX by of gross unfavorable utilization down capacity margins offset partially by were the

full XXXX with For from the PD total than year annual offset record margin points XXXX, company mic were XX.X%, margins segment. gross basis XXX down by year-over-year gross consumer declines both segments, MEMS MSA in more in the significant margins and

lower million of more in by quarter prior cost. microphones. entirely the million, lower in from the the lower the expense were was incentive million, and $XX actions SG&A incentive down reduction MEMS year, the compensation driven expenses levels, with year $X than restructuring the prior $XX costs R&D $X by taken consumer driven benefits million than compensation

adjusted above quarter, was basis XXX our margin EBIT the For XX.X%, points expectations.

were the was the midpoint EPS the of range. For guidance $X.XX EBIT margins full XX.X%. in quarter year, our at

I'll cash Now, sheet the the of above million end slightly $X We quarter. generated spending and of million cash totaled $XX flow. our from and the quarter. to cash of equivalents Cash our million, was in balance turn at Capital the $XX midpoint guidance operations range.

since flow at million cash exited XXXX, X% spin off, the This year of the year For We X.X we've cash total the XX shares repurchase first $XX of of position. million. net just cost revenue. and net year was full in time of representing million, marks cash the free with over a ended debt $X a million

quarter for to XXXX. of first the Moving guidance

$XXX down the company a to We revenue expect total be period million, same $XXX XX% and versus year ago. million between

eight MEMS in weak gross specialty unfavourable specialty approximately the medtech MEMS With for demand segments. be devices. low offset driven mic by XX% medtech margins in in percentage estimate We to audio, in audio utilization factory down mix partially mic, the driven and from period, and to growth year-over-year capacity consumer by by and quarter the ago decline points our inventory revenues first XX%, corrections precision year consumer and

to million $XX primarily and expected higher down the be $XX segment. administrative expense million the primarily taken between and compensation $X by actions driven million levels, million, MEMS restructuring segment. up projecting incentive year actions offset $X be restructuring by between in prior we've is period, year We're microphone MEMS R&D the in from year prior $XX consumer from to cost, by mic driven million expense ago and partially consumer $XX million, selling

the effective on the in of impact basis. rate the expected a XX% and We're XX% for change holiday tax reflects forecasting full income $X.XX EBIT conditions which the unmet and year of This adjusted fully margin and share. quarter quarter average to the be $XX.X within X% X% shares a to range for $X.XX expect the EPS in be to million of assumes projecting weighted during range We're quarter to outstanding an tax 'XX an jurisdictional per of diluted to of in Malaysia. or

quarter, For range from million, the to we $XX expected spending cash milloin be approximately between $XX $X to and capital operations expect generated is million.

we'd current of uncertainty it the our the as in some Given second and headwinds commentary market, like select provide expectations to the quarter for relates macro to 'XX.

segments revenue three Jeff the As we're XX% to mentioned, expected XX% all sequential to growth drive expecting with of increase.

the XX% expect gross also return and We capacity improved more, by utilization in second or to quarter favorable driven mix. will margins

closing to now Jeff? for I'll Jeff, turn over the call back remarks.

Jeffrey Niew

no Thanks, there's John. global significant the with doubt, we some markets. are challenges dealing But in

Our high to demonstrate to and continuing strong to achieve to products us allowing and QX and cash. continue markets focus margins our value results XXXX EBIT generate strategy is on

confident revenue and XX% sequential and XX% free both we from our QX EBIT our profitability to expecting ability of margins, in XXXX, improvement to XX% targets significant are to at QX Looking remain achieve XX% flow. in and midterm cash to

questions. can we open up that, With for

Operator

Absolutely.

with session. proceed. first Labick securities. We Instructions] question-and-answer Our will Bob [Operator Please question CJS comes now the begin from

Bob Labick

taking for Thanks our afternoon. Good questions.

Jeffrey Niew

Hey, Bob.

Bob Labick

the just revenue So, a of XX% just general, kind terms in math it in to on there. looking if do the look in what little a first looks in of on guidance two the dig into at QX, growth about for you're quick gave you declines I like us sequential I wanted half more and still

minus in or in XX plus and XX QX. QX, So,

us? inventory versus can The first first you demand that segment, buy for about that end the you question talking more about if and demand new for half the really in orientation corrections, a market end out because is, talk market you've segment laid

Jeffrey Niew

Yes, with we maybe what in but with let some provide let color units. Bob, about QX, happy bit up then this full by start QX, little and do like now for just the me year. right first additional on business to start maybe delve me But see QX, that, a break also the

prepared QX. As about said we XX% I growth QX over sequential in the in to remarks, expect XX%, revenue

this fully we're and probably at we'd normal for where I booked Audio, MedTech, here think say a the I'd ahead in first be So, what Specialty QX is little time. already. we're of And

we're is -- as very, better. included through seeing the for we in in the already our And very what's guidance feeling move pretty are that achievable. getting generally, that QX, QX. quarter, So, we're bookings good in strong is Even trend QX bookings the

we when are -- improvement in QX, we're about think I where about think pretty sequential So, the I happy with that. we think, growth

say, bookings, out are space, pretty good. then story. defense, of are which Audio it's would MedTech and expectations In MedTech kind in the EV, longer a The would Specialty I similar than current the pros where PD the are even we be and good. And of quite

that feel good So, as pretty we about I think well.

Right majority see improvements. look in sequentially, And there's of I'm now, modest compute, real And move the China's would I cautiously at forecasts inventory not of will we we're in China, growth the inventory these really optimistic till nice clearly look low a of in for QX I half at back year-over-year were and but pretty still. probably in the year. sit I to QX, if sequentially. out be still how would lastly, out my I a places. at a market, seeing or recovery China some or I think specifically that there point not improvements yet, And consumer do the some point say, MEMS in But

XX% again, growth. sequential to overall, XX% So,

not go preface guidance, about make a just again. Now, this, by -- thinking kind I'll I'd and It's fluid I'm it take about, segment XXXX. comment more very like situation. through just when few to it's is this a I'll of comments

say to of to the Devices, strong, XXXX. MedTech Precision and of we terms we're is shortage then in kind growth for this the first be nice would growth, expecting looks And call, them the I'd EV. markets portion the good, chips. space Precision Devices. driven XXXX So, growth earnings last very into being last visibility expect defense in strong abatement pretty the piece in for And I by steady to strong. that's And say have of of been the bookings growth the global continue since our in of

also production more rendering but automotive, to designs for entering confidence our growth. have First, we of that now and that's production going more drive are

I little there still channel. distribution with bit elevated We inventory starting are expect your come experiencing single-digit in would industrial some than PD sit the and we growth to mid softening normal markets, in more a a in say, But overall, for XXXX.

would In is the on the to in medtech space for a would full full based be year, inventory say, quarter, which flattish the the we're expecting to there this year I what's I for segments. say first happen is going correction.

to being with the the top in a discussions points of to probably the in data to us we for lead business get year. full believe get already that year. this business our of return and All our going quarter with to growth will more it's top second first flattish prior customers half year, down But the than versus the

bottom you're here. could that the there's the I I would I have one lot most, sit and still I I are mean, the predicting, not the of a mean, be half. wide I'm the outcomes say it upswing back calling who would variety lastly, happen. people probably a of would microphone But consumer probably there Now, in say, big business.

demand in growth cautious XXXX. right first optimism But I China. inventory apps based a of China, half improvement say by return normal the And definitely the seasonality China second driven now Again, out seasonality, and clearing, back would the impacted for the the it's from see segment continue on recovery of in the half in be being half first by on there's to good. in normal sequential we'll inventory

mid kind of long So upside see color I markets right flat mean, XXXX. of I know in first I the But it's with want that flat and all MSA middle gives a markets. sure I guess road, would us I I downside challenges on would answer. some a of I what we hope PDF we half say kind lot say that. to revenue the But in all cover all, relatively and with year the here, given full you given of CMM make being single-digit,

Bob Labick

doesn't the Yeah. this But it like helpful. clarify. then at want That's I is And all. sound super to case just

potential of macro is going some environment? shifts of any market of changes, this landscape on. everything the in any like major how difficult wins terms In the losses, certainly share or any competitive there despite, sound shifts market node, that's are doesn't But you viewing there's any any like major

Jeffrey Niew

I shifts, the And are market. and don't market. identify would that any think of sit real here. with taking Precision easy defense hard say share there I say, the the competition we're in really Devices would portion getting I it's there's

We're in there a So sit you on and I terms start know just PD. taking how don't share. market capitalizing new of

terms this I high specialty we share and and of sustained. really some there think and in can't we've think up we have share lot don't share business. share, business, of say kind last sit we'd and are I audio, I changes took those see I that or relatively shared won consumer And either in say, then medtech gains sit point changing In we year, that significantly. would of there and or in this nodes down lost the to a

of XXXX. half the to this utilization to business, in trying our really would back term. going in more near get half to short capacity I taking lower we full we're get But utilization. consumer the improvements it want use that capacity the the we're we're And -- the would probably or in optimize hoping margin say space have from to for the business back because we're it

Bob Labick

Got it.

back relates in last restructuring, And me, gave said it jump then I you on promise in it's what the you complete. terms to But you the color. queue. for just of -- great just I'll us update question Okay, said

I back so so in capacity year. you that to August, capacity or half, that do Are feel the how you out, level this to think you've given the first more to restructuring? speak done probably you need Is now how that about drawdown outlook after with you there -- to take that restructuring? planned middle of going the before the of do or you are have last

Jeffrey Niew

now. have I feel level the that pretty mean, I about good right we

John Anderson

background… of lot a There's

Jeffrey Niew

noise Hey, Bob, background lot there's of still a your on side.

Bob Labick

Okay.

Sorry, last just one question.

you I'll answer, if can hit So mute. just

Jeffrey Niew

answer I’ll it. yeah. Yeah,

utilization, capacity business. took feel have, we we the the comfortable good think far with pretty at, fill of So as our market gross capacity can we we that year. we recovers, where about margin as fair again, last I capacity amount think feel capacity when And I we're good reasonably a that out

restructuring far think thing if know, in we're forward with not As as if about the restructuring, say necessary. it, one when business it if about And, it you our can there's becomes taking you sense. shy makes I action any of necessary we’ll

question. So that's how I would answer that

Bob Labick

Great. Thank so you much.

Operator

Thank you.

question next Rolland goes Our Susquehanna. to with Christopher

proceed. may You

Christopher Rolland

Hey, three inventories. roughly into if segments the it, segments quite of But all is and how March. maybe be talk for each down there you but about them, think force sequential? there. about have info. followed question, they of XX% a Can I talk don't affected XX%? the March? different thanks you sure I all of I'm guys Can here lot My a how asking to for sell-in not and for question these was that that rank will next or about, I guys, apply kind thanks I you know, either for way I guess,

Jeffrey Niew

Yeah.

the we in sit would we in QX, QX previous order down, of fiber in end just so there can to sometimes year. precision I the in it in goes that sit the they year-over-year, for on price the more of is is to the end terms QX does sequentially. March this just were of say, get price our and especially give again, where we So before -- quarter, typically typically growth as business, but yeah, QX and in down distribution lower here, a expecting channel, before the our seasonally drive And devices, want say, at increases would the I quarter, people to year,

very difficult the I control XXXX, decline some Now, QX, to in it's had would say, Health it's definitely very But MSA, Hearing sequential slowed in a we sit of strong first and that. there business, half that's down. driving

of towards to our some aid at to hearing basically growth X% back X% report, heavily Hearing pointing the they're X% to half. to look they're you customers, market, Health starting If in full X%, year weighted

to first they're be So expecting down. the half

the the being but So first with half business, we're dealing channel. down inventory also that market, end in the in

And kind fully I already I as said, would, booked but are QX. of see is so, this business what I in for we

already the numbers in we guidance, that So probably which our little thinking we're we're a fully is booked, expect. earlier

starting we're see QX, already bookings than in sequential stronger growth. margins go that of to kind we If to XX% XX% are

QX the think I half back in So about business, and that good pretty into feel I going year. the

I anything is think is wildcard business. not quarter. QX sub-XX% challenging We're is utilization. the running, capacity QX. in We're recovering seeing a the biggest very microphone

some expecting improvement are We in QX. sequential

say not extremely would some It's reduction I in what QX down. say, and being QX from I recovery But inventory China or would a it's low. just coming

I'm the XXXX. can And cautiously of growth said, to year-over-year so, as in back optimistic, that half return this I business

Christopher Rolland

that, guess, you're still if understand drop were Why I you're if implying fully guess, you totally I QX for into on up MEDTECH. case, a the first that booked I be don't maybe I following out? would believe sequential Okay. booked. fully

Jeffrey Niew

I booked it's the skewed say would fully the end that the going But happen. to that it's are out toward shipments lower of expectation. to Well, quarter

Christopher Rolland

Okay, then this if I question things is around in second have increase we large very June, guess I Okay. there. there's inventories. my two And mean,

perhaps you quantify looks? how dynamic inventory I'd understand full all, can to of this the First dynamic love even, industry

get strong dynamic I there this strong June Maybe be that inventory burned order so overall. assume, June. this, needs that threw that's seasonal of to March that in to in terms inventory is out because revenue here in why of

are largest of apologize. have A for or think guidance, largest they're would we customer. a more to But customers, just now then, for I your you the guiding your still June And it's people expected. than at do point to that where lot things it one meaningful? anticipate not And that, weaker your in I add is

Jeffrey Niew

So, But there's that shipment with look you about here's I'd it comments our to customer, going vast PD is what meaningful the so is but at expect not to say growth we from specifically and QX if between sequential make to majority I mean, we're any them. is, QX, MSA. the

it's the PD audio, sequential expecting MEDTECH So and that absolute basis, an specialty say incremental and on would we're I growth in QX.

So it's of growth. not amount a huge sequential

Secondly, following mobile terms inventory lot in as far PCs. you're as things goes, terms mean, in shipments, same a of I we're following phone of of

So let's example. give you one

it We not January was China, just handsets in sales got good. the mean, data it on I not good. for was

And still terms seeing come of there inventory the in product. channel not of finished the out that is so we're

we've the be would out inventory for that we're people I won't industry most the also of saying there sit the and saying And quarter. customers. talked cleared to looking PCs, second till and But end say are what is, the at

Christopher Rolland

That's very you helpful, Thank Jeff. great. Okay, much.

Jeffrey Niew

Thank you.

Operator

you. Thank

Our comes next with Craig-Hallum. question from Anthony Stoss

open. is line Your

Anthony Stoss

Hi, guys. with more the channel, I start you Where you me it have particularly Jeff, well, in side, of just still which doing in side? inventory let the PD for focus view is? on really PD the the wanted to do you. quite think do is

Jeffrey Niew

that, isn't there inventory majority with the the lot which of defense, of and a at there would sit that, say all. medtech say the stuff, is we do custom channel is EV. and would stuff in I I

deliver I custom bills, products, too say, much they we're not got I we market. that their specific for seeing in the oh, inventory portion of order think people

somewhere million of an $XX annualized the at I million, look say, neighborhood business, the PD you the if business So on in would $XX basis. was industrial/distribution

watched distribution, where starting the that up been can some. We are we to especially definitely, it has definitely it in we it, see inventory, creep

growth in overall, of and growth. we business mid little here, short So, by EV single medtech growth the very bit expect are But, steady a XXXX. I term. digit defense driven we – for strong strong still in very mean growth, weakness and expecting, this

Anthony Stoss

And on more it. And maybe you're it's your what fairly interested really shied market. ASPs? I'm And nature guys rational are Got the at generally, point? competitors. this the mobile you I'm your just I competitors then on guess, from seeing curious, of know away acting the But I PD side have

Jeffrey Niew

that the in side, and custom space, pricing say, that more pricing. I'll in challenged, long-term again, of stuff discussion I comment I'll would all say, in PD pressure not, contracts. in bit And a of would portion. much at has as there I There’s on most I haven't the distribution/industrial mean, I our But been little is QX. sit on and business. we the QX on CMM honest, make been it's big pricing now a be seen

If XXXX of four term, really we XXXX, for three, limited and will trend business will XXXX, that of done that in we of that we’re again. capacity, back the hopeful and to a you the and look as microphone persist at But of towards that's and okay, last things a new the years. we're and sub job year reverse of half half kind We've erosion it's the business expecting price so year pretty happen got fill in capacity, good products, lot next business. started the excess tough XXXX of the XXXX. this of saying, erosion first that But in become less has Because and into on kind end there's more, that chasing of pricing the short at as price of we this X%. you even sub look for some keeping

MSA I business Health, or Hearing I'm But think, business.

think really I dramatically. the haven't dynamics we're changed

we're I essentially think seeing flattish pricing.

John Anderson

was the increase. XXX of price Yeah, one of gross PD, some on XXXX Anthony, improvements. input one the productivity over points. really But just good There's through cost kind the margins, of expansion mix. to margin big we've in of just customers on say our drivers at drivers also – basis on we been inflationary There's increase gross add of passing some pricing,

Anthony Stoss

guys That have top And flow expectations are past makes I XX CapEx, Where And your for have given done of what you now, your sense. the on know cash year free the good view your are your the is free on reduced of a wondering updated what gave And on doubled that job kind view for over John, last months, cash flow? nearly on thoughts we're you of them? I'm And us hoping full year, since QX. it that, the you, I cash XXXX? goes? flow curious I

John Anderson

mean CapEx to of the kind you put going going – through yeah, with aren't X% be MSA and and CapEx, CapEx in more I PD, to we standpoint, in a X% cash From think flow. CMM. we're capacity thought clearly I you'd of of the it to more we're skewed going – CapEx for and or from segments, to revenue to

say I will go our of thirds So MSA. would to two in and PD, XXXX, CapEx

John Anderson

it's we worth Tony, like mentioning just XX% the our used XX% point, think side, to the microphone business. of towards CapEx go one X% were when on I And CapEx at X%,

Now, XX%, X% of X%. it's to like

spend dollars. And so we're you our we where can see how shifting

And at off with as low terms despite a of exited flow, Inventory we big macro some payables XXXX. revenues networking -- free cash delivered of had XXXX. spigot, percent cash In flow. in we because the capital. I headwind, we X%, our our a turning mean, historic payables really were started we pretty Tony, XXXX still conditions, the tough increased

$XX expect to don't $XX in it's headwind to We in a million XXXX. So capital, working million recur XXXX. that

getting feel reasonable back have a about that's to that know, good we at one pretty XX%. shot that metrics of is, the I very You

of headwind again, disciplined rate in the having on and, being then doubling a expenses. a more some So percent not kind XXXX operating little and revenue CapEx, our the of XXXX as

Jeffrey Niew

to XXXX. were – So we the of free back to you’re where flow that kind to in points of back percent sales getting know, cash

Anthony Stoss

question can I misheard. second it of half about if We last One kind and in maybe growth. talked I sneak

are September same September quarter, XXXX the QX, for to larger For be you than calling with XXXX September December? thing

Jeffrey Niew

Yes, – yes. yes, I would would say does say, the I answer

back talked half down the segment. think, all You over you growth, we've know just didn't did back break the know, in expecting I know, devices you half precision dynamics XXXX of about. We're on we we it by that the

of half as I medtech, correction started In we think the seeing in inventory XXXX. back

to the growth out of is year. a of again, end market a there expecting, lot the return have data market, lot we the back customers, think half expected are And paths. our I back in and the easier to there's

So expecting growth year-over-year. some nice we're

the microphone The really around wildcard business. is

You year-over-year say, nice I back I'm and if I that and out. there's growth you in to business, say, a but in would there very really being if we cautious growth were sit here I and expect that the seeing right really would recovery. I sit think, start know, half, yes, And calling know, now, and

flattish back kind seeing start when You in my know, microphone – Bob's the half, up we full for question, of some in better we’ll said the we to end will did the than growth year. to strong I do flattish

Anthony Stoss

luck. guys. Thanks, it. it. Best of Appreciate Got

Jeffrey Niew

Thanks.

Operator

Suji Our comes Roth [Operator next from question you. Instructions] Thank Desilva with Capital.

may You proceed.

Suji Desilva

that whether The of a visibility, longer talked to Hi, can for you be I hitting a part three Jeff. that haven't years and program talk you the about John. ramp about Maybe is the EV sub-segment, in know much grow Hi, out? material or market, it's revenues terms up yet. two can auto visibility. to potential what of

Jeffrey Niew

you so around we EV And Yeah, set expectation year, was mentioned last sales be at growth in think the that, slightly I year. tot actually kind I over of I business. last know, going It the had $XX some we million was think think we're reasonable that.

that. exceeded we So

probably the customers segment, shortages we if wasn't it shipped for think that could into our chip more of have a were experiencing. lot that I

to of just there the a kind comment in $XX XXXX, becoming I I strong. revenue. over Right of it for bookings and will XX% million revenue, think probably -- this now, that the over make But would we about very this, XX% in be is, Suji, year another terms I are would sit other part for expect say growth would so

And kind to of bookings XXXX. half, so, business revenue in have, come. I that bookings indication go But that an of, the starts give you mean, like, in in get probably back with we team the want more million could I this And bookings to hearing how the that don't when from the exactly in than where in of I'm into more obviously, excess business. could $XX translate into

from the $XX we we think million, all three years. to So, on But years like are be It I business strong. $XX had hope depends million who three, wins now. winners said, four design this said, that in can are four

winners, those If it see terms than could we'll who have, in even we with content that. how I the more win are think of we that's much achievable. be

to become it started So XXXX. material later year this in

Suji Desilva

-- way a terms And cash term. you restructuring the here, the the other that intermediate restructuring, But more lot start and we to think John, is free revenue is the more to flow, is for before XQ, and in and restructuring, as of baseline right costs, And in revenue and I’m questions OpEx through there looking that is then ahead the in did margin forward? the is run Okay. already forward of costs in rate sorry, from question the terms flow John, talked perhaps, benefit? going with -- he the of a with gross to about had elements about move

John Anderson

Yes.

at the fully very really are of If kind XXXX. XXXX we restructuring, before in levels, into that over is consumer I expect of $XX were run up a talked that's baked Bonuses as primarily I corporate in is incentive and as MEMS would what well about driven million in comp. today it's here announced I've entirely you a look last by segment, low rate, QX and the sitting million XXX annualized, the the the QX, gave that, about numbers August actually which benefits are

back uptick, normalized to So in we're levels have decent to to pretty going terms planning incentive because of we're a comp. get

restructuring And then also from support the We we also there. the took. the conversely headcount have growth PD benefits are some we to in adding

appropriate. of So I kind million rate $XX again, is run think, a

Suji Desilva

John. Okay. Thanks,

John Anderson

Sure.

Operator

you. Thank

comes Susquehanna. question Christopher next from Rolland with Our

You may proceed.

Jeffrey Niew

Chris?

Christopher Rolland

button. that. And might This one heard for have is this about John. incorrectly. Sorry I Mute

did But gross So -- you I margins I EBIT apologize. guide an have well. to QX of XX margin to XX?

John Anderson

of XX%. above back in that said we'll be gross Chris, we Jeff I – margin, with XX% at sequential sequential or said to growth XX% I And QX. margins mentioned have gross Yeah, the in –

Christopher Rolland

Yes.

made I to utilization Okay, mix EBIT thought I I XX and improved up. XX cap -- heard that or favorable

John Anderson

Yeah, capacity do… say utilization, margin, we that gross increased XX% getting to But I dependent didn't on but that. is back

Jeffrey Niew

margins there you in I improvement know, EBIT significant in is QX, a but.. going mean to be

Christopher Rolland

But not that level, yeah.

Jeffrey Niew

most margin look in the bottom QX right the that's QX line.. the -- that's – gross If to going at go revenue,

John Anderson

good It gave trail. you pretty kind of a

If you sequential of run the on just and rate said growth, think gross margins above at XX OpEx. I

you So can…

Christopher Rolland

had have you. must notes. guys. Apologize, some I Yeah, Thank bad

John Anderson

No worries. Thanks, Chris.

Operator

are time. questions further at time. at concludes you. today's be There Thank Instructions] to no [Operator this conference you questions waiting no This Thank participation. other appear call. your this There for

You may now disconnect your line.

Knowles (KN) 9 Feb 232022 Q4 Earnings call transcript