KN - Earnings call transcript Q2 2024

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Thank you for standing by. My name is Calin. I will be your conference operator today. At this time, I would like to welcome everyone to the Q2 2024 Knowles Corporation Earnings Conference Call. [Operator Instructions].

to call like Cook. to now would turn over the Sarah I

may You begin.

Sarah Cook

welcome quarter President and our I'm you, Anderson, our to Thank and and CEO; second today Jeffrey Vice John of President and me Senior Sarah President XXXX CFO. Investor with Relations, Vice presenting our are Niew, and Cook, call. earnings

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

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

uncertainties The to, company filed time fiscal periodic and today's in earnings SEC not including, from release. the SEC year identified XXXX, and to in the urges XX-K limited but filings, ended investors company's to for and reports report time risks the Form annual XX, the uncertainties the December review with risks the

All of to except such statements, law. any required as forward-looking by are update as duty statements made

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

Investor continuing of on selected webcast comparable found non-GAAP website. most made the Relations will be available measures. in All basis, GAAP indicated. This a references our can the slides, financial this a directly reconciliation section be information will include on call unless in financial to which We've operations otherwise

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

Jeffrey Niew

today. all thank for joining you and Sarah, us Thanks,

saying I'm of with quarter. Let our business me performance in the second start the by pleased

plan in expected. on our performed we differentiated where have the focusing end continue QX, we solutions. of on And high-growth markets execute business to We as

expectations and range our $XX were on year-over-year at million which and represents basis. line our guided the X% both strong. Specialty and a midpoint our $X.XX Health of We EPS the market for Audio products of guided From million with segment is revenue, midpoint in Medtech our remain operations $XXX of a at and revenue end XX% grew in Hearing delivered of sequentially growth from perspective, the as cash range.

population, hearing The remain improved need market and the of favorable. margins the by dynamic execution operational reported success EBITDA and driven of adjusted of class aging penetration, middle our all globally over sustained product adoption. We XX% continued new of expansion

the for XXXX throughout year XXXX, to tech of for Audio and segment. a strength within the year and expect be growth We the med specialty

up our improvements Cornell. year-over-year Despite was basis by normalization points of sequentially and on driven headwinds revenue in levels the delivered and within operational markets, from in execution acquisition margins results flat nearly by basis. of the on margin strong Precision industrial Cornell, the Adjusted EBITDA second end inventory Devices gross Driven quarter. revenue, continued distribution a in increased solid XX% XXX

XXX into was up basis financial X% consideration solid. customers CMM standpoint, -- From and an grew to a Revenue all to shareholders we employees. are would stakeholders On positioned strategic We Microphone are in improves. points. the we to from reduction of on to continue Consumer EBITDA our to end suppliers we channel demand on and design alternatives robust, ready the conclusion prior margins up remains distribution progress and industrial was inventory begun well our have from to grow quarter the quarter, taking I in the signs business, markets, MEMS capitalize process, adjusted add, market results see activity as were growth operational recovers. as and in to also our by

quarter, second touch $XX million. on to In by also we the I continued debt cash repurchased our I $XX robust like Before while of our would reducing million capital activities. shares based conclude, on our generation, allocation

cash of remainder sustained for We expect XXXX. generation the

The of the first confidence our and of excellence XXXX businesses. half I the business, we our market remains excited demonstrate across I'm in strong to shareholder continue pleased innovative products about ahead opportunities performance to of the produced have results. our in to our continue with expanding value deliver us. execution be solid share My teams ability as financial operational and

quarterly the me to guidance. turn John John? QX details results the over our go provide Now to let into of and

John Anderson

driven the revenues Jeff. of the reported million XXXX. and organic $XXX Thanks, of quarter up ago acquisition fourth growth at period, by of We quarter X% in of midpoint . EPS year from of second range the was versus and XX% the the guidance prior the year. guidance and the $X.XX midpoint down the quarter up Medtech at Specialty $X.XX revenue million, quarter Audio of from X% in was Cornell segment, X% XXXX. our or and In $XX of second the

lower XX.X%, basis benefits market. in were specialty period, demand margins Our ago audio favorable more and by versus up year mix was by offset foreign product currency. than up Hearing the Gross the Health driven business from XXX points X%,

up as The and inventories ago lower industrial remain driven year of into capacitors offset segment the end period, channel in from revenues Precision high-performance market delivered customer by Device acquisition OEMs shipments of and partially distribution by of XX% $XX million, elevated. Cornell, the the

to points basis second XX.X%, of acquisition from the quarter XXX XXXX due Gross Cornell. down margins of were the

lower points, Cornell Cornell we Precision margin to business, the While at continue sequential remain to gross improvement legacy we expect basis throughout Devices than XXX saw margins of margins improve of and that the at XXXX.

point of related markets. which Gross a a sale margins the were of the the $X and microphone up million recorded prior flat. versus assets, in to of absence benefit due to were ago year year the consumer period basis XXX the XX.X%, to within million, ear decrease quarter fixed the was year-over-year X% increased from share second PD gains and demand IoT primarily revenues in Cornell, were due Excluding gross MEMS segment Consumer XXXX. $XX of end margins

offset higher was driven R&D QX quarter in from due of half expense higher year the $X $XX than prior by basis, fourth the Device the of of a actions taken versus Cornell year $XX the acquisition second million the XXXX. in by Cornell. On in the were X% up expenses due Precision the prior Cornell million, levels, company up Interest million borrowings SG&A associated was XXXX partially segment. in the of bank restructuring to acquisition of XXXX $X acquisition with to million, total expense quarter

to turn I'll cash and our sheet Now balance flow.

our quarter, second from cash the operating midpoint at in generated we In the million of guidance. $XX activities

representing million increase X months equivalents of $XX XXXX. over $XX $XX first and million generated the cash first Capital cash the X million cash of QX the we months ended XXXX, For quarter flow, and was of with we million. $X in spending operating a in

million. second credit under million shares $XX quarter, facility repurchased by total our the we we at cost outstanding a borrowings million, revolving During of X.X $XX reduced and

We exited and the quarter note total interest-free acquisition. issued million under in connection debt seller million Cornell second revolving the $XXX of credit with with that facility includes borrowings an $XXX our of

Lastly, on our based net EBITDA X.Xx. debt adjusted leverage trailing was months ratio XX

Moving to our guidance.

growth to $XXX prior between be million, expenses the $XX $XX expected revenues year-ago of with $XXX and period, the acquisition. Cornell million by of the quarter to R&D the organic to to X% $XX and million, are Cornell. million expected up XXXX, $XX between due third of up versus and acquisition million, expected million to million be be increases expenses are within XX% the the of selling from driven year range and $X and administrative associated are For

be within a to adjusted be imputed of EBIT quarter interest for $X approximately forecasting includes We're noncash XX%. range QX which the to margin $X interest. projecting in million, We're to XX% of million expense

is quarter This to on effective is average $XX.X to the million share. during credits. million, Projecting cash than normal capital quarter, be $XX $X.XX $X $X.XX And and assumes million. be to utilization shares X% of weighted $XX rate within to the of projecting within of range diluted XX% We expect for the basis. million of foreign an expected due to outstanding the per we're tax EPS to range from fully a be lower operations spending a which tax to of

I'll of call. operator now over back our for the turn Operator? the the to call questions-and-answers portion

Operator

comes Rolland Susquehanna. Our the with question Christopher from Instructions] [Operator line of first

Christopher Rolland

be guided could for what just you great. in Devices. and that's tech med Audio force assume and know And Specialty segments? of consumer. that sequential you be I Precision That or growth if for idea include kind strength and give of year-over-year those different would might also I some rank going to us sequential

Jeffrey Niew

Yes.

So Chris, for the question. thanks

from think I sequential of is growth first, very the coming the non-CMM this, the it's So about business. deliberate portion been

and to a on hopefully I we starting return in see particularly think to our pro improvement at -- the some forma way you growth point the starting basis on sequential future, we're and see, Cornell. near include So year-over-year when what to Precision a business, in Device think we're

relatively that seeing we're broad-based. being And

I think So pleased. pretty we're

are in Audio. We some the seeing sequential Medtech and growth Specialty

I Precision in in again from sequential think little Devices going sequential to to versus do expect pronounced in quite QX it's the a growth bit more But honestly, QX. be we have growth QX QX.

is say as a flattish. we it As a CMM coming not on QX. business, off, say, the a sequential strong basis. QX strong seeing growth. But year-over-year of I'd had pretty far it's a pretty lot I'd We are QX, in

year-over-year in up or CMM I X% was the think business about X% QX.

pretty So it's strong coming a QX. off

Christopher Rolland

is typically is up strong it different -- I maybe pretty content? you that. then -- we'll guess you is Or -- guys. then purely selling potentially for And on in CMM for you September any that timing? And it lastly, just yes there Great. stop update business. And are Are seeing something following because just

Jeffrey Niew

Yes.

take question a last update I a inching So the would towards huge but would conclusion. closer let we're the say I me not say from quarter, first. second

think what inching point. this I a closer so can we And towards We're conclusion. about say that's at

for overall, pretty the going year, up the significantly be business actually year-over-year. say, would to I is CMM full

or by I it we're not up think to X% so, quarter, it's for the I I year. so but seeing And think going what about appears full comment would we're -- that's say

Operator

from Anthony the And Craig-Hallum. line Stoss with of your next question comes

Anthony Stoss

couple I questions. have a of

-- $XXX of about? to think think XXXX. equate the number for million acquisition, that CD Or the Is million the to were ballparking quarter, you full change? kind to right $XXX On about to that I of the year still past kind is at

Jeffrey Niew

it's little than I'd that. a say lower

in quite sticking. EBITDA lower Although say, We're EBITDA larger And the here's this doing deal, think that, I what even going expected. way for of we year. $XX the $XX number. synergies the still we're million about million than when to is on We're had we I the frankly, hit announced talked we the would are

we've probably in that talked about think past. I the

terms in dollars talked we it's maybe I quarter, price quarters were X% that of of think closer maybe million X%. to X talking probably of opportunity. now would couple kind a a Last to price of say, we ago, about couple I in business. of

So have little like say, is, than we we're which feeling think where good coming And good think, what probably are. I the about expected faster CD I we margins a would acquisition -- pretty sign. really about up I'd on is, a even lower revenue, talking are

going the going we about probably market to talked the early margins recover, margins on to starts get have would kind target we've see that can said. we the Because than of and to expand, as we're are that to faster

John Anderson

QX Tony, we're just pretty thing of year, improvement. XX%. acquired that, significant sequential and when QX give -- to margins sequential seeing color little were of year, right in last a to around CD we Same this

in We we of kind the as XXs expect high to XXXX. exit be

Jeffrey Niew

Yes.

it's of obviously, also And so combination, -- a some getting but the capacity synergies. and utilization, that's

Anthony Stoss

Got it. Perfect.

want Second just question, something. I confirm to

So anything your of from are in content prior a you biggest handset terms the September customer handset? on assuming guide, in

Jeffrey Niew

we're So actually, customers. is again, would of going kind specific not say make I on comments to what

make overall, coming growth comment, I just of is the non-CMM the the again, think from would business. I sequentially portion the

our I to of we're keep year overall -- what for at but the on which overall, And if think gross will based on this to be And year. full -- up our our margin focus the exposure X% lowest for business look markets. is mobile for we year, full the you -- seeing continuing reducing one CMM

Anthony Stoss

it. Got

that quarters, Jeff, PD, you in same I to of about kind come you're down worth months? X of lastly, the it then think we Are inventory X months' months. to in X Okay. to bring And sitting in past with Or starting still it in? wanted is and

Jeffrey Niew

channel, what inventory to in you're to? correct? referring the referring That's you're So

Anthony Stoss

Yes.

Jeffrey Niew

Yes.

well as kind So up, expect classic in to be seeing I and sequentially PD we we we're brought so again, the expect improve this as to -- it in in QX, both definitely QX. PD of Cornell improving

We little are in it's inventory down we channel down, to a coming bit seeing than the the expected. probably slower but starting come

it's when improvement, going numbers, in sequential the sequential to even look of at in classic but probably nice steepness a to had we growth from we're the little PD seeing I would And So from we some the expected, have Cornell, again, definitely less it. have than QX. QX but we're

inventory in And channel. down the So still inventory. too definitely there pockets coming much there's still where the is are probably

kind to starting the end of in markets. we're overall, see of the light But the the PD tunnel at

channel. than with as faster the of passive has passive Tony, we the the much. get last mixed. seeing So the test make think sometimes of a involved versus we're not kind inventory in is been rate I There lot been at because these but a which inventory channel, is we're semiconductors, channel, still obviously inventory a comment reducing in semiconductor would What passive the in is on, semiconductors semiconductor things we've

Operator

of Baird. Tristan with And line your Gerra from question the next comes

Tyler Bomba

know This Cornell can your on side, about pricing some you is for rest I to pricing you Tristan. the you talked but across of of businesses? Tyler the have on the speak opportunities

Jeffrey Niew

for Yes, we It's have I would Again, there lot say are price sure. gotten about with the Medtech pricing these can things talk very contracts, increases very, big reductions. we've customers I sit I stable. and stable. very first, wouldn't longer-term it. of stable. especially a Audio say, in

I valuable a the Cornell, supplier. some we're we're price of seeing Device Precision valued segment, think In outside modest increases. very

increases. when before, classic again pricing think some -- think doing talked I first Tyler, I section, the about started we I've had this larger where PD in we

business, CMM outside mobile, mobile is say of I Now stable would And I been is it's in Mobile then the business. but continual. and lastly, CMM pricing our has still I'd kind there pretty challenged. think of smaller sit still say challenged.

less our exposure in as reduce in biggest to, area. see mobile, that's price decreases And so that and would our mobile probably we in less again, challenge try business. over probably the And we time,

Tyler Bomba

that seen the to at Health for relative Any business, that looking OTC expectations your just Hearing have there's then the notable market? And call sense Great. on to you anything out business? upside

Jeffrey Niew

I've Yes. of there business for us. could like And times there's significant any many a really pretty to still like in sit what volume. of We've is been always the terms I like we've becoming as on piece sockets. significant And back big how kind OTC. of hold this to lost I say can and point no can that of be. not confidently, call, about really it expectations talking tried

OTC people it's just would it's aids. had more we developing the not think say are hearing I kind helping traditional more with so the line hoped, but market about of -- people way And with is what hearing the where in I -- market hearing what still aid

a think a for years, in in And to at terms then there's an works go maybe of channel. a, person over-the-counter And opt didn't in aid are that. value way hearing the much These factor channel look into many low this realize traditional bit they the will little hearing to of having traditional people And level. expectation, a the aid aid think the appreciation complicated OTC. in hearing I for a in probably and the they at probably meeting devices. but say, well. continue getting starting would too very audiologists are But the I of market aid. under do And And hearing again, very it's we for I

Operator

with [Operator CJS question comes the Bob line Securities. Instructions] from of Our next Labick

Bob Labick

long takes drivers you a about you to So in it you And destock particular, where in talked obviously get the stuff. maybe that back can biggest have growth about in Device market inventory you that? channel overall where are the the to see little how up going in of rate? kind talk bit the Precision demand and end But the on

Jeffrey Niew

Yes. Yes.

other. participate just So as let traditional comments me about markets. kind well. again, divide make of few as bit a Cornell areas. the as these We try different industrial, electric well got to up into some all a Medtech, PD defense, little in And We'll

I definitely defense. seeing in say, and let what start defense. me just so start And with We're would growth

would We seen Device But high a some the we of has we defense. in expected. growth not will markets. have where there in in are see defense. It's aid, inventory but hearing issues, not number been full we seeing for our some as Medtech, the have of as other probably growth year, areas Precision

in the that strong we expecting that the And market the to improvement modest been, see are pretty and I are right? there's some X would of year all some probably industrial/other. say, there in is inventory still the we But more guess forward. is little of sit I'd market it has Medtech -- marketplace. that's growth [indiscernible] bit decline, what seeing year-over-year probably down, the in in has fixed, going a half not that So I say that that of starting -- my we're as back and the kind wind the

area like as not recovery We're sequential improvement. I up probably But when that the is thought of front the set it's steepness large in not the industrial some we kind more really as an seeing probably area. of effort

we're Now strong OEM lot half of different I a customers. the way, our year. expecting also let half expecting at growth kind year sequential and of in way. which driven A back of versus of by distribution. the improvement cut me OEM a Med, is can modest that it pretty back some We're sequential our different distribution, the

Bob Labick

go it. then a haven't Got this. I And had through really to fully Okay. chance

silly. you guess, the to And goodwill and the was, about that of a risk kind about talk I the segment? at process what us says little So CMM? Could what, sounding of in that impairment

John Anderson

can Sure, take Bob. I that.

third a business. the sale quarter that business. or review reviewing the we alternatives included for last were of of possibilities, restructuring of a announced in strategic that potential CMM range recall, including as So we the you year,

quarter During million. XXXX, review. goodwill of a management CMM carrying impairment our charge the we it's the a reporting $XXX the likely concluded value. a not than fair the result, team And of recorded below evaluated potential second we of of value as that its was outcomes we And more as unit

Bob Labick

the And it. M&A? get with likely is M&A? resolution and playing? Or you've Got the strategic events It But of doable they about process inching are to back can M&A potential basically, ongoing to -- you Okay. going you then talked is said be finish still segment. a talk you're I how alternatives? still in mean, most about. towards that Can separate you CMM CMM there. PD kind Or

Jeffrey Niew

Let is which strong me first very start be seasonally, very robust. with half. flow. the statement, the We're had cash cash very the the half. pleased to weaker in that half flow cash in continue to first cash We're flow is half. usually our continues We first a Normally the expecting in flow back with first

But are And at we just definitely And a I say, Cornell what do. want acquisition, guess the sit There's I is and say, which from we that that. shareholders look I of point think our make I why sure to out to acquisitions. looking what standpoint, is, they lot we would opportunities we there don't anything we it doing from at would how are and with there. a fits synergy would say do

us. I mean that acquisition this for a We're next Cornell. great looking for has been really

in M&A. the we find And are process balance thing, CMM good take don't sheet M&A. going shape, move for a the think conclusion the with forward If so to going forward move right I to of we it's is to our

John Anderson

net going ratio. on call always leverage And to going not levels Bob, said modest maintain debt a it, above, X.XX we're we've

Jeffrey Niew

cash capital on shares And leads We're back of flow. buy little because just continuing that as a well . bit to kind of the the allocation.

Operator

will Sarah the questions And there I time. this to over no turn further Cook. call are back at

Sarah Cook

today. Thank joining you us for

always, forward next your the interest in with our This As earnings Knowles, appreciate call. to look concludes today. and speaking we on you call

Operator

call. And today's this conference concludes

now may You disconnect.

Knowles (KN) 31 Jul 242024 Q2 Earnings call transcript