Knowles Corporation ((KN)) has held its Q4 earnings call. Read on for the main highlights of the call.
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The latest earnings call from Knowles Corporation revealed a mixed sentiment with strong financial growth tempered by significant challenges. On the positive side, there was notable annual revenue and EPS growth, robust cash flow, and a substantial order in the energy sector. However, the company faces hurdles in specialty film capacitor production, pricing pressures, tariff exposure, and cautious revenue guidance for Q1 2025.
Full Year Revenue and EPS Growth
For the full year 2024, Knowles Corporation reported a 21% increase in revenue and a 32% rise in non-GAAP diluted EPS from 2023 levels. This impressive growth was driven primarily by strong performances in the MedTech and specialty audio segments.
Strong Cash Flow and Share Buyback Program
Knowles generated $130 million in cash from operating activities during 2024. The board demonstrated confidence in the company’s financial stability by authorizing an additional $150 million for share repurchases, reflecting a commitment to returning value to shareholders.
Significant Order in the Energy Sector
A highlight of the earnings call was the announcement of a major order exceeding $75 million from a new customer in the energy sector. This order includes a commitment to ship at least $25 million by 2026, signaling a significant business opportunity.
Positive Book-to-Bill Trend in Precision Devices
The Precision Devices segment showed a positive book-to-bill trend in Q4, with strong bookings in the medical and defense markets. This indicates healthy demand and potential for future growth in these areas.
Production Challenges in Specialty Film Capacitors
Despite overall growth, Knowles faced production challenges in its specialty film capacitor line, resulting in a $3 million shortfall in Q4 shipments. These issues are linked to plant consolidation and the ramp-up of new products.
Pricing Pressure in MedTech and Specialty Audio
The MedTech and Specialty Audio segments experienced a 130 basis point decline in gross margins year-over-year. This was due to lower average pricing on mature products and increased factory costs, highlighting a need for strategic price management.
Tariff Exposure
Approximately 5% of Knowles’ 2024 revenue is at risk due to tariffs on imports from China or Mexico. The company is actively working to mitigate these impacts, but this remains a concern for their financial outlook.
Q1 2025 Revenue Guidance
Looking forward, Knowles Corporation provided guidance for Q1 2025, projecting revenues between $124 million and $134 million, which suggests a potential decline from Q4 2024. EPS is expected to range from $0.16 to $0.20, reflecting cautious optimism amid market uncertainties.
Forward-Looking Guidance
Knowles Corporation anticipates continued revenue and EPS growth in 2025, supported by a strong order backlog and strategic initiatives such as the sale of its consumer MEMS microphone business. The company is preparing to leverage its $75 million energy sector order and enhance shareholder value through an expanded stock repurchase plan.
In conclusion, the Knowles Corporation earnings call paints a picture of a company experiencing robust growth yet facing several significant challenges. While there are clear opportunities for expansion, particularly in the energy sector, the company must navigate production issues, pricing pressures, and external tariff risks to maintain its upward trajectory.
