Knowles Corporation ((KN)) has held its Q3 earnings call. Read on for the main highlights of the call.
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The recent earnings call for Knowles Corporation reflected a generally positive sentiment, with notable achievements in revenue and EPS growth, particularly within the Precision Devices segment and defense market. The company is effectively managing its cash flow and making strategic investments, leading to share buybacks and debt reduction. Despite facing challenges such as higher production costs in the specialty film line, increased SG&A expenses, and tariff exposure, the overall outlook remains optimistic for future growth.
Overall Revenue and EPS Growth
Knowles Corporation reported a revenue of $153 million for Q3 2025, marking a 7% increase year-over-year. The earnings per share (EPS) also saw a significant rise of 22% year-over-year, reaching $0.33. This growth underscores the company’s strong financial performance and effective operational strategies.
Precision Devices Segment Success
The Precision Devices segment was a standout performer, generating $88 million in revenue, which is a 12% increase from the previous year. This growth was driven by robust demand across medtech, defense, industrial, and EV and energy markets, highlighting the segment’s strategic importance to Knowles Corporation.
Strong Cash Flow and Share Buyback
The company reported cash from operations amounting to $29 million, which facilitated a share buyback of $20 million and a reduction in bank borrowings by $15 million. This demonstrates Knowles’ commitment to returning value to shareholders and maintaining a healthy balance sheet.
Defense Market Performance
The defense market showed particularly strong performance with significant design wins and bookings, supported by increased defense spending and robust demand for military applications. This sector continues to be a key area of growth for Knowles Corporation.
Higher Production Costs in Specialty Film
The specialty film product line experienced higher production costs and lower-than-expected yields, which impacted the gross margins. This challenge highlights the need for improved efficiency and cost management in this segment.
Increased SG&A Expenses
SG&A expenses rose by $2 million from the previous year, driven by annual merit increases and higher incentive compensation costs. While these expenses are a concern, they reflect the company’s investment in talent and performance incentives.
Tariff Exposure
Tariff exposure remains a concern, although it accounts for less than 5% of revenue and 3% of the cost of goods sold. The company has successfully passed these costs onto customers so far, mitigating the impact on its financial performance.
Guidance for Continued Growth
Looking ahead, Knowles Corporation anticipates continued growth, with Q4 2025 revenues expected to be between $151 million and $161 million, representing a 9% increase at the midpoint year-over-year. EPS is projected to range from $0.33 to $0.37. The Medtech & Specialty Audio segment is expected to grow by 2% to 4%, while the Precision Devices segment is projected to grow at the high end of their 6% to 8% range in 2025. Cash generation from operations is forecasted to be 16% to 20% of revenues, supporting further share repurchases and debt reduction.
In conclusion, the earnings call for Knowles Corporation was marked by a positive sentiment, with strong revenue and EPS growth, particularly in the Precision Devices segment and defense market. While challenges such as higher production costs and increased expenses persist, the company’s strategic investments and effective cash flow management suggest a promising outlook for future growth.