Knowles Corp

Previous wording

On April 2, 2025, the U.S. announced a new universal baseline tariff of 10%, plus an additional country-specific tariff for select trading partners, on all U.S. imports. These actions, and retaliatory tariffs imposed by foreign jurisdictions, has resulted in market volatility and uncertainty regarding the ultimate effect of the tariffs on global economic conditions. Based on a preliminary analysis, we do not anticipate that these factors will have a material impact on our operations; however, we continue to monitor changes in international trade relations and trade policy, including those related to tariffs, which could adversely impact our results. We are optimizing operations and leveraging existing programs and strategies to reduce the impact from tariffs. Additionally, we are taking measures to control costs and implementing pricing actions designed to mitigate the risk these policies may have on our revenues and operations.

Current wording

On April 2, 2025, the U.S. announced a new universal baseline tariff of 10%, plus an additional country-specific tariff for select trading partners, on all U.S. imports. These actions, and retaliatory tariffs imposed by foreign jurisdictions, have resulted in market volatility and uncertainty regarding the ultimate effect of the tariffs on global economic conditions. Based on a preliminary analysis, we do not anticipate that these factors will have a material impact on our operations; however, we continue to monitor changes in international trade relations and trade policy, including those related to tariffs, which could adversely impact our results. We are optimizing operations and leveraging existing programs and strategies to reduce the impact from tariffs. Additionally, we are taking measures to control costs and implementing pricing actions designed to mitigate the risk these policies may have on our revenues and operations.

Previous wording

As inventory levels in the industrial markets have recently begun to normalize, our Precision Devices segment has experienced increased distribution orders for the past two quarters. In addition, with bookings increasing we have seen backlog across our capacitor products increase for the past two quarters.

Current wording

As inventory levels in the industrial markets have recently begun to normalize, our Precision Devices segment has experienced increased bookings for the past three quarters. In addition, with bookings increasing we have seen backlog across our capacitor products increase for the past three quarters.

Previous wording

Research and development expenses for the first quarter of 2025 were $9.7 million, compared with $9.4 million for the first quarter of 2024, an increase of $0.3 million or 3.2%. Research and development expenses as a percentage of revenues for the first quarter of 2025 and 2024 were 7.3% and 7.1%, respectively. The increase in expenses and as a percentage of revenues was primarily driven by increased development activities in both our PD and MSA segments as we continue to invest in our businesses.

Current wording

Research and development expenses for the second quarter of 2025 were $10.0 million, compared with $9.6 million for the second quarter of 2024, an increase of $0.4 million or 4.2%. Research and development expenses as a percentage of revenues for the second quarter of 2025 and 2024 were 6.9% and 7.1%, respectively. The increase in expenses was primarily driven by increased development activities in both our PD and MSA segments as we continue to invest in our businesses. The decrease in expenses as a percentage of revenues was driven by higher revenues.

Previous wording

Interest expense for the first quarter of 2025 was $2.7 million, compared with $4.4 million for the first quarter of 2024, a decrease of $1.7 million. The decrease is due to a lower outstanding revolving credit facility balance during the first quarter of 2025 and lower imputed interest expense on our Seller Note from the CD acquisition. For additional information on borrowings and interest expense, refer to Note 8. Borrowings to our Consolidated Financial Statements.

Current wording

Interest expense for the second quarter of 2025 was $2.5 million, compared with $4.6 million for the second quarter of 2024, a decrease of $2.1 million. The decrease is due to a lower outstanding revolving credit facility balance during the second quarter of 2025 and lower imputed interest expense on our Seller Note from the CD acquisition. For additional information on borrowings and interest expense, refer to Note 8. Borrowings to our Consolidated Financial Statements.

Previous wording

Other expense for the first quarter of 2025 was $0.5 million, compared with income of $0.4 million for the first quarter of 2024, a change of $0.9 million. Expense in 2025 primarily represents unrealized losses in our investment balances. Income in the first quarter of 2024 primarily represents unrealized gains in our investment balances.

Current wording

Other expense for the second quarter of 2025 was $0.9 million, compared with expense of $0.3 million for the second quarter of 2024, a change of $0.6 million. Expense in 2025 and 2024 is primarily due to unfavorable foreign currency exchange rate changes, partially offset by unrealized gains in our investment balances.

Previous wording

The effective tax rate ("ETR") from continuing operations for the first quarter of 2025 and 2024 was 150.0% and 200.0%, respectively. The ETR from continuing operations for the first quarter of 2025 and 2024 includes discrete items totaling $0.5 million of tax benefit and $0.4 million of tax expense, respectively. The discrete items impacting the tax provision for 2025 and 2024 are primarily attributable to stock-based compensation. Absent the discrete items, the ETR from continuing operations for the first quarter of 2025 and 2024 was 212.5% and 160.0%, respectively. The Company accrues taxes in various countries where it generates income and applies a valuation allowance in other jurisdictions, which resulted in the provision for the first quarter of 2025 and 2024. The change in the ETR was mainly due to the mix of earnings and losses by taxing jurisdictions and net discrete items.

Current wording

The effective tax rate ("ETR") from continuing operations for the second quarter of 2025 and 2024 was 31.0% and 38.5%, respectively. The ETR from continuing operations for the second quarter of 2025 and 2024 includes discrete items totaling $0.1 million of tax expense. The discrete items impacting the tax provision for 2025 and 2024 are primarily attributable to stock-based compensation. Absent the discrete items, the ETR from continuing operations for the second quarter of 2025 and 2024 was 30.1% and 37.2%, respectively. The Company accrues taxes in various countries where it generates income and applies a valuation allowance in other jurisdictions, which resulted in the provision for the second quarter of 2025 and 2024. The change in the ETR was due to the mix of earnings and losses by taxing jurisdictions and net discrete items.

Previous wording

The non-GAAP ETR from continuing operations for the first quarter of 2025 and 2024 was 14.7% and 10.1%, respectively. The non-GAAP ETR from continuing operations includes no discrete impact for the first quarter of 2025 or 2024. The change in the non-GAAP ETR was primarily due to decreased utilization of foreign tax credits compared to the prior year.

Current wording

The non-GAAP ETR from continuing operations for the second quarter of 2025 and 2024 was 15.9% and 10.7%, respectively. The non-GAAP ETR from continuing operations includes no discrete impact for the second quarter of 2025 or 2024. The change in the non-GAAP ETR was primarily due to decreased utilization of foreign tax credits compared to the prior year.

Previous wording

Earnings from continuing operations before interest and income taxes ("EBIT") for the first quarter of 2025 was $3.5 million, compared with $5.4 million for the first quarter of 2024, a decrease of $1.9 million. EBIT margin (EBIT as a percentage of revenues) for the first quarter of 2025 was 2.6%, compared with 4.1% for the first quarter of 2024. The decrease in EBIT and EBIT margin was primarily due to higher operating expenses and other expense in the first quarter of 2025 compared to other income for the first quarter of 2024.

Current wording

Earnings from continuing operations before interest and income taxes ("EBIT") for the second quarter of 2025 was $13.8 million, compared with $12.4 million for the second quarter of 2024, an increase of $1.4 million. EBIT margin (EBIT as a percentage of revenues) for the second quarter of 2025 was 9.5%, compared with 9.2% for the second quarter of 2024. The increase in EBIT and EBIT margin was primarily due to higher gross profit, partially offset by higher operating expenses.

Previous wording

Adjusted earnings before interest and income taxes ("Adjusted EBIT") from continuing operations for the first quarter of 2025 was $21.7 million, compared with $23.3 million for the first quarter of 2024, a decrease of $1.6 million. Adjusted EBIT margin (Adjusted EBIT from continuing operations as a percentage of revenues) for the first quarter of 2025 was 16.4%, compared with 17.5% for the first quarter of 2024. The decrease in Adjusted EBIT and Adjusted EBIT margin was primarily due to lower non-GAAP gross profit margin, partially offset by lower non-GAAP operating expenses.

Current wording

Adjusted earnings before interest and income taxes ("Adjusted EBIT") from continuing operations for the second quarter of 2025 was $27.7 million, compared with $25.2 million for the second quarter of 2024, an increase of $2.5 million. Adjusted EBIT margin (Adjusted EBIT from continuing operations as a percentage of revenues) for the second quarter of 2025 was 19.0%, compared with 18.6% for the second quarter of 2024. The increase in Adjusted EBIT and Adjusted EBIT margin was primarily due to higher non-GAAP gross profit, partially offset by higher non-GAAP operating expenses.

Previous wording

Diluted Loss per Share from Continuing Operations and Non-GAAP Diluted Earnings per Share from Continuing Operations

Current wording

Diluted Earnings per Share from Continuing Operations and Non-GAAP Diluted Earnings per Share from Continuing Operations

Previous wording

Non-GAAP diluted earnings per share from continuing operations was $0.18 for the first quarter of 2025 and the first quarter of 2024. As described above, there is no change primarily due to lower non-GAAP gross profit and higher non-GAAP income tax expense, offset by lower non-GAAP operating expenses and interest expense.

Current wording

Non-GAAP diluted earnings per share from continuing operations was $0.24 for the second quarter of 2025, compared with $0.20 for the second quarter of 2024, an improvement of $0.04. As described above, the improvement is primarily due to higher non-GAAP gross profit and lower interest expense, partially offset by higher non-GAAP operating expenses and higher non-GAAP income tax expense.

Previous wording

Revenues for the first quarter of 2025 were $132.2 million, compared with $133.3 million for the first quarter of 2024, a decrease of $1.1 million or 0.8%. PD revenues decreased$1.8 million due to lower demand from the industrial market in our CD business and the defense market in our legacy PD business, partially offset by higher demand from the medtech market in our legacy PD business. MSA revenues increased $0.7 million, primarily due to higher shipping volumes of metal cans within the specialty audio market that we manufacture and sell to Syntiant as part of our supply agreement associated with the sale of CMM, partially offset by lower shipping volumes of hearing health products and unfavorable customer mix.

Current wording

Revenues for the six months ended June 30, 2025 were $278.1 million, compared with $268.5 million for the six months ended June 30, 2024, an increase of $9.6 million or 3.6%. MSA revenues increased $7.0 million, primarily due to higher shipping volumes of metal cans within the specialty audio market that we manufacture and sell to Syntiant as part of our supply agreement associated with the sale of CMM and additional higher shipping volumes into the specialty audio and hearing health markets, partially offset by lower average pricing on mature products. PD revenues increased $2.6 million due to higher demand from the medtech and electrification markets as well as higher average pricing, partially offset by lower demand from the industrial and defense markets.

Previous wording

During the first quarter of 2025, we recorded restructuring charges of $0.5 million within Gross profit and $2.4 million within Operating expenses related to headcount reductions across the Company to rightsize operating expenses subsequent to the sale of the CMM business. For additional information, refer to Note 7. Restructuring and Related Activities to our Consolidated Financial Statements.

Current wording

During the six months ended June 30, 2025, we recorded restructuring charges of $0.5 million within Gross profit and $2.4 million within Operating expenses related to headcount reductions across the Company to rightsize operating expenses subsequent to the sale of the CMM business. For additional information, refer to Note 7. Restructuring and Related Activities to our Consolidated Financial Statements.

Previous wording

During the first quarter of 2024, we recorded restructuring charges of $1.8 million related to headcount reductions and $0.7 million for costs associated with transferring certain capacitors manufacturing to existing facilities to further optimize operations, all within our PD segment. For additional information, refer to Note 7. Restructuring and Related Activities to our Consolidated Financial Statements.

Current wording

During the six months ended June 30, 2024, we recorded restructuring charges of $1.3 million within Gross profit and $1.4 million within Operating expenses related to transferring certain capacitors manufacturing to existing facilities to further optimize operations, all within our PD segment. For additional information, refer to Note 7. Restructuring and Related Activities to our Consolidated Financial Statements.

Previous wording

Non-GAAP gross profit for the first quarter of 2025 was $55.0 million, compared with $57.9 million for the first quarter of 2024, a decrease of $2.9 million or 5.0%. Non-GAAP gross profit margin (non-GAAP gross profit as a percentage of revenues) for the first quarter of 2025 was 41.6%, compared with 43.4% for the first quarter of 2024. The decreases were primarily due to unfavorable product mix, the absence of a one-time benefit in our MSA business recorded in the prior year, and production inefficiencies in our CD business as we ramp up our specialty film product line, partially offset by Company-wide product cost reductions.

Current wording

Non-GAAP gross profit for the six months ended June 30, 2025 was $119.5 million, compared with $117.7 million for the six months ended June 30, 2024, an increase of $1.8 million or 1.5%. Non-GAAP gross profit margin (non-GAAP gross profit as a percentage of revenues) for the six months ended June 30, 2025 was 43.0%, compared with 43.8% for the six months ended June 30, 2024. The increase in non-GAAP gross profit was primarily due to higher shipping volumes and company-wide product cost reductions, partially offset by unfavorable product mix, unfavorable inventory reserve adjustments, and production inefficiencies in our CD business as we ramp up our specialty film product line. The decrease in non-GAAP gross profit margin is primarily due to unfavorable product mix, unfavorable inventory reserve adjustments, and production inefficiencies in our CD business as we ramp up our specialty film product line, partially offset by company-wide product cost reductions.

Previous wording

Selling and administrative expenses for the first quarter of 2025 were $37.2 million, compared with $37.3 million for the first quarter of 2024, a decrease of $0.1 million or 0.3%. Selling and administrative expenses as a percentage of revenues for the first quarter of 2025 and 2024 were 28.1% and 28.0%, respectively. The decrease in expenses was primarily driven by lower marketing costs, a change in our deferred compensation liability, the benefits of restructuring actions taken in the prior year, lower professional fees, and lower intangible amortization, partially offset by the acceleration of stock-based compensation expense for employees who are nearing or have reached retirement eligibility. The increase in expenses as a percentage of revenues was driven by lower revenues.

Current wording

Selling and administrative expenses for the six months ended June 30, 2025 were $73.1 million, compared with $72.9 million for the six months ended June 30, 2024, an increase of $0.2 million or 0.3%. Selling and administrative expenses as a percentage of revenues for the six months ended June 30, 2025 and 2024 were 26.3% and 27.2%, respectively. The increase in expenses was primarily driven by the acceleration of stock-based compensation expense for employees who are nearing or have reached retirement eligibility and higher incentive compensation, partially offset by the benefits of restructuring actions, a reduction of CD related acquisition costs, and reduced intangible amortization costs. The decrease in expenses as a percentage of revenues was driven by higher revenues.

Previous wording

Loss from discontinued operations for the first quarter of 2025 was $1.6 million, compared with earnings of $3.5 million for the first quarter of 2024, a decrease of $5.1 million. Loss from discontinued operations for the first quarter of 2025 was primarily driven by unfavorable working capital adjustments. Earnings from discontinued operations for the first quarter of 2024 was primarily driven by the gain on sale of asset, partially offset by income tax expense and additional expenses in connection with the sale of the CMM business. For additional information, refer to Note 3. Discontinued Operations to our Consolidated Financial Statements.

Current wording

Loss from discontinued operations for the six months ended June 30, 2025 was $1.6 million, compared with a loss of $260.6 million for the six months ended June 30, 2024, an increase of $259.0 million. Loss from discontinued operations for the six months ended June 30, 2025 was primarily driven by unfavorable working capital adjustments. Loss from discontinued operations for the six months ended June 30, 2024 was primarily driven by goodwill impairment, income tax expense, and additional expenses in connection with the sale of the CMM business, partially offset by the gain on sale of technology and gain on sale of fixed assets. For additional information, refer to Note 3. Discontinued Operations to our Consolidated Financial Statements.

Previous wording

Diluted loss per share from continuing operations was nil for the first quarter of 2025, compared with a loss of $0.01 for the first quarter of 2024, an improvementof $0.01. As described above, the improvement is primarily due to lower interest and income tax expense, partially offset by higher operating expenses and other expense in the first quarter of 2025 compared to other income for the first quarter of 2024.

Current wording

Diluted earnings per share from continuing operations was$0.08 for thesix months ended June 30, 2025, compared with earnings of$0.04 for thesix months ended June 30, 2024, an improvementof $0.04. As described above, the improvement is primarily due to lower interest and income tax expense, partially offset by higher operating expenses and other expense in the six months ended June 30, 2025 compared to other income for the six months ended June 30, 2024.

Previous wording

MSA revenues were $59.7 million for the first quarter of 2025, compared with $59.0 million for the first quarter of 2024, an increase of $0.7 million or 1.2%. Revenues increased primarily due to higher shipping volumes of metal cans within the specialty audio market that we manufacture and sell to Syntiant as part of our supply agreement associated with the sale of CMM, partially offset by lower shipping volumes of hearing health products and unfavorable customer mix.

Current wording

MSA revenues were $67.4 million for the second quarter of 2025, compared with $61.1 million for the second quarter of 2024, an increase of $6.3 million or 10.3%. Revenues increased primarily due to higher shipping volumes of metal cans within the specialty audio market that we manufacture and sell to Syntiant as part of our supply agreement associated with the sale of CMM and additional higher shipping volumes into the specialty audio and hearing health markets, partially offset by lower average pricing on mature products.

Previous wording

MSA EBIT was $19.3 million for the first quarter of 2025, compared with $22.8 million for the first quarter of 2024, a decrease of $3.5 million or 15.4%. EBIT margin for the first quarter of 2025 was 32.3%, compared with 38.6% for the first quarter of 2024. The decreases were primarily due to lower gross profit and higher operating expenses. The gross profit decrease was primarily due to unfavorable product mix, the absence of a one-time benefit recorded in the prior year, and the impact of higher shipping volumes of our lower margin metal can products to Syntiant, partially offset by product cost reductions. The increase in operating expenses was primarily driven by higher stock-based compensation.

Current wording

MSA EBIT was $21.0 million for the second quarter of 2025, compared with $24.1 million for the second quarter of 2024, a decrease of $3.1 million. EBIT margin for the second quarter of 2025 was 31.2%, compared with 39.4% for the second quarter of 2024. The decreases were primarily due to lower gross profit and higher operating expenses. The gross profit decrease was primarily due to impairment charges recorded in the second quarter of 2025, lower average pricing on mature products, unfavorable product mix, higher factory costs, and the impact of higher shipping volumes of our lower margin metal can products to Syntiant, partially offset by higher shipping volumes. The increase in operating expenses was primarily driven by higher stock-based compensation and legal costs.

Previous wording

Due to the global nature of our operations, a portion of our cash is generated and typically held outside the United States. Our cash and cash equivalents totaled $101.9 million and $130.1 million at March 31, 2025 and December 31, 2024, respectively. Of these amounts, cash held by our non-U.S. operations totaled $45.4 million and $92.4 million as of March 31, 2025 and December 31, 2024, respectively. To the extent we repatriate these funds to the U.S., we may be required to pay U.S. state income taxes and applicable foreign withholding taxes on those amounts during the period when such repatriation occurs. Management will continue to reassess our need to repatriate the earnings of our foreign subsidiaries.

Current wording

Due to the global nature of our operations, a portion of our cash is generated and typically held outside the United States. Our cash and cash equivalents totaled $103.2 million and $130.1 million at June 30, 2025 and December 31, 2024, respectively. Of these amounts, cash held by our non-U.S. operations totaled $31.8 million and $92.4 million as of June 30, 2025 and December 31, 2024, respectively. To the extent we repatriate these funds to the U.S., we may be required to pay U.S. state income taxes and applicable foreign withholding taxes on those amounts during the period when such repatriation occurs. Management will continue to reassess our need to repatriate the earnings of our foreign subsidiaries.

Previous wording

On February 24, 2020, we announced that our Board of Directors had authorized a share repurchase program of up to $100.0 million of our common stock. On April 28, 2022, we announced that our Board of Directors had increased the authorization by up to $150.0 million in additional aggregate value. On February 13, 2025, the Company announced another authorization increase of up to $150.0 million in additional aggregate value. At March 31, 2025, we have $189.0 million remaining that may yet be repurchased under our share repurchase program. The timing and amount of any shares repurchased will be determined by us based on our evaluation of market conditions and other factors, and will be made in accordance with applicable securities laws in either the open market or in privately negotiated transactions. We are not obligated to purchase any shares under the program, and the program may be suspended or discontinued at any time. Any shares repurchased will be held as treasury stock. During the three months ended March 31, 2025, the Company repurchased 300,768 shares of common stock for a total of $5.0 million. The Company did not repurchase any shares of its common stock during the three months ended March 31, 2024.

Current wording

On February 24, 2020, we announced that our Board of Directors had authorized a share repurchase program of up to $100.0 million of our common stock. On April 28, 2022, we announced that our Board of Directors had increased the authorization by up to $150.0 million in additional aggregate value. On February 13, 2025, the Company announced another authorization increase of up to $150.0 million in additional aggregate value. At June 30, 2025, we have $159.0 million remaining that may yet be repurchased under our share repurchase program. The timing and amount of any shares repurchased will be determined by us based on our evaluation of market conditions and other factors, and will be made in accordance with applicable securities laws in either the open market or in privately negotiated transactions. We are not obligated to purchase any shares under the program, and the program may be suspended or discontinued at any time. Any shares repurchased will be held as treasury stock. During the six months ended June 30, 2025 and 2024, the Company repurchased 2,182,462 and 1,432,989 shares of common stock, respectively, for a total of $35.0 million and $25.0 million, respectively.

Previous wording

Cash provided by operating activities adjusts net earnings for certain non-cash items, including impairment charges, depreciation expense, amortization of intangible assets, stock-based compensation, changes in deferred income taxes, and the effects of changes in operating assets and liabilities. Excluding non-cash items, the decrease in cash provided by operating activities in 2025 is primarily due to $21.0 million of payments to settle supplier obligations and separation costs related to the CMM business and unfavorable changes in working capital driven by the timing of collections and payments, partially offset by customer prepayments of $19.8 million.

Current wording

Cash provided by operating activities adjusts net earnings for certain non-cash items, including impairment charges, depreciation expense, amortization of intangible assets, stock-based compensation, changes in deferred income taxes, and the effects of changes in operating assets and liabilities. Excluding non-cash items, the decrease in cash provided by operating activities in 2025 is primarily due to $29.3 million of payments to settle supplier obligations and separation costs related to the CMM business and higher restructuring payments, partially offset by customer prepayments of $19.8 million and lower incentive compensation payments.

Previous wording

Cash used in financing activities during 2025 was primarily related to $15.0 million of payments on the revolving credit facility, $6.7 million of tax payments related to net share settlement of equity awards, and $5.0 million of repurchases of common stock, partially offset by proceeds of $0.6 million from the exercise of options. Cash provided by financing activities during 2024 was primarily related to $20.0 million of net borrowings on the revolving credit facility, partially offset by $5.8 million of tax payments related to net share settlement of equity awards.

Current wording

Cash used in financing activities during 2025 was primarily related to $35.0 million of repurchases of common stock, $15.0 million of payments on the revolving credit facility, and $6.9 million of tax payments related to net share settlement of equity awards, partially offset by proceeds of $0.6 million from the exercise of options. Cash used in financing activities during 2024 was primarily related to $25.0 million of repurchases of common stock, $14.0 million of net payments on the revolving credit facility, and $5.9 million payment of taxes related to net share settlement of equity awards.

Previous wording

In 2025 we generated adjusted free cash flow of $18.3 million compared to adjusted free cash flow of $13.3 million in 2024. The increase in adjusted free cash flow in 2025 was primarily due to customer prepayments of $19.8 million, lower incentive compensation payments and reduced restructuring payments, partially offset by unfavorable changes in working capital and accruals driven by the timing of collections and payments.

Current wording

In 2025 we generated adjusted free cash flow of $57.9 compared to adjusted free cash flow of $36.5 million in 2024. The increase in adjusted free cash flow in 2025 was primarily due to customer prepayments of $19.8 million and lower incentive compensation payments, partially offset by higher restructuring payments.