Knowles Corp

Previous wording

We are a leading manufacturer of specialty electronic components. We design parts that perform unique and critical functions for innovative technologies. Through extreme reliability, custom engineering, and scalable manufacturing, we enable businesses to succeed in the most demanding applications across medtech, defense, and industrial markets. Our high performance capacitors, radio frequency ("RF") and microwave filters, advanced medtech microphones, and balanced armature speakers, enhance the performance of our customers products to change, improve, and save lives. Our focus on the customer, combined with unique technology, proprietary manufacturing techniques, and global operational expertise, enables us to deliver innovative solutions across multiple applications. References to "Knowles," the "Company," "we," "our," or "us" refer to Knowles Corporation and its consolidated subsidiaries, unless the context otherwise requires.

Current wording

We are a leading manufacturer of specialty electronic components. We design parts that perform unique and critical functions for innovative technologies. Through extreme reliability, custom engineering, and scalable manufacturing, we enable businesses to succeed in the most demanding applications across medtech, defense, industrial, and electrification/energy markets. Our high performance capacitors, radio frequency ("RF") filters, advanced medtech microphones, and balanced armature speakers enable and enhance the performance of technologies with the power to change, improve, and save lives. Our focus on the customer, combined with unique technology, proprietary manufacturing techniques, and global operational expertise, enables us to deliver customized solutions across multiple applications. References to "Knowles," the "Company," "we," "our," or "us" refer to Knowles Corporation and its consolidated subsidiaries, unless the context otherwise requires.

Previous wording

At December 31, 2024, we had two reporting segments: (i) PD and (ii) MSA. These segments were determined in accordance with Financial Accounting Standards Board Accounting Standards Codification 280 - Segment Reporting. We previously reflected our CMM business as a reportable segment; however, CMM's results were reclassified to discontinued operations in 2024 based on the Company's intention and eventual divestiture of this business. The results of operations and the related assets and liabilities for CMM have been classified as discontinued operations for all periods presented. The remaining segments are aligned around similar product applications serving our key end markets to enhance focus on end market growth strategies.

Current wording

At December 31, 2025, we had two reporting segments: (i) PD and (ii) MSA. These segments were determined in accordance with Financial Accounting Standards Board Accounting Standards Codification 280 - Segment Reporting. These segments are aligned around similar product applications serving our key end markets to enhance focus on end market growth strategies.

Previous wording

Our PD segment specializes in the design and delivery of high performance capacitor products and RF solutions primarily serving the defense, medtech, electrification, and industrial markets. PD has sales, support, and engineering facilities in North America, Europe, and Asia, as well as manufacturing facilities in North America and Asia.

Current wording

Our PD segment specializes in the custom design and delivery of high performance capacitor products and RF solutions primarily serving the defense, industrial, medtech, and electrification/energy markets. PD has sales, support, and engineering facilities in North America, Europe, and Asia as well as manufacturing facilities in North America and Asia.

Previous wording

Our MSA segment designs and manufactures balanced armature speakers and microphones used in applications that serve the hearing health and premium audio markets. MSA has sales, support, and engineering facilities in North America, Europe, and Asia, as well as manufacturing facilities in Asia.

Current wording

Our MSA segment designs and manufactures balanced armature speakers and microphones used in hearing health and specialty audio applications that serve the medtech and industrial markets. MSA has sales, support, and engineering facilities in North America, Europe, and Asia, as well as manufacturing facilities in Asia.

Previous wording

In addition to the GAAP financial measures included in this item, we have presented certain non-GAAP financial measures. We use non-GAAP measures as supplements to our GAAP results of operations in evaluating certain aspects of our business, and our executive management team and Board of Directors focus on non-GAAP items as key measures of our performance for business planning purposes. These measures assist us in comparing our performance between various reporting periods on a consistent basis, as these measures remove from operating results the impact of items that, in our opinion, do not reflect our core operating performance. We believe that our presentation of non-GAAP financial measures is useful because it provides investors and securities analysts with the same information that we use internally for purposes of assessing our core operating performance. The Company does not consider these non-GAAP financial measures to be a substitute for the information provided by GAAP financial results. For a reconciliation of these non-GAAP financial measures to the most directly comparable GAAP financial measures, see the reconciliation included herein.

Current wording

In addition to the generally accepted accounting principles ("GAAP") financial measures included in this item, we have presented certain non-GAAP financial measures. We use non-GAAP measures as supplements to our GAAP results of operations in evaluating certain aspects of our business, and our executive management team and Board of Directors focus on non-GAAP items as key measures of our performance for business planning purposes. These measures assist us in comparing our performance between various reporting periods on a consistent basis, as these measures remove from operating results the impact of items that, in our opinion, do not reflect our core operating performance. We believe that our presentation of non-GAAP financial measures is useful because it provides investors and securities analysts with the same information that we use internally for purposes of assessing our core operating performance. The Company does not consider these non-GAAP financial measures to be a substitute for the information provided by GAAP financial results. For a reconciliation of these non-GAAP financial measures to the most directly comparable GAAP financial measures, see the reconciliation included herein.

Previous wording

Cost of goods sold ("COGS") for the year ended December 31, 2024 was $316.8 million, compared with $251.9 million for the year ended December 31, 2023, an increase of $64.9 million or 25.8%. This increase was primarily due to our acquisition of CD and lower factory capacity utilization in our legacy PD business, partially offset by product cost reductions and favorable MSA product mix.

Current wording

Cost of goods sold ("COGS") for the year ended December 31, 2025 was $332.5 million, compared with $316.8 million for the year ended December 31, 2024, an increase of $15.7 million or 5.0%. This increase was primarily due to higher shipping volumes, unfavorable product mix, and lower than expected yields in our CD business as we ramped up our specialty film product line, partially offset by company-wide product cost reductions, increased factory capacity utilization in our ceramic capacitor and RF filter businesses, a reduction of CD-related acquisition and production transfer costs, and lower precious metal costs.

Previous wording

Research and development expenses for the years ended December 31, 2023 and 2022 were $32.4 million and $29.3 million, respectively, an increase of $3.1 million or 10.6%. Research and development expenses as a percentage of revenues for the years ended December 31, 2023 and 2022 were 7.1% and 6.1%, respectively. The increase in expenses was primarily driven by additional development activities in both our MSA and PD segments as we continue to invest in our businesses. In addition, our acquisition of the CD business increased expenses in our PD segment. The increase in expenses as a percentage of revenues was driven by our increased investment and lower revenues.

Current wording

Research and development expenses for the years ended December 31, 2025 and 2024 were $40.2 million and $39.5 million, respectively, an increase of $0.7 million or 1.8%. Research and development expenses as a percentage of revenues for the years ended December 31, 2025 and 2024 was 6.8% and 7.1%. The increase in expenses was primarily driven by increased development activities as we continue to invest in our businesses and higher incentive compensation. The decrease in expenses as a percentage of revenues was driven by higher revenues.

Previous wording

Interest expense, net for the year ended December 31, 2024 was $16.3 million, compared with $5.4 million for the year ended December 31, 2023, an increase of $10.9 million or 201.9%. The increase was primarily due to imputed interest expense on our Seller Note and a higher outstanding revolving credit facility balance as a result of the acquisition of CD. For additional information on borrowings and interest expense, refer to Note 11. Borrowings to our Consolidated Financial Statements under Item 8, "Financial Statements and Supplementary Data."

Current wording

Interest expense, net for the year ended December 31, 2025 was $9.3 million, compared with $16.3 million for the year ended December 31, 2024, a decrease of $7.0 million or 42.9%. The decrease is due to lower imputed interest expense on our Seller Note from the CD acquisition, a lower outstanding revolving credit facility balance, and lower interest rates during the year ended December 31, 2025. For additional information on borrowings and interest expense, refer to Note 11. Borrowings to our Consolidated Financial Statements under Item 8, "Financial Statements and Supplementary Data."

Previous wording

Other expense for the year ended December 31, 2024 was $0.8 million, compared with $0.7 million for the year ended December 31, 2023, a change of $0.1 million. Expense in both 2024 and 2023 is primarily due to unfavorable foreign currency exchange rate changes.

Current wording

Other expense for the year ended December 31, 2025 was $3.2 million, compared with $0.8 million for the year ended December 31, 2024, a change of $2.4 million. Expense in both 2025 and 2024 is primarily due to unfavorable foreign currency exchange rate changes, partially offset by unrealized gains in our investment balances.

Previous wording

Provision for (Benefit from) Income Taxes and Non-GAAP Provision for Income Taxes

Current wording

Provision for Income Taxes and Non-GAAP Provision for Income Taxes

Previous wording

The effective tax rate ("ETR") for the year ended December 31, 2024 was 32.6% or a $11.3 million tax provision, compared with (75.9)% or a $28.3 million tax benefit for the year ended December 31, 2023. The change in the ETR was primarily due to the release of a portion of the valuation allowance in the U.S. and the impact of intangible property transfers recorded during 2023. The change in ETR was also impacted by the mix of earnings and losses by taxing jurisdictions.

Current wording

The effective tax rate ("ETR") for the year ended December 31, 2025 was 20.5% or a $13.1 million tax provision, compared with 32.6% or a $11.3 million tax provision for the year ended December 31, 2024. The change in the ETR was primarily related to a decrease in U.S. Subpart F income and U.S. Global Intangible Low-Taxed Income inclusions compared to 2024. The change in ETR was also impacted by the mix of earnings and losses by taxing jurisdictions.

Previous wording

The non-GAAP ETR for the year ended December 31, 2024 was 8.4% or a $7.7 million tax provision, compared with 22.1% or a $18.3 million tax provision for the year ended December 31, 2023. The change in the non-GAAP ETR was primarily due to increased utilization of foreign tax credits compared to the prior year. After the foreign tax credits have been fully utilized, we expect the future non-GAAP ETR to increase.

Current wording

The non-GAAP ETR for the year ended December 31, 2025 was 11.8% or a $13.1 million tax provision, compared with 8.4% or a $7.7 million tax provision for the year ended December 31, 2024. The change in the non-GAAP ETR was primarily due to decreased utilization of foreign tax credits compared to the prior year. As of December 31, 2025, the foreign tax credits have been fully utilized, and we expect the future non-GAAP ETR to increase.

Previous wording

Earnings before interest and income taxes from continuing operations ("EBIT") for the year ended December 31, 2024 was $51.0 million, compared with $42.7 million for the year ended December 31, 2023, an increase of $8.3 million or 19.4%. EBIT margin (EBIT from continuing operations as a percentage of revenues) for the year ended December 31, 2024 was 9.2%, compared with 9.3% for the year ended December 31, 2023. The increase in EBIT is primarily due to higher gross profit from the acquisition of CD, partially offset by higher operating expenses from the acquisition of CD. The decrease in EBIT margin is primarily due to higher operating expenses and impacts of the acquisition of CD on gross margins, partially offset by higher gross profit.

Current wording

Earnings before interest and income taxes from continuing operations ("EBIT") for the year ended December 31, 2025 was $73.3 million, compared with $51.0 million for the year ended December 31, 2024, an increase of $22.3 million or 43.7%. EBIT margin (EBIT from continuing operations as a percentage of revenues) for the year ended December 31, 2025 was 12.4%, compared with 9.2% for the year ended December 31, 2024. The increase in EBIT and EBIT margin was primarily due to improved operating leverage on higher revenues, higher gross profit, and dividend income recorded in 2025.

Previous wording

Adjusted earnings before interest and income taxes ("Adjusted EBIT") from continuing operations for the year ended December 31, 2024 was $107.9 million, compared with $88.2 million for the year ended December 31, 2023, an increase of $19.7 million or 22.3%. Adjusted EBIT margin (adjusted EBIT from continuing operations as a percentage of revenues) for the year ended December 31, 2024 was 19.5%, compared with 19.3% for the year ended December 31, 2023. The increase in Adjusted EBIT is primarily due to higher non-GAAP gross profit from the acquisition of CD, partially offset by higher non-GAAP operating expenses from the acquisition of CD. The increase in Adjusted EBIT margin was primarily due to higher non-GAAP gross profit, partially offset by higher non-GAAP operating expenses, and impacts of the acquisition of CD on gross margins.

Current wording

Adjusted earnings before interest and income taxes ("Adjusted EBIT") from continuing operations for the year ended December 31, 2025 was $120.1 million, compared with $107.9 million for the year ended December 31, 2024, an increase of $12.2 million or 11.3%. Adjusted EBIT margin (adjusted EBIT from continuing operations as a percentage of revenues) for the year ended December 31, 2025 was 20.2%, compared with 19.5% for the year ended December 31, 2024. The increase in Adjusted EBIT and Adjusted EBIT margin was primarily due to improved operating leverage on higher revenues and higher non-GAAP gross profit.

Previous wording

Non-GAAP diluted earnings per share for the year ended December 31, 2023 was $0.69, compared with $1.05 for the year ended December 31, 2022, a decrease of $0.36. As described above, the decrease was primarily due to lower non-GAAP gross profit, higher non-GAAP operating expenses, increased interest expense, and unfavorable foreign currency exchange rate impacts.

Current wording

Non-GAAP diluted earnings per share for the year ended December 31, 2025 was $1.11, compared with $0.92 for the year ended December 31, 2024, an increase of $0.19. As described above, the improvement is primarily due to higher non-GAAP gross profit, lower interest expense, and reduced share count, partially offset by higher non-GAAP income tax expense, non-GAAP operating expenses, and other expense.

Previous wording

(2)Production transfer costs represent duplicate costs incurred to consolidate or migrate manufacturing to facilities primarily within the United States. These amounts are included in the corresponding Gross profit and Earnings from continuing operations before interest and income taxes for each period presented.

Current wording

(2) Production transfer costs represent duplicate costs incurred to migrate manufacturing to existing facilities.

Previous wording

(3)These expenses are related to the acquisition of Cornell Dubilier by the Precision Devices segment. These expenses include ongoing costs to facilitate integration, the amortization of fair value adjustments to inventory, and costs incurred by the Company to carry out this transaction.

Current wording

(3) These expenses are related to the acquisition of CD by the PD segment. These expenses include ongoing costs to facilitate integration, the amortization of fair value adjustments to inventory, and costs incurred by the Company to carry out this transaction.

Previous wording

(4) In 2024 and 2023, other expenses include non-recurring professional service fees related to the execution of various reorganization projects and foreign currency exchange rate impacts on restructuring balances. In 2022, Other expenses represent an adjustment to pre-spin-off pension obligations of $3.4 million, which was recorded in Other (income) expense, net, and the ongoing net lease cost related to facilities not used in operations.

Current wording

(5) Other expenses include non-recurring professional service fees related to the execution of various reorganization projects and foreign currency exchange rate impacts on restructuring balances.

Previous wording

(7) The number of shares used in the diluted per share calculations on a non-GAAP basis excludes the impact of stock-based compensation expense expected to be incurred in future periods and not yet recognized in the financial statements, which would otherwise be assumed to be used to repurchase shares under the GAAP treasury stock method.

Current wording

(10) The number of shares used in the diluted average shares outstanding calculations on a non-GAAP basis excludes the impact of stock-based compensation expense expected to be incurred in future periods and not yet recognized in the financial statements, which would otherwise be assumed to be used to repurchase shares under the GAAP treasury stock method. Non-GAAP diluted average shares outstanding also excludes the impact of certain equity awards that are not yet earned.

Previous wording

PD revenues were $300.0 million for the year ended December 31, 2024, compared with $221.4 million for the year ended December 31, 2023, an increase of $78.6 million or 35.5%. Revenues increased due to our acquisition of the CD business, partially offset by lower demand from the industrial market in our legacy PD business as a result of continued demand weakness associated with excess customer and channel inventory.

Current wording

PD revenues were $328.9 million for the year ended December 31, 2025, compared with $300.0 million for the year ended December 31, 2024, an increase of $28.9 million or 9.6%. Revenues increased due to higher demand from the medtech, defense, and industrial markets, as well as higher average pricing.

Previous wording

MSA revenues were $253.5 million for the year ended December 31, 2024, compared with $235.4 million for the year ended December 31, 2023, an increase of $18.1 million or 7.7%. Revenues increased primarily due to higher shipping volumes of hearing health products driven by stronger end market demand, partially offset by lower shipping volumes into the specialty audio market and lower average pricing on mature products. In addition, revenues in the year ended December 31, 2023 were unfavorably impacted by financial incentives offered to customers in the fourth quarter of 2022, which resulted in higher shipping volumes in the fourth quarter of 2022 and lower revenues in the first quarter of 2023.

Current wording

MSA revenues were $264.3 million for the year ended December 31, 2025, compared with $253.5 million for the year ended December 31, 2024, an increase of $10.8 million or 4.3%. Revenues increased primarily due to higher shipping volumes of metal cans that we manufacture and sell to Syntiant as part of our supply agreement associated with the sale of CMM and higher shipping volumes into the specialty audio market, partially offset by lower average pricing on mature products.

Previous wording

On December 27, 2024, we completed the sale of the CMM segment to Syntiant Corp. for approximately $142.4 million in total consideration, consisting of $58.0 million in net cash received, $1.6 million for estimated working capital adjustments, and Series D-2 preferred stock of Syntiant with a fair value of $77.2 million. We will also share in certain separation costs pursuant to a credit for up to $13.5 million, which the buyer may apply to specified separation costs post-closing. For additional information, refer to Note 2. Disposed and Discontinued Operations to our Consolidated Financial Statements under Item 8, "Financial Statements and Supplementary Data.

Current wording

On December 27, 2024, we completed the sale of CMM to Syntiant for approximately $141.9 million in total consideration, consisting of $63.6 million in cash ($58.0 million net of cash sold), Syntiant Series D-2 preferred stock with a fair value of $77.2 million, and $1.1 million for estimated purchase price adjustments. The purchase price adjustment is still being finalized and is subject to change. For additional information, refer to Note 2. Discontinued Operations to our Consolidated Financial Statements. The Company shares in certain separation costs pursuant to a credit for up to $13.5 million that Syntiant may apply to specified separation costs post-closing. As the balance of the separation credit is now below the $7.0 million contractual threshold, costs will be shared equally by the Company and Syntiant. For additional information, refer to Note 1. Summary of Significant Accounting Policies to our Consolidated Financial Statements under Item 8, "Financial Statements and Supplementary Data.

Previous wording

On September 25, 2023, the Company amended its Amended and Restated Credit Agreement (the "A&R Credit Agreement") to, among other things, (a) permit the Company in connection with the acquisition of Cornell Dubilier, to incur senior priority seller financing indebtedness (the “Seller Note”) in an aggregate principal amount of $122.9 million secured by certain assets (including equity interests) acquired in connection with such acquisition and the capital stock of Cornell Dubilier, LLC (the “Acquisition Assets”), which shall mature two years after the effective date of such Seller Note (the “Seller Note Maturity Date”), (b) extends the requirement to pledge the Acquisition Assets that would otherwise constitute collateral under the Credit Agreement to the date that is 90 days after the Seller Note Maturity Date, and (c) restricts, until the Seller Note Maturity Date, the amount of dispositions and investments from the Company and certain of its subsidiaries into Cornell Dubilier, LLC and the acquired subsidiaries that constitute Acquisition Assets from exceeding $80.0 million in the aggregate. All other terms remain the same as the A&R Credit Agreement dated February 8, 2023.

Current wording

On September 25, 2023, the Company amended its Amended and Restated Credit Agreement (the "A&R Credit Agreement") to, among other things, (a) permit the Company in connection with the acquisition of Cornell Dubilier, to incur senior priority seller financing indebtedness (the “Seller Note”) in an aggregate principal amount of $122.9 million secured by certain assets (including equity interests) acquired in connection with such acquisition and the capital stock of Cornell Dubilier, LLC (the “Acquisition Assets”), which matured two years after the effective date of such Seller Note (the “Seller Note Maturity Date”) and (b) extend the requirement to pledge the Acquisition Assets that would otherwise constitute collateral under the Credit Agreement to the date that is 90 days after the Seller Note Maturity Date. All other terms remain the same as the A&R Credit Agreement dated February 8, 2023.

Previous wording

On February 8, 2023, we entered into the A&R Credit Agreement that amends and restates the prior Credit Agreement (the "2020 Credit Agreement"), which provides for a senior secured revolving credit facility with borrowings in an aggregate principal amount at any time outstanding not to exceed $400.0 million. As of December 31, 2024, outstanding borrowings under the Credit Facility were $134.0 million. At any time during the term of the Credit Facility, we will be permitted to increase the commitments under the Credit Facility or to establish one or more incremental term loan facilities under the Revolving Credit Facility in an aggregate principal amount not to exceed $200.0 million for all such incremental facilities. Commitments under the Credit Facility will terminate, and loans outstanding thereunder will mature, on February 8, 2028. For additional information, refer to Note 11. Borrowings to our Consolidated Financial Statements.

Current wording

On February 8, 2023, we entered into the A&R Credit Agreement that amends and restates the prior Credit Agreement (the "2020 Credit Agreement"), which provides for a senior secured revolving credit facility with borrowings in an aggregate principal amount at any time outstanding not to exceed $400.0 million. As of December 31, 2025, outstanding borrowings under the Credit Facility were $114.0 million. At any time during the term of the Credit Facility, we may request to increase the commitments under the Credit Facility or to establish one or more incremental term loan facilities under the Credit Facility in an aggregate principal amount not to exceed the sum of $200.0 million, plus additional amounts, so long as the senior secured leverage ratio does not exceed 2.00 to 1.00. Commitments under the Credit Facility will terminate, and loans outstanding thereunder will mature, on February 8, 2028. For additional information, refer to Note 11. Borrowings to our Consolidated Financial Statements.

Previous wording

On February 24, 2020, we announced that our Board of Directors had authorized a share repurchase program of up to $100 million of our common stock. On April 28, 2022, we announced that our Board of Directors had increased the authorization by up to $150 million in additional aggregate value. At December 31, 2024, we have $44.0 million remaining that may yet be purchased 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. The actual timing, number, and share price of shares repurchased will depend on a number of factors, including the market price of our common stock, general market and economic conditions, and applicable legal requirements. Any shares repurchased will be held as treasury stock. During the years ended December 31, 2024, 2023, and 2022 we repurchased 2,987,697, 2,851,604, and 2,339,045 shares of common stock, respectively, for a total of $53.7 million, $47.5 million, and $44.0 million, respectively.

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 that its Board of Directors had increased its share repurchase authorization by an additional $150.0 million in additional aggregate value. At December 31, 2025, we have $129.0 million remaining that may yet be purchased 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. The actual timing, number, and share price of shares repurchased will depend on a number of factors, including the market price of our common stock, general market and economic conditions, and applicable legal requirements. Any shares repurchased will be held as treasury stock. During the years ended December 31, 2025, 2024, and 2023 we repurchased 3,571,865, 2,987,697, and 2,851,604 shares of common stock, respectively, for a total of $65.0 million, $53.7 million, and $47.5 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 increase in cash provided by operating activities in 2024 is primarily due to higher revenues and gross profit. The increase was partially offset by higher 2024 payments for restructuring, interest, and income taxes.

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, dividend income, and the effects of changes in operating assets and liabilities. The decrease in cash provided by operating activities in 2025 is primarily due to $32.5 million of payments in 2025 to settle supplier obligations and separation costs related to CMM, the absence of $24.4 million of cash generated by CMM in 2024, and an increase in net working capital. This decrease was partially offset by higher 2025 earnings from continuing operations and customer prepayments of $19.8 million. In addition, the Company's 2025 payments for taxes, interest, incentive compensation, and restructuring charges were all lower than 2024.

Previous wording

The cash provided by investing activities in 2024 is driven by the proceeds from the sale of our CMM business and proceeds from the sale of intellectual property, partially offset by capital expenditures and payments to finance the seller loan to Syntiant in conjunction with the sale of our CMM business. The cash used in investing activities during 2023 was primarily driven by the acquisition of CD and capital expenditures, partially offset by proceeds from the sale of certain machinery and equipment. The 2024 and 2023 capital expenditures supported product innovation and cost savings.

Current wording

The cash used in investing activities during 2025 was driven by capital expenditures, which is primarily driven by capacity expansion related to our specialty film product line and cost savings. The cash provided by investing activities in 2024 is driven by the proceeds from the sale of CMM and proceeds from the sale of technology, partially offset by capital expenditures and payments to finance the seller loan to Syntiant in conjunction with the sale of CMM.

Previous wording

Our 2024, 2023, and 2022 capital expenditures attributable to continuing operations as a percentage of revenues (see Adjusted free cash flows below) were 2.1%, 2.7%, and 3.1%, respectively. In 2025, we expect capital expenditures to be in the range of 3% to 5% of revenues. We expect to fund these capital expenditures through our existing cash balances and cash flows from operating activities.

Current wording

Our 2025, 2024, and 2023 capital expenditures attributable to continuing operations as a percentage of revenues (see Adjusted free cash flows below) were 5.4%, 2.1%, and 2.7%, respectively. In 2026, we expect capital expenditures to be in the range of 4% to 5% of revenues. We expect to fund these capital expenditures through our existing cash balances and cash flows from operating activities.

Previous wording

Cash used in financing activities during 2024 is primarily related to $53.7 million of repurchases of common stock, the $50.0 million payment on the CD Seller Note, $26.0 million net payments on the revolving credit facility, and $6.6 million payment of taxes related to net share settlement of equity awards, partially offset by proceeds of $5.8 million from the exercise of options. Cash provided by financing activities during 2023 is primarily related to $115.0 million net borrowings of revolving credit facility, partially offset by $47.5 million of repurchases of common stock and $6.2 million payment of taxes related to net share settlement of equity awards.

Current wording

Cash used in financing activities during 2025 is primarily related to the $72.7 million payment on the CD Seller Note, $65.0 million of repurchases of common stock, $20.0 million net payments on the revolving credit facility, and $7.4 million of tax payments related to net share settlement of equity awards, partially offset by proceeds of $6.7 million from the exercise of options. Cash used in financing activities during 2024 is primarily related to $53.7 million of repurchases of common stock, the $50.0 million payment on the CD Seller Note, $26.0 million net payments on the revolving credit facility, and $6.6 million payment of taxes related to net share settlement of equity awards, partially offset by proceeds of $5.8 million from the exercise of options.

Previous wording

In addition to measuring cash flow generation based on the operating, investing, and financing classifications included in the Consolidated Statement of Cash Flows (including discontinued operations), Knowles also measures adjusted free cash flow and adjusted free cash flow as a percentage of revenues. Adjusted free cash flow is defined as non-GAAP net cash attributable to continuing operations less non-GAAP capital expenditures attributable to continuing operations. Non-GAAP net cash attributable to continuing operations is defined as net cash provided by operating activities less amounts attributable to discontinued operations. Non-GAAP capital expenditures attributable to continuing operations is defined as capital expenditures less amounts attributable to discontinued operations. Knowles believes these measures are helpful in measuring its cash generated from its continuing operations that is available to repay debt, fund acquisitions, and repurchase Knowles common stock. Adjusted free cash flow and adjusted free cash flow as a percentage of revenues are not presented in accordance with GAAP and may not be comparable to similarly titled measures used by other companies in our industry. As such, adjusted free cash flow and adjusted free cash flow as a percentage of revenues should not be considered in isolation from, or as an alternative to, any other liquidity measures determined in accordance with GAAP.

Current wording

In addition to measuring cash flow generation based on the operating, investing, and financing classifications included in the Consolidated Statement of Cash Flows (including discontinued operations), Knowles also measures adjusted free cash flow and adjusted free cash flow as a percentage of revenues. Adjusted free cash flow is defined as non-GAAP net cash attributable to continuing operations less non-GAAP capital expenditures attributable to continuing operations. Non-GAAP net cash attributable to continuing operations is defined as net cash provided by operating activities less amounts utilized in or provided by discontinued operations. Non-GAAP capital expenditures attributable to continuing operations is defined as capital expenditures less amounts attributable to discontinued operations. Knowles believes these measures are helpful in measuring its cash generated from its continuing operations that is available to repay debt, fund acquisitions, and repurchase Knowles common stock. Adjusted free cash flow and adjusted free cash flow as a percentage of revenues are not presented in accordance with GAAP and may not be comparable to similarly titled measures used by other companies in our industry. As such, adjusted free cash flow and adjusted free cash flow as a percentage of revenues should not be considered in isolation from, or as an alternative to, any other liquidity measures determined in accordance with GAAP.

Previous wording

In 2024, we generated adjusted free cash flow of $93.8 million compared to adjusted free cash flow in 2023 of $66.9 million. The increase in adjusted free cash flow in 2024 compared to 2023 was primarily due to higher adjusted earnings from continuing operations before interest and income taxes. The increase was partially offset by higher 2024 cash payments for interest and income taxes.

Current wording

In 2025, we generated adjusted free cash flow of $114.4 million compared to adjusted free cash flow in 2024 of $93.8 million. The increase in adjusted free cash flow in 2025 compared to 2024 was primarily due to higher adjusted earnings from continuing operations before interest and income taxes and also due to customer prepayments received in 2025. In addition, the Company's 2025 payments for taxes, interest, incentive compensation, and restructuring charges were all lower than 2024. The increase in adjusted free cash flow was partially offset by an increase in net working capital.

Previous wording

(1) Relates to the maturity of indebtedness under our Revolving Credit Facility and the Seller Note; does not give effect to any early repayment of or future amounts which may be drawn under the Revolving Credit Facility.

Current wording

(1) Relates to the maturity of indebtedness under our Revolving Credit Facility; does not give effect to any early repayment of or future amounts which may be drawn under the Revolving Credit Facility.

Previous wording

We conduct business through our subsidiaries in many different countries and fluctuations in currency exchange rates could have a significant impact on the reported results of operations, which are presented in U.S. dollars. A significant and growing portion of our products are manufactured in lower-cost locations and sold in various countries. Cross-border transactions, both with external parties and intercompany relationships, could result in increased foreign exchange exposures. A weakening of foreign currencies relative to the U.S. dollar would adversely affect the U.S. dollar value of the Company’s foreign currency-denominated sales, but would be beneficial to the cost of materials, products, and services purchased overseas. A strengthening of foreign currencies relative to the U.S. dollar would positively affect the U.S. dollar value of the Company’s foreign currency-denominated sales, but would have a negative effect on the cost of materials, products, and services purchased overseas. Our foreign currency exposure is primarily driven by changes in the Chinese renminbi (yuan), the Malaysian ringgit, the Philippine peso, and the Japanese yen. Based on our current sales and manufacturing activity, a sustained 10% weakening of the U.S. dollar for a period of one year would reduce our pre-tax earnings by approximately $19.4 million, excluding the impact of our hedging program. See Note 10. Hedging Transactions and Derivative Instruments to our Consolidated Financial Statements under Item 8, "Financial Statements and Supplementary Data" for information on the Company's hedges of foreign currency exchange rate risk.

Current wording

We conduct business through our subsidiaries in many different countries and fluctuations in currency exchange rates could have a significant impact on the reported results of operations, which are presented in U.S. dollars. A significant portion of our products are manufactured in lower-cost locations and sold in various countries. Cross-border transactions, both with external parties and intercompany relationships, could result in increased foreign exchange exposures. A weakening of foreign currencies relative to the U.S. dollar would adversely affect the U.S. dollar value of the Company’s foreign currency-denominated sales, but would be beneficial to the cost of materials, products, and services purchased overseas. A strengthening of foreign currencies relative to the U.S. dollar would positively affect the U.S. dollar value of the Company’s foreign currency-denominated sales, but would have a negative effect on the cost of materials, products, and services purchased overseas. Our foreign currency exposure is primarily driven by our manufacturing activity in lower-cost locations and changes in the Chinese renminbi (yuan), the Malaysian ringgit, the Philippine peso, and the Mexican peso. Based on our current manufacturing activity and to a lesser extent sales, a sustained 10% weakening of the U.S. dollar for a period of one year would reduce our pre-tax earnings by approximately $14.8 million, excluding the impact of our hedging program. See Note 10. Hedging Transactions and Derivative Instruments to our Consolidated Financial Statements under Item 8, "Financial Statements and Supplementary Data" for information on the Company's hedges of foreign currency exchange rate risk.

Previous wording

Dependence on Key Customers; Concentration of Credit

Current wording

Dependence on Key Customers; Utilization of Distributors

Previous wording

The loss of any key customer and our inability to replace revenues provided by a key customer may have a material adverse effect on our business and financial condition. For the years ended December 31, 2024, 2023, and 2022, WS Audiology A/S accounted for approximately 14%, 16%, and 13% of our revenues attributable to continuing operations, respectively. For the year ended December 31, 2022, Sonova Holding AG accounted for approximately 12% of our revenues attributable to continuing operations. No other customer accounted for more than 10% of total revenues during these periods. If a key customer fails to meet payment obligations, our operating results and financial condition could be adversely affected.

Current wording

The loss of any key customer or a reduction in the purchases of our products by such customers or our large distribution partners and our inability to replace those revenues may have a material adverse effect on our business and financial condition. In addition, if a key customer or distribution partner fails to meet payment obligations, our operating results and financial condition could be adversely affected. Further, our distributors could retain inventory levels that exceed their future anticipated sale, which could adversely impact our future sales to those distributors. Our only customers that accounted for 10% or more of total revenues in 2025 were WS Audiology A/S and TTI, Inc. WS Audiology, a hearing aid manufacturer, accounted for approximately 11%, 14%, and 16% of our revenues attributable to continuing operations for the years ended December 31, 2025, 2024, and 2023, respectively. TTI is a distributor of electromechanical components. For the year ended December 31, 2025, TTI, Inc. accounted for approximately 10% of our revenues attributable to continuing operations. In prior years, TTI accounted for less than 10% of our revenues attributable to continuing operations.

Previous wording

Borrowings under our Revolving Credit Facility are at variable interest rates. A hypothetical 100 basis point increase in interest rates affecting our external variable rate borrowings as of December 31, 2024 would increase our annual interest expense by approximately $1.3 million.

Current wording

Borrowings under our Revolving Credit Facility are at variable interest rates. A hypothetical 100 basis point increase in interest rates affecting our external variable rate borrowings as of December 31, 2025 would increase our annual interest expense by approximately $1.1 million.

Previous wording

Goodwill: The Company tests goodwill for impairment annually as of October 1, or more frequently if there are events or circumstances indicating it is more likely than not (that is, a likelihood of more than 50 percent) that the carrying value of individual reporting units may exceed their respective fair values. Recoverability of goodwill is measured at the reporting unit level. The Company’s three reporting units are Precision Devices, Cornell Dubilier, and MedTech & Specialty Audio.

Current wording

Goodwill: The Company tests goodwill for impairment annually as of October 1, or more frequently if there are events or circumstances indicating it is more likely than not (that is, a likelihood of more than 50 percent) that the carrying value of individual reporting units may exceed their respective fair values. Recoverability of goodwill is measured at the reporting unit level. The Company’s four reporting units are High Performance Capacitors ("HPC"), Radio Frequency Microwave Filters ("RFMW"), Cornell Dubilier ("CD"), and MedTech & Specialty Audio ("MSA").

Previous wording

In the quantitative impairment assessment, fair value is estimated using a discounted cash flow model that includes market participant assumptions, forecasted future cash flows based on historical performance and future estimated results, determination of appropriate discount rates, and other assumptions which are considered reasonable in the discounted cash flow analysis. Significant assumptions used in the model include forecasted revenue and terminal growth rates, profit margins, income tax rates, capital expenditures, working capital requirements, and the Company's weighted average cost of capital. The fair value measurements for reporting units are based on significant unobservable inputs.

Current wording

In the quantitative impairment assessment, fair value is estimated using a discounted cash flow model that includes market participant assumptions, forecasted future cash flows based on historical performance and future estimated results, and other assumptions which are considered reasonable in the discounted cash flow analysis. Significant assumptions used in the model include forecasted revenue and terminal growth rates, profit margins, income tax rates, capital expenditures, working capital requirements, and the Company's weighted average cost of capital. The fair value measurements for reporting units are based on significant unobservable inputs.

Previous wording

The Company performed a qualitative impairment assessment for its three reporting units as of October 1, 2024. No goodwill impairment charges were recorded in continuing operations during the years ended December 31, 2024, 2023, or 2022.

Current wording

The Company performed a qualitative goodwill impairment test for the HPC, RFMW, and MSA reporting units and a quantitative impairment test for the CD reporting unit as of October 1, 2025. No goodwill impairment charges were recorded in continuing operations during the years ended December 31, 2025, 2024, or 2023.

Previous wording

Fair value measurements require considerable judgment and are sensitive to changes in underlying assumptions. As a result, there can be no assurance that estimates and assumptions made for purposes of the impairment assessment will prove to be an accurate prediction of the future. Potential circumstances that could have a negative effect on the fair value of our reporting units include, but are not limited to, lower than forecasted revenue and terminal growth rates, decreased profit margins, higher income taxes, increased capital expenditures, higher working capital requirements, and changes in the weighted average cost of capital.

Current wording

Fair value measurements require considerable judgment and are sensitive to changes in underlying assumptions. As a result, there can be no assurance that estimates and assumptions made for purposes of the impairment assessment will prove to be an accurate prediction of the future. Potential circumstances that could have a negative effect on the fair value of our reporting units include, but are not limited to, lower than forecasted revenue and terminal growth rates, decreased profit margins, higher income taxes, increased capital expenditures, higher working capital requirements, and an increase in the weighted average cost of capital.