Knowles Raises Outlook as Precision Devices Drives Growth
Adjusted EBITDA margin reached 25.1% as higher production volume lifted profitability.
Knowles Corporation (KN), a precision-components maker, lifted its full-year outlook after second-quarter revenue rose 14.3% from a year earlier, driven by broad growth in Precision Devices.
The quarter extended Knowles’ expansion while marking a shift in its sales mix toward the faster-growing segment. Precision Devices accounted for about 58.9% of revenue, up from 55.6% in the prior quarter and 53.8% a year earlier.
Revenue increased to $166.8 million from $145.9 million a year earlier and rose 8.9% sequentially, though year-over-year growth moderated from 16% in the first quarter. GAAP diluted earnings from continuing operations climbed to $0.21 a share from $0.09 a year earlier, while adjusted earnings rose to $0.33 a share from $0.24.
Precision Devices revenue rose 25.2% from a year earlier to $98.3 million, with growth across Medtech, Defense, Industrial and Electrification. Its adjusted EBITDA margin expanded 310 basis points to 23.9% as higher production volume increased factory-capacity utilization.
MedTech & Specialty Audio revenue increased 1.6% to $68.5 million, trailing the growth in Precision Devices. The segment’s adjusted EBITDA margin rose 140 basis points to 43.4% as higher hearing-health shipment volumes and factory-productivity gains supported profitability.
Knowles’ $166.8 million of revenue exceeded the top of its prior outlook by $4.8 million, and adjusted earnings finished one cent above the previous range. For the third quarter, the company projects revenue of $167 million to $177 million and adjusted earnings of $0.34 to $0.38 a share. Knowles now expects full-year revenue growth of 10% to 12% and adjusted EBITDA growth of more than 20%, compared with its earlier organic-growth expectation at the high end of a 4% to 6% range.
Operating cash flow rebounded to $28.2 million from a $0.7 million use of cash in the first quarter, though it remained below the year-earlier level as working capital increased. Inventory rose 18.1% from year-end to $147.1 million as Knowles prepared for expected second-half Precision Devices demand, while book-to-bill remained above one for a seventh consecutive quarter.