Knowles Reports Q2 2018 Financial Results and Provides Outlook for Q3 2018
ITASCA, Ill.--(BUSINESS WIRE)--Jul 24, 2018--Knowles Corporation (NYSE: KN), a market leader and global provider of advanced micro-acoustic, audio processing, and precision device solutions, today announced results for the second quarter ended June 30, 2018.
“We delivered Q2 revenues at the high end of our guidance, with gross margins and EPS above our expected range,” said Jeffrey Niew, president and CEO of Knowles. “Sales in our Audio segment were 10 percent higher than the year ago period driven by strong MEMS microphone shipments. In the Precision Devices segment, revenues hit record levels for the second consecutive quarter due to strong demand for capacitors across most end markets and an acquisition completed in the first quarter.”
“As we enter the second half of the year, we are seeing positive momentum in both of our business segments and expect 9 percent total company revenue growth in 2018. Our microphone business continues to grow in Mobile, Ear, and IoT. We also expect increasing sales of intelligent audio solutions across all of our end markets. In addition, I expect continued strength in capacitor demand, and our hearing health business to remain stable throughout the rest of the year.”
“As we transition from an acoustic component supplier to an audio solutions provider, we are expanding our available market and enabling macro audio trends, including processing at the edge of the network and voice as a user interface. I continue to believe that our core capabilities in acoustics, digital signal processing and algorithms are unique and unrivaled, and we are ideally positioned to grow across all of our end markets,” continued Niew.
The following table highlights the Company’s financial performance on both a GAAP and supplemental non-GAAP basis for continuing operations* (in millions, except per share data):
* Continuing operations excludes the results of our speaker and receiver product line which was sold on July 7, 2016 and our timing device business which was sold on November 28, 2017.
** Current period results include $7.3 million in stock-based compensation, $1.6 million from amortization of intangibles, $1.3 million in production transfer costs and restructuring charges, and $1.3 million of other expense.
*** Not meaningful
In addition to the GAAP results included in this press release, Knowles has presented supplemental non-GAAP gross profit, earnings before interest and income taxes, adjusted earnings before interest and income taxes, non-GAAP diluted earnings per share, as well as other metrics on a non-GAAP basis that exclude certain amounts that are included in the most directly comparable GAAP measure to facilitate evaluation of Knowles’ operating performance. Non-GAAP results are not presented in accordance with GAAP. Non-GAAP information should be considered a supplement to, and not a substitute for, financial statements prepared in accordance with GAAP. In addition, the non-GAAP financial measures included in this press release do not have standard meanings and may vary from similarly titled non-GAAP financial measures used by other companies. Knowles believes that non-GAAP measures are useful as supplements to its GAAP results of operations to evaluate certain aspects of its operations and financial performance, and its management team primarily focuses on non-GAAP items in evaluating Knowles’ performance for business planning purposes. Knowles also believes that these measures assist it with comparing its performance between various reporting periods on a consistent basis, as these measures remove from operating results the impact of items that, in Knowles’ opinion, do not reflect its core operating performance including, for example, stock-based compensation, certain intangibles amortization expense, fixed asset impairment charges, restructuring, production transfer costs, and other charges which management considers to be outside our core operating results. Knowles believes that its presentation of these non-GAAP financial measures is useful because it provides investors and securities analysts with the same information that Knowles uses internally for purposes of assessing its core operating performance. For a reconciliation of these non-GAAP financial measures to the most directly comparable GAAP financial measures, see the reconciliation table accompanying this release.
Third Quarter 2018 Outlook
The following forward looking guidance for the quarter ending September 30, 2018 on a continuing operations basis is as follows:
Q3 2018 GAAP results for continuing operations are expected to include approximately $0.07 per share in stock-based compensation, $0.02 per share in amortization of intangibles, and $0.01 per share in amortization of debt discount. Expected Q3 2018 GAAP results exclude potential restructuring items.
Webcast and Conference Call Information
Investors can listen to a live or replay webcast of the Company’s quarterly financial conference call at http://investor.knowles.com. The live webcast will begin today at 3:30 p.m. Central time. The webcast replay will be available after 7:00 p.m. Central time today.
Investors can also listen to the conference call at 3:30 p.m. Central time today by calling (866) 393-4306 (United States) or (734) 385-2616 (International). The conference call replay will be available after 7:00 p.m. Central time today through 11:59 p.m. Central time on July 31, 2018 at (855) 859-2056 (United States) or (404) 537-3406 (International). The access code is 9787364.
Knowles Corporation (NYSE: KN) is a market leader and global provider of advanced micro-acoustic, audio processing, and precision device solutions, serving the mobile consumer electronics, communications, medical, military, aerospace, and industrial markets. Knowles uses its leading position in MEMS (micro-electro-mechanical systems) microphones and strong capabilities in audio processing technologies to optimize audio systems and improve the user experience in mobile, ear, and IoT applications. Knowles is also the leader in acoustic components used in hearing aids and has a strong position in high-end capacitors. Knowles’ focus on the customer, combined with unique technology, proprietary manufacturing techniques, rigorous testing, and global scale, enables it to deliver innovative solutions that optimize the user experience. Founded in 1946 and headquartered in Itasca, Illinois, Knowles is a global organization with employees in 11 countries. For more information, visit knowles.com.
Forward Looking Statements
This news release contains forward-looking statements within the meaning of the safe harbor provisions of the United States Private Securities Litigation Reform Act of 1995. The words “believe,” “expect,” “anticipate,” “project,” “estimate,” “budget,” “continue,” “could,” “intend,” “may,” “plan,” “potential,” “predict,” “seek,” “should,” “will,” “would,” “objective,” “forecast,” “goal,” “guidance,” “outlook,” “effort,” “target,” and similar expressions, among others, generally identify forward-looking statements, which speak only as of the date the statements were made. The statements in this news release are based on current plans, expectations, forecasts, and assumptions involving risks and uncertainties that could cause actual outcomes or results to differ materially from those outcomes or results that are projected, anticipated, or implied in these statements. These risks and uncertainties include, but are not limited to: MEMS microphone demand from our largest customers, in particular, two North American, a Korean, and Chinese OEM customers; the success and rate of multi-microphone and smart microphone adoption and market adoption of our “intelligent audio” solutions; our ability to stem or overcome price erosion in our segments; fluctuations in our stock’s market price; fluctuations in operating results and cash flows; our ability to prevent or identify quality issues in our products or to promptly remedy any such issues that are identified; the timing of OEM product launches; downward pressure on the average selling prices for our products; risks associated with increasing our inventories in advance of anticipated orders by customers; macroeconomic conditions, both in the U.S. and internationally; foreign currency exchange rate fluctuations; our ability to achieve continued reductions in our operating expenses; our ability to qualify our products and facilities with customers; our ability to obtain, enforce, defend or monetize our intellectual property rights; increases in the costs of critical raw materials and components; availability of raw materials and components; managing new product ramps and introductions for our customers; our dependence on a limited number of large customers; our ability to maintain and expand our existing relationships with leading OEMs in order to maintain and increase our revenue; increasing competition and new entrants in the market for our products; our ability to develop new or enhanced products or technologies in a timely manner that achieve market acceptance; our reliance on third parties to manufacture, assemble, and test our products and sub-components; government trade restrictions and import/export controls; changes in tax laws or our ability to utilize our tax structure and any net operating losses and other factors that we may not have currently identified or quantified; and other risks, relevant factors, and uncertainties identified in our Annual Report on Form 10-K for the fiscal year ended December 31, 2017, subsequent Reports on Forms 10-Q and 8-K and our other filings we make with the U.S. Securities and Exchange Commission. Knowles disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.
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