Knowles (KN) 16th Annual East Coast IDEAS Conference summary

Business transformation and market focus

• Underwent significant transformation, divesting low-margin assets and acquiring high-value businesses, resulting in a focus on MedTech, defense, and industrial markets.

• Now operates in two main segments: Precision Devices (specialty capacitors and RF filters) and MedTech & Specialty Audio (hearing health microphones and speakers).

• MedTech and defense markets are resilient and non-cyclical, providing insulation from broader economic cycles.

• Precision Devices segment grew 16%-17% YoY last quarter; MedTech & Specialty Audio up 14% YoY in Q1.

• Transformation included divesting consumer MEMS microphones and commodity businesses, with no further divestitures planned.

Financial performance and outlook

• Achieved nearly $600 million in revenue last year, with strong EBITDA and cash flow margins.

• Consensus for 2026 is $640-$645 million in revenue (8%+ growth) and $160 million EBITDA (14% growth).

• Six consecutive quarters of book-to-bill over one in Precision Devices; strong April bookings.

• Cash from operations averages 20% of revenue; leverage ratio expected to approach zero by end of 2026.

• EBITDA margin currently at 25%, with a path to 30% over 3-4 years through gross margin expansion and operating leverage.

Capital allocation and M&A strategy

• Repurchased $210 million in shares since 2022 at an average price of $19; current share price over $30.

• CapEx typically 3%-5% of revenue, with recent years at the high end due to capacity expansion.

• Acquired Cornell Dubilier for $263 million in 2023, a highly successful deal with significant revenue and margin growth.

• Future M&A targets include consolidation, extensions (new applications), and adjacencies (e.g., inductors, resistors, magnetics).

• Will not exceed 2.75x leverage for acquisitions; focus on $10-$30 million EBITDA targets.