Knowles (KN) 2024 Southwest IDEAS Conference summary

Business transformation and portfolio changes

• Transitioned from a consumer electronics focus to higher-margin, niche markets through divestitures and acquisitions.

• Sold the consumer MEMS microphone business for $150 million, closing expected late Q4 2024 or early Q1 2025.

• Portfolio now concentrated in MedTech, defense, and industrial sectors, with no further divestitures planned.

• Recent acquisition of Cornell Dubilier expanded industrial and capacitor offerings, adding $100 million in annual revenue.

• Gross margin profile improved from 40% to 45.9% after divestitures, with potential to reach high 40s as industrial demand recovers.

Financial performance and outlook

• Revenue CAGR excluding divested consumer business was 6.4% from 2017–2023; expected to approach 9% for 2024.

• EBITDA CAGR projected to rise from 10% to 15% with full-year impact of recent acquisitions.

• Net debt reduced to about 1x EBITDA, with $130 million net debt and $130–$140 million EBITDA expected in 2024.

• Free cash flow generation exceeds $100 million annually, supporting internal investment, share repurchases, and acquisitions.

• Targeting high single-digit revenue CAGR and 15% EPS growth through organic growth and acquisitions.

Market segments and product focus

• MedTech (including hearing health) represents 40% of 2024 revenue, defense 20%, and industrial 40%.

• Leading supplier of microphones and speakers for hearing aids, with 60–65% global market share and $15–$25 content per pair.

• High-performance capacitors and RF microwave filters serve niche, high-reliability applications in medical and defense markets.

• Hearing health business delivers 55% gross margin, 40% EBITDA margin, and stable 3% annual growth.

• Industrial segment excludes traditional automotive, focusing on customized solutions for diverse applications.