Knowles Reports Q1 2021 Financial Results and Provides Outlook for Q2 2021
Knowles Corporation (NYSE: KN) reported Q1 2021 revenues of $201 million, exceeding guidance. The gross profit margin improved to 38.8%. Strong demand for MEMS microphones and recovery trends in Hearing Health drove audio revenues, while Precision Devices met expectations. For Q2 2021, the company anticipates a 28% sales increase year-over-year, supported by record bookings in Precision Devices. Knowles aims for strong earnings growth in 2021, bolstered by increased revenues and operating expense control.
- Q1 2021 revenue of $201 million, exceeding guidance.
- Gross profit margin improved to 38.8%.
- 28% anticipated sales growth in Q2 2021.
- Record Q1 bookings in Precision Devices.
- Q1 revenues decreased from $243.2 million in Q4 2020.
Knowles Corporation (NYSE: KN), a market leader and global provider of advanced micro-acoustic microphones, speakers, audio processing, and precision device solutions, today announced results for the first quarter ended March 31, 2021.
“First quarter revenue and gross margin were above the midpoint of our guidance. Audio revenues were driven by strong MEMS microphone demand across multiple end markets and improving trends in our Hearing Health business, while Precision Devices revenues were in line with our expectations,” said Jeffrey Niew, president and CEO of Knowles.
“For the second quarter of 2021, we expect sales to increase
Financial Highlights
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):
Q1FY21 |
Q4FY20 |
Q1FY20 |
|
Revenues |
|
|
|
Gross profit (as a % of revenues) |
|
|
|
Non-GAAP gross profit (as a % of revenues) |
|
|
|
Diluted earnings (loss) per share* |
|
|
|
Non-GAAP diluted earnings per share |
|
|
|
* Current period results include
Second Quarter 2021 Outlook
The forward looking guidance for the quarter ending June 30, 2021 on a continuing operations basis is as follows:
|
GAAP |
|
Adjustments |
|
Non-GAAP |
|
Revenues |
|
|
- |
|
|
|
Gross Profit Margin |
|
|
|
|
|
|
EPS |
|
|
|
|
|
Q2 2021 GAAP results are expected to include approximately
Non-GAAP Financial Measures
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, 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.
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 (844) 589-0917 (United States) or (647) 253-8649 (International). The conference call replay will be available after 7:00 p.m. Central time today through 11:59 p.m. Central time on April 29, 2021 at (800) 585-8367 (United States) or (416) 621-4642 (International). The conference ID is 6551218.
About Knowles
Knowles Corporation (NYSE: KN) is a market leader and global provider of advanced micro-acoustic microphones and speakers, audio processing, and precision device solutions, serving the consumer electronics, communications, medtech, defense, electric vehicle, and industrial markets. Knowles uses its leading position in SiSonic™ 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, high-end capacitors and mmWave RF solutions for a diverse set of markets. 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 over a dozen countries. The company continues to invest in high value solutions to diversify its revenue and increase exposure to high growth markets. 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, such as statements about our future plans, objectives, expectations, financial performance, and continued business operations. 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 currently available information and the current expectations, forecasts, and assumptions of Knowles’ management concerning 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, including risks relating to the COVID-19 pandemic and governmental responses to it, including but not limited to, the impact on our supply chain, customer demand, and costs associated with our operations. Other risks and uncertainties include, but are not limited to: unforeseen changes in MEMS microphone demand from our largest customers, in particular, two North American, a Korean, and Chinese OEM customers; our ongoing ability to execute our strategy to diversify our end markets and customers; 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; risks associated with increasing our inventories in advance of anticipated orders by customers; global economic instability; the impact of changes to laws and regulations that affect the Company’s ability to offer products or services to customers in different regions; risks associated with shareholder activism, including proxy contests; our ability to achieve continued reductions in our operating expenses; the ability to qualify our products and facilities with customers; our ability to obtain, enforce, defend or monetize our intellectual property rights; difficulties or delays in and/or the Company’s inability to realize expected cost synergies from its acquisitions; 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; escalating international trade tensions, new or increased tariffs and trade wars among countries; financial risks, including risks relating to currency fluctuations, credit risks and fluctuations in the market value of the Company; market risk associated with fluctuations in commodity prices, particularly for various precious metals used in our manufacturing operation, and changes in tax laws, changes in tax rates and exposure to additional tax liabilities; and other risks, relevant factors, and uncertainties identified in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020, 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.
| INVESTOR SUPPLEMENT - FIRST QUARTER 2021 | ||||||||||||
| KNOWLES CORPORATION | ||||||||||||
| CONSOLIDATED STATEMENTS OF EARNINGS | ||||||||||||
| (in millions, except share and per share amounts) | ||||||||||||
| (unaudited) | ||||||||||||
| Quarter Ended | ||||||||||||
| March 31, 2021 | December 31, 2020 | March 31, 2020 | ||||||||||
| Revenues | $ |
201.0 |
|
$ |
243.2 |
|
$ |
163.1 |
|
|||
| Cost of goods sold |
|
123.0 |
|
|
151.2 |
|
|
105.5 |
|
|||
| Restructuring charges - cost of goods sold |
|
- |
|
|
- |
|
|
1.4 |
|
|||
| Gross profit |
|
78.0 |
|
|
92.0 |
|
|
56.2 |
|
|||
| Research and development expenses |
|
23.3 |
|
|
22.7 |
|
|
25.7 |
|
|||
| Selling and administrative expenses |
|
36.2 |
|
|
32.2 |
|
|
36.2 |
|
|||
| Restructuring charges |
|
0.2 |
|
|
(0.5 |
) |
|
3.9 |
|
|||
| Operating expenses |
|
59.7 |
|
|
54.4 |
|
|
65.8 |
|
|||
| Operating earnings (loss) |
|
18.3 |
|
|
37.6 |
|
|
(9.6 |
) |
|||
| Interest expense, net |
|
4.0 |
|
|
3.9 |
|
|
3.7 |
|
|||
| Other (income) expense, net |
|
(0.9 |
) |
|
1.3 |
|
|
(2.7 |
) |
|||
| Earnings (loss) before income taxes and discontinued operations |
|
15.2 |
|
|
32.4 |
|
|
(10.6 |
) |
|||
| Provision for income taxes |
|
2.7 |
|
|
2.8 |
|
|
2.2 |
|
|||
| Earnings (loss) from continuing operations |
|
12.5 |
|
|
29.6 |
|
|
(12.8 |
) |
|||
| Earnings from discontinued operations, net |
|
- |
|
|
- |
|
|
3.7 |
|
|||
| Net earnings (loss) | $ |
12.5 |
|
$ |
29.6 |
|
$ |
(9.1 |
) |
|||
| Earnings (loss) per share from continuing operations: | ||||||||||||
| Basic | $ |
0.14 |
|
$ |
0.32 |
|
$ |
(0.14 |
) |
|||
| Diluted | $ |
0.13 |
|
$ |
0.32 |
|
$ |
(0.14 |
) |
|||
| Earnings per share from discontinued operations: | ||||||||||||
| Basic | $ |
- |
|
$ |
- |
|
$ |
0.04 |
|
|||
| Diluted | $ |
- |
|
$ |
- |
|
$ |
0.04 |
|
|||
| Net earnings (loss) per share: | ||||||||||||
| Basic | $ |
0.14 |
|
$ |
0.32 |
|
$ |
(0.10 |
) |
|||
| Diluted | $ |
0.13 |
|
$ |
0.32 |
|
$ |
(0.10 |
) |
|||
| Weighted-average common shares outstanding: | ||||||||||||
| Basic |
|
92,263,705 |
|
|
91,667,461 |
|
|
91,795,980 |
|
|||
| Diluted |
|
94,983,586 |
|
|
92,957,686 |
|
|
91,795,980 |
|
|||
| KNOWLES CORPORATION | ||||||||||||
| RECONCILIATION OF GAAP FINANCIAL MEASURES TO NON-GAAP FINANCIAL MEASURES (1) | ||||||||||||
| (in millions, except share and per share amounts) | ||||||||||||
| (unaudited) | ||||||||||||
| Quarter Ended | ||||||||||||
| March 31, 2021 |
December 31, 2020 |
March 31, 2020 |
||||||||||
| Gross profit | $ |
78.0 |
|
$ |
92.0 |
|
$ |
56.2 |
|
|||
| Gross profit as % of revenues |
|
38.8 |
% |
|
37.8 |
% |
|
34.5 |
% |
|||
| Stock-based compensation expense |
|
0.4 |
|
|
0.4 |
|
|
0.5 |
|
|||
| Restructuring charges |
|
- |
|
|
- |
|
|
1.4 |
|
|||
| Production transfer costs (2) |
|
- |
|
|
0.1 |
|
|
0.1 |
|
|||
| Non-GAAP gross profit | $ |
78.4 |
|
$ |
92.5 |
|
$ |
58.2 |
|
|||
| Non-GAAP gross profit as % of revenues |
|
39.0 |
% |
|
38.0 |
% |
|
35.7 |
% |
|||
| Research and development expenses | $ |
23.3 |
|
$ |
22.7 |
|
$ |
25.7 |
|
|||
| Stock-based compensation expense |
|
(1.5 |
) |
|
(1.2 |
) |
|
(2.4 |
) |
|||
| Intangibles amortization expense |
|
(1.5 |
) |
|
(1.3 |
) |
|
(1.4 |
) |
|||
| Non-GAAP research and development expenses | $ |
20.3 |
|
$ |
20.2 |
|
$ |
21.9 |
|
|||
| Selling and administrative expenses | $ |
36.2 |
|
$ |
32.2 |
|
$ |
36.2 |
|
|||
| Stock-based compensation expense |
|
(9.2 |
) |
|
(3.3 |
) |
|
(0.6 |
) |
|||
| Intangibles amortization expense |
|
(1.8 |
) |
|
(1.9 |
) |
|
(1.9 |
) |
|||
| Other (3) |
|
(0.5 |
) |
|
(0.4 |
) |
|
(0.2 |
) |
|||
| Non-GAAP selling and administrative expenses | $ |
24.7 |
|
$ |
26.6 |
|
$ |
33.5 |
|
|||
| Operating expenses | $ |
59.7 |
|
$ |
54.4 |
|
$ |
65.8 |
|
|||
| Stock-based compensation expense |
|
(10.7 |
) |
|
(4.5 |
) |
|
(3.0 |
) |
|||
| Intangibles amortization expense |
|
(3.3 |
) |
|
(3.2 |
) |
|
|||||
FAQ
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