Knowles Q2 2025 Earnings Call Summary and Q&A Highlights: Strong Bookings and Strategic Growth Initiatives
Earnings Call
08/05
[Management View] Knowles Corporation reported Q2 2025 revenue of $146 million, an 8% YoY increase, surpassing guidance. EPS rose by 20% YoY to $0.24. Key growth drivers included MedTech and Specialty Audio (MSA) and Precision Devices (PD) segments, with strong demand in hearing health and specialty audio. The company emphasized strategic growth through specialty film and inductor product lines.
[Outlook] For Q3 2025, Knowles projects revenue between $144 million and $154 million, with EPS guidance of $0.29-$0.33. The company anticipates continued sequential and YoY growth, supported by robust order activity and normalized distribution inventory. Capital expenditures are expected to rise for specialty film capacity expansion.
[Financial Performance] Q2 2025 saw an 8% YoY revenue increase, with MSA revenue up 10% YoY and PD revenue up 6% YoY. Gross margins improved sequentially, with MSA at 50.6% and PD at 38.7%. SG&A expenses rose by $2 million YoY, while interest expenses decreased by $2 million due to reduced debt.
[Q&A Highlights] Question 1: What is driving the upside in guidance, and any updates on the thin film opportunity? Answer: The PD segment had a strong bookings quarter with a book-to-bill ratio above 1.15, driven by demand across medical, defense, and industrial markets. MSA demand rebounded in Q2, and both segments are expected to grow YoY in 2025. Specialty film growth is expected to contribute significantly in H2 2025.
Question 2: Thoughts on Q4 without the MEMS business and gross margin expectations? Answer: While not guiding for Q4, Knowles expects YoY and sequential growth. Gross margins are projected to improve by at least 100 basis points in Q3, driven by capacity utilization in high-performance products and the MSA segment.
Question 3: Expansion of specialty film and inductor lines and their impact on growth? Answer: Specialty film growth will be driven by MedTech, defense, and industrial customers, with significant contributions expected in late 2025. The inductor line, launched recently, will leverage ceramic capacitor capabilities, with revenue expected in approximately 24 months.
Question 4: M&A market outlook and capital allocation strategy? Answer: The M&A market is reopening, and Knowles is exploring opportunities in consolidation, extensions, and adjacencies. The company maintains financial flexibility with low leverage and strong cash flow, supporting share buybacks and potential acquisitions.
[Sentiment Analysis] Analysts expressed positive sentiment, acknowledging strong performance and strategic growth initiatives. Management conveyed confidence in continued growth and operational execution.
[Risks and Concerns] Potential risks include tariff impacts, though mitigated by pass-through pricing. Economic shocks may affect industrial markets, but MedTech and defense sectors are expected to remain resilient.
[Final Takeaway] Knowles Corporation demonstrated strong financial performance in Q2 2025, driven by robust demand across key segments. Strategic initiatives in specialty film and inductor lines are set to expand future growth opportunities. The company maintains a positive outlook for continued revenue and earnings growth, supported by strong bookings and operational execution. Management's disciplined approach to capital allocation, including potential M&A, positions Knowles well for sustained growth.