Knowles Reports Q1 2015 Financial Results And Provides Outlook For Q2 2015

Q1 revenue and EPS above mid-point of prior projections; Resumed microphone shipments to key customer platform

ITASCA, Ill.--(BUSINESS WIRE)--Knowles Corporation (NYSE: KN), a market leader and global supplier of advanced micro-acoustic solutions and specialty components, today announced results for the first quarter ended March 31, 2015.

“As we look to Q2, we expect sequential revenue growth in our mobile consumer segment as we gain share on an existing platform. Within specialty components, we expect broad based sequential revenue growth partially offset by weaker sales into the wireless infrastructure market.”

“Our Q1 revenue and earnings were above the mid-point of our prior expectations,” said Jeffrey Niew, President and CEO of Knowles. “Revenue in our mobile consumer segment was better than anticipated as we resumed shipments of microphones to a key customer platform earlier than planned. We also experienced stronger than expected speaker and receiver sales. Sales for specialty components were lower than projected primarily due to softer than expected demand in the wireless infrastructure market.”

“As we look to Q2, we expect sequential revenue growth in our mobile consumer segment as we gain share on an existing platform. Within specialty components, we expect broad based sequential revenue growth partially offset by weaker sales into the wireless infrastructure market.”

“We are increasingly confident that we will experience strong revenue growth in the second half of 2015 driven by customer platform launches and adoption of our new products. This would drive improved capacity utilization and, coupled with the optimization of our manufacturing footprint, should significantly improve operating margins in the back half of the year.”

Financial Highlights

The following highlights the Company’s financial performance on both a GAAP and supplemental non-GAAP basis. The Company provides supplemental information regarding its gross profit, operating expenses, earnings before interest and income taxes, adjusted earnings before interest and income taxes, net earnings and diluted earnings per share, as well as other metrics, on a non-GAAP basis that excludes stock-based compensation as well as certain intangibles amortization expense, restructuring, production transfer costs, and other charges which management considers to be outside our core operating results. Non-GAAP results are not presented in accordance with GAAP and may not be comparable to similarly titled non-GAAP information provided by other companies. Non-GAAP information should be considered a supplement to, and not a substitute for, financial statements prepared in accordance with GAAP. A reconciliation of GAAP to non-GAAP results is attached to this press release.

• Revenue for the first quarter of 2015 was $238.6 million compared with $273.4 million reported in the same period one year ago.
• Gross profit for the first quarter of 2015 was $53.8 million compared with gross profit of $83.1 million reported in the same period one year ago. Non-GAAP gross profit for the first quarter of 2015 was $58.8 million compared with non-GAAP gross profit of $89.0 million reported in the same period one year ago.
• Loss before interest and income taxes for the first quarter of 2015 was $(9.9) million compared with earnings before interest and income taxes of $10.8 million in the year ago period. Current period results include $10.0 million from amortization of intangibles, $5.4 million in production transfer costs and $3.0 million in stock-based compensation.
• Adjusted earnings before interest and income taxes for the first quarter of 2015 were $8.6 million compared with $32.1 million reported in the same period one year ago.
• Provision for income taxes for the first quarter of 2015 was $3.5 million compared with $2.5 million reported in the same period one year ago.
• Net loss for the first quarter of 2015 was $(15.8) million compared with net earnings of $7.6 million reported in the same period one year ago. Non-GAAP net earnings for the first quarter of 2015 was $4.9 million compared with $27.5 million reported in the same period one year ago.
• Loss per diluted share for the first quarter of 2015 was $(0.19) compared with EPS of $0.09 per diluted share in the same period one year ago.
• Non-GAAP EPS for the first quarter of 2015 was $0.06 per diluted share compared with $0.32 per diluted share in the same period one year ago.

Second Quarter 2015 Outlook

The forward looking guidance for the quarter ending June 30, 2015, which has been compiled below, is based on our assumptions, and expected business trends and conditions:

• Revenue: $240 million to $260 million
• Non-GAAP Gross Margin: 25 percent to 27 percent
• Adjusted EBIT Margin: 3 percent to 5 percent
• Non-GAAP EPS: $0.03 to $0.09

Q2 2015 GAAP results are expected to include $11 million in amortization of intangibles, $4 million to $6 million in production transfer related costs, approximately $4 million in stock-based compensation, approximately $3 million in restructuring costs, and related tax effects on these 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 4:00 p.m. Central time. The webcast replay will be available after 7:00 p.m. Central time.

Investors can also listen to the conference call at 4:00 p.m. Central time today by calling (877) 359-9508 (United States) or (224) 357-2393 (International). The conference call replay will be available after 7:00 p.m. Central time on April 23, 2015 through 11:59 p.m. Central time on April 30, 2015 at (855) 859-2056 (United States) or (404) 537-3406 (International). The access code is 18316127.

About Knowles

Knowles Corporation (NYSE: KN) is a market leader and global supplier of advanced micro-acoustic solutions and specialty components serving the mobile communications, consumer electronics, medical technology, military, aerospace and industrial markets. Knowles has a leading position in micro-electro-mechanical systems microphones, speakers and receivers which are used in smartphones, tablets and mobile handsets. Knowles is also a leading manufacturer of transducers used in hearing aids and other medical devices and has a strong position in oscillators (timing devices) and capacitor components which enable various types of communication. Knowles’ focus on the customer, combined with unique technology, rigorous testing and global scale, helps to deliver innovative solutions and consistently dependable and precise products. Founded in 1946 and headquartered in Itasca, Illinois, Knowles has approximately 13,000 employees in 15 countries around the world. For more information, visit www.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,” “expect,” “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: the pace and success of achieving the cost savings from our announced restructurings; 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; risks associated with increasing our inventory in advance of anticipated orders by customers; macroeconomic conditions, both in the U.S. and internationally; our financial performance during and after the current economic conditions; foreign currency exchange rate fluctuations; our ability to maintain and improve costs, quality and delivery for our customers; our ability to qualify our products and facilities with customers; risks and costs inherent in litigation; our ability to obtain, protect, defend or monetize our intellectual property rights; increases in the costs of critical raw materials and components; availability of raw materials and components; competition; anticipated growth for us and adoption of our technologies and solutions that may not occur; managing rapid growth; managing rapid declines in customer demand for certain of our products or solutions, delays in customer product introductions, and other related customer challenges that may occur; our ability to successfully consummate acquisitions and divestitures; our obligations and risks under various transaction agreements that were executed as part of our spin-off from our former parent company, Dover Corporation; managing the integration of our businesses which were included in our recent spin-off from Dover Corporation; managing new product ramps and introductions for our customers; risks associated with international sales and operations; retaining key personnel; our dependence on a limited number of large customers; business and competitive factors generally affecting the advanced micro-acoustic solutions and specialty components industry, our customers and our business, fluctuations in demand by our telecom and other customers; 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, 2014, subsequent Reports on Forms 10-Q and 8-K and our other filings we make with the SEC. 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.

Supplemental Information

The financial results disclosed in this release include certain measures calculated and presented in accordance with GAAP. In addition to the GAAP results included in this press release, Knowles has presented supplemental, non-GAAP gross profit, operating expenses, earnings before interest and income taxes, adjusted earnings before interest and income taxes, net earnings, diluted earnings per share to facilitate evaluation of Knowles’ operating performance. These non-GAAP financial measures exclude certain amounts that are included in the most directly comparable GAAP measure. In addition, these non-GAAP financial measures do not have standard meanings and may vary from similarly titled non-GAAP financial measures used by other companies. Knowles uses non-GAAP measures as supplements to its GAAP results of operations in evaluating certain aspects of its business, and its Board of Directors and executive management team focus on non-GAAP items as key measures of Knowles’ performance for business planning purposes. These measures assist Knowles in 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. 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.

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