Transaction will further transform Knowles into
a premier industrial technology company
Updates Q3 Guidance and Provides Q4 revenue
outlook for continuing operations
Knowles Corporation (NYSE: KN) ("Knowles" or the "Company"), a
leading global supplier of high performance electronics for
demanding applications, including capacitors and radio frequency
("RF") filters, advanced medtech microphones, and balanced armature
speakers, announced today that, following a thorough strategic
review, it has entered into a definitive agreement to sell its
Consumer MEMS Microphones ("CMM") business to Syntiant Corp
("Syntiant") for $150 million (the "Transaction").
The Transaction supports Knowles' continued transformation into
an industrial technology company, consisting of its Precision
Devices ("PD") and MedTech & Specialty Audio ("MSA") segments,
primarily serving the aerospace, defense, medtech, industrial, and
electrification markets. On a pro forma basis, the remaining
Knowles businesses(a), inclusive of Cornell Dubilier’s full year
results, had $560 million of revenue in 2023.
Knowles will receive $150 million in total consideration,
subject to net working capital and other adjustments, consisting of
$70 million in cash and $80 million in Syntiant preferred stock.
Syntiant has received a customary debt financing commitment letter
in connection with the Transaction and expects to raise additional
funds through an equity financing. The closing of the Transaction,
which is subject to certain regulatory approvals, third party
consents, and other customary closing conditions, is expected to
occur in the fourth quarter of 2024. Knowles intends to use the net
cash proceeds from the sale of CMM to fund the paydown of debt and
the repurchase of Company stock.
"After performing an in-depth strategic review, we believe this
Transaction with Syntiant is the best outcome for our shareholders,
employees, customers, and suppliers. The Transaction provides
Knowles with the ability to protect the intellectual property of
our market-leading Hearing Health business while maximizing value
for shareholders," said Knowles Chief Executive Officer Jeffrey
Niew. "Today's announcement represents another significant
milestone in Knowles' transformation into a premier industrial
technology company, building upon the success of our recent Cornell
Dubilier acquisition."
Knowles today posted an investor presentation with further
details which is also available at http://investor.knowles.com.
(a) Pro forma results do not include all required accounting
adjustments associated with the disposition of the Consumer MEMS
Microphones business. See reconciliation of Pro Forma results in
the Appendix.
Third Quarter 2024 Guidance Update: Subject to Change
Knowles is updating its third quarter 2024 guidance to reflect
the anticipated sale of the CMM business. Operating results for the
CMM segment will be reported as discontinued operations beginning
in the third quarter of 2024.
The forward looking guidance for the quarter ending September
30, 2024 is as follows:
GAAP
Adjustments
Non-GAAP
Revenues from continuing
operations
$139 to $143 million
—
$139 to $143 million
Diluted earnings per share from
continuing operations
$0.10 to $0.14
$0.14
$0.24 to $0.28
Net cash provided by operating
activities
$35 to $45 million
—
$35 to $45 million
Q3 2024 GAAP earnings per share from continuing operations are
expected to include approximately $0.06 per share in stock-based
compensation expense, $0.04 per share in intangibles amortization
expense, $0.02 per share in acquisition related costs, and $0.02
from differences related to the GAAP effective tax rate. These
items are excluded from non-GAAP results.
Q3 2024 Net cash provided by operating activities is expected to
include $5 million of cash provided by discontinued operations.
__________________________________________________________________________________________________
Q4 Revenue Outlook:
Q4 2024 revenue from continuing operations is expected to be in
the range of $140 to $150 million.
__________________________________________________________________________________________________
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, free cash
flow, 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.
Advisors
Jefferies LLC served as exclusive financial advisor to Knowles
and Sidley Austin LLP served as legal counsel.
About Knowles
Knowles is a market leader and global provider of
high-performance capacitors and radio frequency ("RF") filtering
products, and advanced micro-acoustic microphones and balanced
armature speakers, serving the medtech, defense, electric vehicle,
and industrial markets. Knowles' focus on the customer, combined
with unique technology, proprietary manufacturing techniques, and
global operational expertise, enables us to deliver innovative
solutions across multiple applications. Founded in 1946 and
headquartered in Itasca, Illinois, Knowles is a global organization
with employees in 11 countries. The Company continues to invest in
high value solutions to diversify its revenue and increase exposure
to high growth markets. For more information, please visit
knowles.com.
About the CMM Business
Knowles' CMM business designs and manufactures
micro-electro-mechanical systems microphones which enable voice
control communications and superior audio recording for customers
across the ear, compute, internet of things, and smartphone market
segments.
About Syntiant
Syntiant is a leader in the development of low power edge AI
speech, audio, sensor, and vision applications across a wide range
of consumer and industrial use cases, from earbuds to automobiles.
Current investors include Intel Capital, Microsoft’s M12, Applied
Ventures, Robert Bosch Venture Capital, the Amazon Alexa Fund, and
Atlantic Bridge Capital. For more information, please visit
www.syntiant.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. Other risks and uncertainties include, but are not
limited to: the occurrence of any event, change, or other
circumstance that could give rise to the termination of the
Transaction; the possibility that various closing conditions
associated with the Transaction may not be satisfied or waived; the
possibility of a failure to obtain, delays in obtaining or adverse
conditions contained in regulatory or other required approvals;
unanticipated difficulties or expenditures relating to the
Transaction; legal proceedings that may be instituted against
Knowles and others following announcement of the Transaction;
disruptions of current plans and operations caused by the
announcement and pendency of the Transaction; potential
difficulties in employee retention as a result of the announcement
and pendency of the Transaction; the response of customers,
distributors, suppliers and competitors to the announcement of the
Transaction; incurrence of additional impairment charges and a
significant charge to earnings due to future events or factors,
such as the Company’s inability to realize expected synergies from
its acquisitions; 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, including due to inflation, rising interest rates,
negative impacts caused by pandemics and public health crises, or
the impacts of geopolitical uncertainties; the impact of changes to
laws and regulations that affect the Company’s ability to offer
products or services to customers in different regions; our ability
to achieve 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; disruption caused by a cybersecurity incident, including a
cyber-attack, cyber breach, theft, or other unauthorized access;
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; a sustained decline in our stock
price and market capitalization may result in the impairment of
certain intangible or long-lived assets; market risk associated
with fluctuations in commodity prices, particularly for various
precious metals used in our manufacturing operation, 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, 2023, 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.
APPENDIX: PRO FORMA
FINANCIALS
(in millions, except per share
amounts)
(unaudited)
Year Ended December 31,
2023
Knowles Corporation
Consolidated Revenues
Reconciliation
Revenues
$
707.6
(-) Revenues from discontinued
operations
(256.2
)
Revenues from continuing operations
451.4
+ Revenues from Cornell Dubilier prior to
acquisition
108.4
Pro forma revenues from continuing
operations
$
559.8
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version on businesswire.com: https://www.businesswire.com/news/home/20240919893884/en/
Financial Contact: Sarah Cook Knowles Investor Relations
Email: investorrelations@knowles.com
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