Knowles Corp Earnings Call Highlights Growth And Risks

Knowles Corporation ((KN)) has held its Q4 earnings call. Read on for the main highlights of the call.

Knowles Corporation’s latest earnings call struck a confident tone as management highlighted stronger-than-expected revenue and earnings, expanding margins and solid cash generation. Executives acknowledged near-term execution and supply risks, but repeatedly emphasized a healthy backlog, low leverage and clear growth drivers across precision devices, specialty film, energy, medtech and defense.

Q4 Revenue Growth

Knowles posted Q4 2025 revenue of $162 million, up 14% year-over-year and above the high end of guidance, signaling strong demand across key segments. The upside performance versus the company’s own outlook suggests that growth initiatives and end-market exposure are starting to scale more quickly than previously anticipated.

Q4 EPS and Profitability

Earnings power accelerated in Q4, with EPS of $0.36 rising 33% year-over-year and topping the midpoint of guidance. Management further underlined profitability momentum with Q1 2026 adjusted EBIT margin projected between 18% and 20%, implying continued operating leverage despite ramp-related headwinds.

Full-Year Revenue and EPS Performance

For full-year 2025, Knowles delivered revenue of $593 million, a 7% increase that came in above its $560 million to $590 million outlook range. EPS for the year climbed 21% to $1.11 versus 2024, underscoring both topline growth and improved cost discipline as key contributors to shareholder value.

Strong Cash Generation and Liquidity

Cash generation remained a bright spot, with 2025 cash from operations of $114 million, or 19.2% of revenue, and Q4 cash from operations of $47 million exceeding guidance. The company ended Q4 with $54 million of cash, $114 million drawn on its revolver and total liquidity above $340 million, providing ample flexibility to fund growth and capital returns.

Adjusted EBITDA and Leverage

Adjusted EBITDA for 2025 reached $140 million, up 9% year-over-year, reflecting healthy underlying earnings before non-cash and non-recurring items. With a net leverage ratio of just 0.4 times trailing twelve months adjusted EBITDA, Knowles enters 2026 with a conservative balance sheet and room to deploy additional capital.

Precision Devices Segment Outperformance

The Precision Devices segment was the standout, posting Q4 revenue of $90 million, up 23% year-over-year, and full-year revenue growth of 10%, above the 6% to 8% organic target. Segment gross margin reached 40.1% in Q4, expanding 230 basis points from 2024 and highlighting the attractive economics of this portfolio despite some ramp inefficiencies.

Medtech & Specialty Audio Stability

Medtech and Specialty Audio delivered steady performance, with Q4 revenue of $73 million up 4% year-over-year. For 2025, the segment generated $264 million of revenue, also up 4% and landing at the high end of its 2% to 4% organic growth goal, reinforcing its role as a stable cash and earnings contributor.

Robust Order Activity and Backlog

Order trends remained robust, particularly in Precision Devices, where the book-to-bill exceeded 1 at approximately 1.06 in Q4. Management pointed to a healthy backlog, strong bookings including a very strong January and broad-based demand across multiple end markets as evidence of durable growth visibility.

Large Energy / Specialty Film Opportunity

A key growth catalyst lies in the large energy order and broader specialty film category, which management expects to generate roughly $25 million or more in 2026 once fully ramped by the end of Q2. Overall, specialty film revenue including energy is projected in the $50 million to $65 million range for 2026, with a bias toward the second half.

Capital Allocation and Shareholder Returns

Knowles continued to return capital, repurchasing 451,000 shares for $10 million in Q4 while still maintaining modest leverage. Management also signaled room to pursue synergistic acquisitions alongside ongoing buybacks, reflecting confidence in the cash profile and balance sheet strength.

Specialty Film Production Inefficiencies

Not everything was smooth, as Precision Devices margin gains were partially offset by higher scrap costs and production inefficiencies in the specialty film line. These ramp-related issues remain a near-term headwind to further margin expansion, though management framed them as transitional as volumes scale.

Ramp and Execution Risk on Large Energy Order

The ramp of the large energy order brings execution risk, with capacity expansion and full-volume manufacturing still underway following recent permitting and equipment installation. Management expects full ramp by the end of Q2 but only modest revenue contribution in Q1, leaving limited room for error in the near term.

Seasonal and Near-Term Cash Flow Weakness

Despite strong full-year cash generation, management guided to Q1 2026 cash from operations between negative $5 million and positive $5 million, reflecting seasonality and working-capital swings. Investors will be watching whether this temporary softness normalizes as expected over the course of the year.

Rising SG&A and Incentive Costs

Operating expenses ticked higher, with SG&A up $2 million year-over-year in Q4 primarily due to elevated incentive compensation tied to better results. While this modestly pressures operating expenses, it also underscores management’s pay-for-performance structure and alignment with shareholder outcomes.

Supply, Capacity, and Pricing Uncertainty

Management also flagged emerging capacity and component constraints that could surface in the back half of 2026, potentially limiting the ability to fulfill all demand. These supply tensions could create mixed pricing dynamics, offering some pricing power but also possibly capping volumes in certain lines.

Forward-Looking Guidance and Outlook

Looking ahead, Knowles guided Q1 2026 revenue to $143 million to $153 million, with the midpoint implying 12% year-over-year growth and EPS of $0.22 to $0.26, up roughly 33% at the midpoint. The company expects Q1 adjusted EBIT margins of 18% to 20%, modest near-term cash flow volatility, full-year capex at 4% to 5% of revenue and above-historic organic growth in 2026 supported by the specialty film and energy ramp.

Knowles’ earnings call painted a picture of a company balancing strong growth and profitability with a realistic view of ramp, supply and seasonal risks. With a healthy backlog, expanding high-margin businesses and significant balance sheet flexibility, the company appears well positioned, though execution on specialty film and supply-chain management will remain critical watchpoints for investors.