Knowles Surpasses Q4 Revenue High End, Energy Order to Fuel 2026

Date of Call: Feb 5, 2026

Financials Results

• Revenue: Q4: $162M, up 14% YOY. Full Year: $593M, up 7% YOY.
• EPS: Q4: $0.36, up 33% YOY. Full Year: $1.11, up 21% YOY.
• Gross Margin: Q4: 51.9%, up slightly YOY. Full Year: above 50%.
• Operating Margin: Not explicitly provided; focus shifted from gross margin to revenue/EBITDA guidance.

Guidance:

• Q1 2026 revenue expected between $143M and $153M, up 12% YOY at midpoint.
• Q1 EPS expected between $0.22 and $0.26, up 33% YOY at midpoint.
• Q1 adjusted EBIT margin expected between 18% and 20%.
• Full year 2026 organic growth expected above historic levels, with strong YOY growth in Q3.
• Full year capital spending expected at 4% to 5% of revenue.

Business Commentary:

Strong Financial Performance in Q4 2025:

• Knowles Corporation reported Q4 revenue of $162 million, up 14% year-over-year, exceeding the high end of their guided range. EPS was $0.36, up 33% year-over-year.
• The growth was driven by strong demand across segments, particularly in Precision Devices, and increased operational efficiencies.

Precision Devices Segment Growth:

• The Precision Devices segment delivered Q4 revenues of $90 million, up 23% from the previous year. Full-year revenue increased by 10%.
• Growth was attributed to strength across key end markets like MedTech, Defense, Industrial, EV, and Energy, with normalized channel inventory levels and new design wins contributing significantly.

MedTech and Specialty Audio Segment Steady Growth:

• The MedTech and Specialty Audio segment reported Q4 revenue of $73 million, up 4% year-over-year. Full-year revenue was $264 million, up 4% from the previous year.
• Growth was driven by increased shipment volumes, particularly in Specialty Audio, and new design wins in Hearing Health applications.

Energy Order and Specialty Film Line:

• The large energy order is expected to contribute approximately $25 million in revenue in 2026, with full volume production ramping up by late Q2.
• The broadening customer base for the specialty film line beyond medical applications into areas like energy and defense is expected to support future growth.

Positive Outlook for 2026 and Beyond:

• Knowles is positioned for continued strong organic revenue growth above historic levels, with expectations for strong year-over-year growth in Q3 2026.
• The positive outlook is supported by new design wins, a healthy backlog, increased demand, and robust cash generation that allows for strategic acquisitions and share buybacks.

Sentiment Analysis:

Overall Tone: Positive

• CEO: '2025 was a breakthrough year... I'm excited about the momentum and strength of our business.' CFO: 'We delivered strong year-over-year revenue, earnings and cash flow growth... gives me confidence in our ability to continue to achieve revenue, earnings and cash flow growth, which is expected to drive shareholder value throughout '26 and beyond.'

Q&A:

• Question from Christopher Rolland (Susquehanna Financial Group): Update on the large energy order and thin film capacity products, including customer breadth, capacity plans, and TAM.
  Response: The energy order is expected to be >$25M revenue in 2026, ramping fully in Q2. The specialty film line has broadened customer applications beyond medical to include energy, military, and industrial. Full-year 2026 revenue for this product category is still expected in the $50M-$65M range.

• Question from Christopher Rolland (Susquehanna Financial Group): Update on prospects for next big organic hits and M&A pipeline.
  Response: Organic opportunities over the next 24-36 months look promising, with positive momentum in micro solutions for medical applications, defense, and energy. The M&A pipeline continues to be good, but specific details cannot be shared.

• Question from Anthony Stoss (Craig-Hallum Capital Group): Gross margin guide for Q1 and expectations for Q2 gross margin given the energy order ramp.
  Response: The company has shifted focus from gross margin to revenue, EPS, and cash flow. Full-year 2025 gross margin was 45.5%. There is potential for margin expansion in 2026, especially in the back half, as production volumes increase on the specialty film line.

• Question from Anthony Stoss (Craig-Hallum Capital Group): Fastest-growing markets for 2026 and exposure to satellite.
  Response: Growth is broad-based across Defense, MedTech, Industrial, and Energy markets. Bookings remain strong, with particular momentum in the Industrial segment. The company has some exposure to satellite but did not single it out as the fastest-growing.

• Question from Will Gildea (CJS Securities): Specific update on production build-out and capacity status for the energy order.
  Response: Capacity is being set up in Greenville, SC. The team is on track to ramp production to ~10x current levels over the next 5 months, aiming for full volume by end of Q2. The facility is being prepared with equipment and global engineering support.

• Question from Will Gildea (CJS Securities): Whether the energy order capacity can be used for other pulse power applications.
  Response: Yes, the high-volume production line is being set up near the standard specialty film line in the same facility, with automation and improvements intended to benefit both the energy order and the broader specialty film business long-term.

• Question from Tyler Bomba (Robert W. Baird): Detailed update on supply/demand dynamics in Industrial and expectations for H2 revenue rebound.
  Response: Strong industrial shipments are expected in H1 2026, building on strong H2 2025. For H2 2026, industrial revenue is expected to be flattish compared to H2 2025, but full-year 2026 industrial revenue is expected to show growth.

• Question from Tyler Bomba (Robert W. Baird): Impact of industry-wide component shortages on demand and potential for price increases in H2.
  Response: Management is monitoring capacity and pricing dynamics closely. With current strong bookings and book-to-bill ratios, there are emerging concerns about capacity utilization in the back half of the year if demand continues at this rate.

Contradiction Point 1

Specialty Film Line 2026 Revenue Guidance

It involves differing expectations for revenue from a specific business line, which directly impacts financial planning and investor outlook.

Update on the large energy order and thin film capacity products: Have new customer adoption expanded? Provide details on capacity additions, revenue timing, and TAM? - Christopher Rolland (Susquehanna Financial Group)

2025Q4: Total revenue for the specialty film line, including energy, is expected to be in the range of $50 million to $65 million for 2026. - Jeffrey Niew(CEO)

What is your current capacity, plans for expanding capacity, demand and revenue projections for next year, and confidence in securing high-volume customer orders for specialty film? - Christopher Rolland (Susquehanna Financial Group, LLLP, Research Division)

2025Q3: The specialty film line ... is expected to generate $25-$30 million in revenue in 2025, and with the energy order added, total revenue for next year should be at least $55-$60 million. - Jeffrey Niew(CEO)

Contradiction Point 2

Gross Margin Trajectory for the Specialty Film Line

It involves changes in the financial forecast for gross margin improvements, a key profitability indicator.

What is the gross margin guidance for Q1 and the June quarter, considering ramp timing? - Anthony Stoss (Craig-Hallum Capital Group)

2025Q4: Potential expansion of 50–75 basis points in 2026, weighted to the back half, is possible as production volumes increase... - John Anderson(CFO)

What is the timeline for gross margin improvements in the specialty film line and their current impact? - Anthony Stoss (Craig-Hallum Capital Group LLC, Research Division)

2025Q3: Gross margin improvements for the specialty film line are expected to be linear from Q3 2025 through Q2 2026, with a bigger jump once the energy order ramps fully in late Q2 2026. - John Anderson(CFO)

Contradiction Point 3

Timeline for Revenue from the Energy Order

It pertains to differing timelines for a major revenue driver, impacting financial projections and operational planning.

Can you provide an update on the large energy order and thin film capacity products, including any expansion in new customers, capacity expansion plans, revenue timing, and TAM? - Christopher Rolland (Susquehanna Financial Group)

2025Q4: The energy order is expected to generate revenue of $25 million in 2026, ramping up fully in the second quarter. - Jeffrey Niew(CEO)

Can you elaborate on the organic growth acceleration beyond 2025, particularly in the film expansion and inductor lines, and whether the film is related to the previously mentioned energy order? - Bob Labick (CJS Securities)

2025Q2: revenue from the specific energy order starting in mid-2026. - Jeffrey Niew(CEO)

Contradiction Point 4

Outlook for Organic Growth Drivers

It reflects a shift from broad-based growth expectations to specific near-term drivers, potentially altering strategic focus and investor perception.

What is the next growth driver—internal opportunities or acquisitions—and are there any updates on target evaluations? - Christopher Rolland (Susquehanna Financial Group)

2025Q4: Key areas include: Micro Solutions in Medical (volume production expected in 2027), Defense, Ceramic Capacitors... Overall, the company is confident in achieving organic growth above its initial targets. - Jeffrey Niew(CEO)

What factors contributed to the guidance upside, and what is the current status of demand for the thin film opportunity? - Christopher Rolland (Susquehanna Financial Group)

2025Q2: Both segments are expected to have year-over-year growth for full-year 2025. Bookings for July are already strong. - Jeffrey Niew(CEO)

Contradiction Point 5

Industrial Market Revenue Forecast

It involves conflicting outlooks for a key market segment, affecting demand and supply chain planning.

What are the current supply/demand dynamics in the Industrial sector, and do you anticipate a rebound in the second half? - Tyler Bomba (Robert W. Baird)

2025Q4: For the second half, industrial revenue is forecasted to be flattish compared to the second half of 2025, but full-year growth is anticipated. - Jeffrey Niew(CEO)

Given minimal tariff exposure (5% direct, 3% indirect), what is the overall end-market customer exposure, and what are customers' outlooks and potential impacts in the back half of the year? - Bob Labick (CJS Securities)

2025Q1: The most sensitive area is industrial, but distributor inventory levels have normalized (3-3.5 months), leading to increased order activity. Overall, minimal tariff impact is expected. - Jeffrey Niew(CEO)