Knowles Corporation · NYSE:KN
Knowles — Investor Presentation (November 2021)
37 slides from Knowles's investor presentation, Nov 30, 2021
Slide 1: Investor Presentation
Investor Presentation November 30, 2021
Slide 2: Safe Harbor
Safe Harbor Forward Looking Statements This presentation 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 performa
Slide 3: Our Company
« knowles Our Company
Slide 4: Who We Are
Who We Are A global technology leader and manufacturer. Knowles develops advanced micro-acoustic microphones, speakers, audio Founded: 1946 solutions, high performance capacitors and RF filters for the world’s leading HQ: Itasca, IL technology providers. NYSE: KN 2021E Revenue Precision Devices 1000
Slide 5: Investment Thesis
Investment Thesis Repositioned to drive improved financial performance. Over the past five years, we have optimized our product and market portfolio to deliver higher growth, earnings and cash flow. We have built a highly sustainable business with unique capabilities in solving customers’ most compl
Slide 6: Leadership Team
Leadership Team Experienced Management Team. Chris Dugan Greg Doll Peter Vancorenland Jon Kiachian Shehab Albahri President, Vice President, Senior Vice President, Vice President, Sr. Director, Precision Devices Audio MEMS R&D, Audio MEMS Audio R&D, Audio 10 18 19 28 16 Years Years Years Years Years
Slide 7: Business Transformation
Business Transformation Shift in strategy to expand margins. Achievements Since 2016, we have executed multiple initiatives Revenue above to improve performance and shareholder value: 40% Gross Profit Margin • Divested smartphone focused, lower margin speaker and receiver business 2017 2021* • Dives
Slide 8: Financial Improvement
Financial Improvement We have significantly improved our financial performance from 2017 to 2021. Since implementing our strategy to more deeply invest in market segments that yield the most attractive margins and free cash flow, our financial performance has continued to improve year over year. REV
Slide 9: Growth Potential
Growth Potential Strategy provides a path to greater returns. Organic growth Provides path to Improving gross margins $2.50+ Focused investments Non-GAAP diluted earnings remove the “mid- * per term share target” time reference, just Accretive M&A and share buybacks focus it on $2.50. * Reconciliati
Slide 10: Our Markets
Our Markets « knowles 10
Slide 11: Market Focus
Market Focus Focusing on markets with the most attractive growth potential. While every one of our markets is experiencing favorable tailwinds, we are investing in those with the strongest growth and macro trends. Growth Ear IoT Defense Electric Telecom Vehicle Core MedTech Smartphone Industrial Com
Slide 12: Market Shift
Market Shift Shift in mix of markets drives higher gross margins. We have expanded the markets we serve beyond the the smartphone industry. Today, our business is more diversified across the markets that yield higher gross margins. Electric Vehicle 1% Electric Vehicle 2% Defense 5% Defense 9% Indust
Slide 13: Our Products
Our Products « knowles 13
Slide 14: Product Innovation
Product Innovation Long-held reputation Innovate Innovate a concept for differentiated, customer-driven in delivering high features & functionality performance products. Design a high quality, Design high performance, With decade upon decade of cost-effective product manufacturing expertise, our tec
Slide 15: Product Investments
Product Investments Focus on value and specialization. We have redirected our innovation and manufacturing capabilities to focus on higher growth and financial return opportunities. We seek to amplify the success of our fastest growing segment, Precision Devices. Reduced Investments: • Commoditized
Slide 16: Product Portfolio
Product Portfolio Two platforms with industry-leading performance in every market. PRECISION DEVICES CAPACITORS SAM $1.0B 1 High Performance RF Filtering Capacitors Solutions RF & MICROWAVE High voltage, temp, reliability High frequency filtering and capacitance/size. for next generation communicati
Slide 17: Precision Devices: Capacitors
CAPACITORS RF & MICROWAVE Specializing in high voltage, high temp, high reliability capacitors for mission critical applications. Multiple proprietary Our unique high voltage, Broad offering and highest The ability to solve manufacturing processes high temperature, high provide advantages in ADVANTA
Slide 18: Precision Devices: RF & Microwave
CAPACITORS RF & MICROWAVE Delivering high performance ceramic filtering across a broad range of applications and frequencies. Higher stability (K) in Capabilities to serve Custom design, rapid Materials and RF expertise smallest footprint enables expanded use of radio customers to expand prototyping
Slide 19: Audio: Ear
EAR IoT COMPUTE MEDTECH SMARTPHONE Enabling an unrivaled listening experience through groundbreaking innovation in ear-worn devices. Recognized as the leader Investments in automation Size, power, robustness in providing microphones enable the adoption of and balanced armature and audio performance
Slide 20: Audio: IoT
EAR IoT COMPUTE MEDTECH SMARTPHONE Pushing the boundaries of AI/machine learning in IoT devices offering voice control and communication. Broad portfolio of solutions Proven field robust Solutions for audio to enable lowest power Enabler of the Voice as a operation and high microphone architecture a
Slide 21: Audio: Compute
EAR IoT COMPUTE MEDTECH SMARTPHONE Enabling high quality communication from anywhere. Differentiated with compute Performance to enable next Pioneering leader Enabling high performance application expertise, generation compute form ADVANTAGES with a proven track system simulation and test factors an
Slide 22: Audio: MedTech
EAR IoT COMPUTE MEDTECH SMARTPHONE Delivering the highest performing solutions to address hearing loss. An undisputed legacy Leveraging audio and Leading the market in Unique expertise for in microphone and application expertise to balanced armature speaker address new use cases and manufacturing sc
Slide 23: Audio: Smartphone
EAR IoT COMPUTE MEDTECH SMARTPHONE Driving innovation to enable audio features for leading, high volume smartphone providers. Industry leader with field Broad, unique portfolio Fully integrated from design Expertise in addressing proven technology for to support price and to final shipment with dual
Slide 24: ESG Efforts
ESG Efforts A steadfast commitment. Striving to be an ethically, socially and environmentally responsible steward to the communities in which we live and work. Environmental Sustainability Social Responsibility Governance Highlights • Issued inaugural 2021 Corporate • Diversity and inclusion strateg
Slide 25: Our Financials
Our Financials « knowles 25
Slide 26: Financial Performance
Financial Performance Track record of improved financial performance. REVENUE Non-GAAP Non-GAAP OPERATING ADJUSTED EBIT Non-GAAP DILUTED GROSS PROFIT MARGIN* EXPENSE MARGIN* MARGIN* EPS* ($M) (%) (%) (%) ($) 1.50 866.3 41.1 40.3 19.7 25.4 21.9 14.9 0.88 744.2 +4.8% +0.8% -3.5% 14.3% CAGR 3.9% CAGR 2
Slide 27: Cash Generation
Cash Generation Proven ability to deliver strong free cash flow. Gross Margin Expansion FREE CASH FLOW* FREE CASH FLOW • Focused on markets that value our technology and ($M) MARGIN* manufacturing differentiation (%) • Implemented a more disciplined approach to pricing • Divested lower gross margin
Slide 28: Capital Deployment
Capital Deployment Strong cash flow generation and debt reduction enables shift in future capital allocation priorities. Organic Growth 2021E CAPITAL ALLOCATION • Shift R&D spend to markets with optimal growth trends and products with better profit potential 2 • Redirect Capital Expenditures to mark
Slide 29: Our Outlook
Our Outlook « knowles 29
Slide 30: Financial Outlook: Drivers of mid-term targets
Financial Outlook Drivers of our mid-term financial targets. Revenue Growth • Growth in the mid to high single digit CAGR% Non-GAAP Gross Profit Margin* • Improve to 43% or more on mix and new product introductions Non-GAAP Operating Expense* • Efficiently leverage resources to support growth and re
Slide 31: Mid-term financial targets
Financial Outlook Mid-term financial targets. Adjusted EBIT Margin* 22–24% Free Cash Flow Margin* 15–17% * Reconciliations of these forward-looking Non-GAAP financial measures to the most directly comparable GAAP financial measures are not provided because the information needed to complete a reconc
Slide 32: Key Takeaways
Key Takeaways We have built a highly sustainable business with unique capabilities in solving customers’ most complex technical challenges. Innovating across complex customer needs to Unparalleled product performance maximize differentiation Focusing on market segments with the most favorable tailwi
Slide 33: Question & Answer
Question & Answer (888) 330-3292 (United States) or (646) 960-0857 (International) The conference ID is 7928348 Dial *1 to ask a question 33
Slide 34: Appendix
« knowles Appendix 34
Slide 35: Q4 2021 Projections
§ July 28, 2021 Q4 2021 Projections GAAP ADJUSTMENTS NON-GAAP Revenue $230–235M — $230–235M Gross Profit Margin 40.5–41.0% 0.3% 40.0–42.0% Diluted EPS $0.32–0.34 $0.11 $0.43–0.45 Projections as of November 30, 2021; Q4 2021 GAAP results are expected to include approximately $0.07 per share in stock-
Slide 36: Reconciliation of GAAP to Non-GAAP Financial Measures
RECONCILIATION OF GAAP FINANCIAL MEASURES TO NON-GAAP FINANCIAL MEASURES ($M, except per share amounts) (unaudited) (1) Projections as of November 30, 2021. Calculated as results for the nine months Years Ended December 31 ended September 30, 2021 plus the midpoint of Q4 2021 projections. 2021E 1 20
Slide 37: Free Cash Flow
FREE CASH FLOW ($M) Years Ended Dec. 31, 2021E1 2020 2019 2018 2017 Cash provided by operating activities $166.6 $128.1 $123.9 $98.5 $92.9 Less: Capital expenditures (48.2) (31.9) (41.2) (80.1) (51.6) Free cash flow $118.4 $96.2 $82.7 $18.4 $41.3 Free cash flow margin 13.7% 12.6% 9.7% 2.2% 5.5% (1)