Knowles Corporation · NYSE:KN
Knowles — Investor Presentation (February 2023)
37 slides from Knowles's investor presentation, Feb 23, 2023
Slide 1: Knowles, February 23, 2023
« knowles February 23, 2023
Slide 2: Safe Harbor: Forward Looking Statements
4€ knowles 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, financi
Slide 3: Our Company
Our Company 4« knowles
Slide 4: A global technology leader and manufacturer
A global technology leader and manufacturer Knowles develops advanced micro-acoustic microphones and speakers, audio solutions, hig technology providers. 2022 Revenue $765 2022 Adjusted EBIT® $142 2022 Free Cash Flow* $54M For this Non-GAAP financial n MedTech & Specialty Audio 30% 2022 Revenue By S
Slide 5: ESG highlights
Total Scope 1 & Scope 2 Emissions (Location-based) reduced by Total Scope 1 & Scope 2 Emissions (Market-based) reduced by Water intensity reduced by Hazardous Waste intensity reduced by APPROXIMATELY Of our total purchased 18% == renewable sources A% 5% 16% 14% ule APPROXIMATELY OF OUR 2021 A5% 70%
Slide 6: Strategic shift has delivered margin expansion and driven profitability
Strategic shi es t has delivered margin expansion and driven profitability Adjusted EBIT Margin” (%) 18.6 2018 2022 Free Cash Flow Margin® (%) ($) m1 $1.26 $1.01 6% CAGR 2022 2018 2022 2018 AP reconciliation, Non-GAAP Diluted EPS’ 4« knowles ¢ Realigned R&D and CapEx spend to higher value markets Dr
Slide 7: Diversified markets and segments drive resilient profitable growth
| 4€ knowles Diversified markets and segments drive resilient profitable growth, delivering higher earnings and cash flow 2022 Revenue & Non-GAAP Gross Profit Margin by Segment Non-GAAP Revenue Gross Profit Margin* Precision Devices | $243M 47% MedTech & Specialty Audio $230M 50% Non-GAAP een Gross
Slide 8: Repositioned to drive improved financial performance
4€ knowles Repositioned to drive improved financial performance. Delivering strong earnings and cash flow by optimizing our product and market portfolio, while bringing unparalleled innovation and manufacturing expertise to the complex, technical challenges that face our customers. Investment in Hig
Slide 9: Our Markets and Products
4« knowles Our Markets and Products
Slide 10: Innovation
Innovation « knowles Long-held reputation innewatea sancentter Innovate differentiated, customer-driven in delivering allele features & functionality performance products Design a high quality, high performance, With decade upon decade of 4 cost-effective product manufacturing expertise, our technol
Slide 11: Delivering specialty high performance components across a broad range of applications
4€ knowles Delivering specialty high performance components across a broad range of applications — APPLICATIONS DEFENSE RADAR AND IMPLANTABLES MEDICAL IMAGING ELECTRIC VEHICLES COMMUNICATIONS Secular ° Increasing defense budgets 2022 Revenue Revenue Growth Growth ° Upgrades to defense electronic $24
Slide 12: Delivering the highest performing solutions to address hearing loss
4€ knowles Delivering the highest performing solutions to address hearing loss . KEY APPLICATIONS - m fo. HEARING AID IN EAR MONITOR COMMUNICATIONS TRUE WIRELESS 2022 Revenue Revenue Growth + Aging globel population $230M +2% Secular SAM Growth - Allday wear with 2018-2022 CAGR rechargeable batterie
Slide 13: Driving innovation to enable voice control, communication and superior audio recording
4€ knowles Driving innovation to enable voice control, communication and superior audio recording KEY La Shoe i Mite 6 EAS EAR COMPUTE SMARTPHONE 2022 Revenue Revenue Growth Secular ° Voice asa user interface -11% $292M 11 SAM Growth : High quality video recording 2018-2022 CAGR $1 1 B Trends: ~ Rem
Slide 14: Shift in mix of markets drives higher gross margins
Shift in mix of markets drives higher gross margins We have expanded the markets we serve beyond the smartphone industry. Today, our business is more diversified across the markets that yield higher gross margins. Electric Vehicle Defense Industrial Ear/loT/Compute MedTech Smartphone ot Electric Veh
Slide 15: Remove the mid-term target time reference
remove the “mid- term target” time reference, just focus it on $2.50.
Slide 16: Financials
Muir Financials 4« knowles
Slide 17: Proven track record of expanding profitability
Proven track record of expanding profitability Revenue ($M) 827 2018 2022 Non-GAAP Gross Profit Margin” (%) 40.6 2018 2022 Adjusted EBIT Margin’ (%) 18.6 14.2 2018 2022 * For this Non-GAAP financial measure see the Appendix for GAAP to Non-GAAP reconailiation. Adjusted EBITDA Margin’ (%) 24.1 19.7 +
Slide 18: Precision Devices: Impressive growth and margin expansion
Impressive growth and margin expansion with resilient end markets Revenue ($M) 242.9 144.7 2018 2022 Non-GAAP Gross Profit Margin* (%) All 2018 2022 Adjusted EBIT Margin* (%) 28.0 2018 2022 * For this Non-GAAP financial measure see the Appendix for GAAP to Non-GAAP reconailiation. Adjusted EBITDA Ma
Slide 19: MedTech & Specialty Audio
MedTech & Specialty Audio : 4« knowles Industry leading technology in niche market driving steady growth and profitability * Growth through new product introductions, Revenue Non-GAAP Adjusted Adjusted MEMS microphone ($M) Gross as Margin* EBIT mer EBITDA Narain’ adoption, and OTC ° 109 aay penetrat
Slide 20: Consumer MEMS Microphones
Consur MEMS Microph « owles elo cyclical consumer sreasing Expos ry marvat \ fF allanani marai end markets with cnallie na mar 1) Q arkets WITN Cnalie 1Q| g ma g Ns R&D and production capacity shifted to Ear, loT, Revenue Non-GAAP Adjusted Adjusted and Computing markets ($M) Gross Profit Margin* EBI
Slide 21: Mix shift and recovery in Consumer MEMS expected to drive improved gross margins
4€ knowles Mix shift and recovery in Consumer MEMS expected to drive improved gross margins TOTAL COMPANY MARGIN EXPANSION Precision Devices Mix Shift to Higher Margi Non-GAAP Products and End Markets, + *1OObps : -_ MedTech & Gross Profit Margin Specialty Audio 9 43% Capacity Utilizati ConsumerMEMS
Slide 22: Proven ability to deliver strong free cash flow
: 4« knowles Proven ability to deliver strong free cash flow ion Free Cash Flow Margin* 2023 DRIVERS Gross Margin Ex + Focused on markets that value our technology (%) and manufacturing differentiation Working Capital + Implemented a more disciplined approach to pricing 16:4 15.0+ Improvements + Red
Slide 23: Capital Deployment
Capital Deployment 4€ knowles Strong balance sheet and proven cash flow generation enhances shareholder value through strategic capital deployment Consistent Cash Flow $600M+ of cash generated Organic Growth Generation by operations since 2018 Continued investment of R&D spend to markets with optima
Slide 24: Accelerating path to mid-term financial targets
4€ knowles Accelerating path to mid-term financial targets DRIVERS TARGETS Revenue Growth Growth in the mid to high single digit CAGR% Adjusted EBIT Margin 22-24” Non-GAAP Gross Profit Margin* Improve to 43% or more on mix and new product introductions Free Cash Flow Margin® Non-GAAP Operating Expen
Slide 25: We have built a highly sustainable business
4€ knowles We have built a highly sustainable business with unique capabilities in solving customers’ most complex technical challenges Unparalleled product performance > Innovating across complex customer needs to maximize differentiation Diversification in high-growth markets Focusing on market se
Slide 26: Appendix
y Pe Prone 4« knowles 26
Slide 27: Key Financial Metrics (Unaudited)
July 28, 2021 Key Financial Metrics (Unaudited) * For this Non-GAAP financial measure see the Appendix for GAAP to Non-GAAP reconciliation.
Slide 28: Key Financial Metrics (Unaudited)
July 28, 2021 Key Financial Metrics (Unaudited) * For this Non-GAAP financial measure see the Appendix for GAAP to Non-GAAP reconciliation.
Slide 29: Key Financial Metrics (Unaudited)
July 28, 2021 Key Financial Metrics (Unaudited) * For this Non-GAAP financial measure see the Appendix for GAAP to Non-GAAP reconciliation.
Slide 30: Reconciliation of GAAP Financial Measures to Non-GAAP Financial Measures
Reconciliation of GAAP Financial Measures to Non-GAAP Financial Measures (Continuing operations, in millions, except per share amounts) Revenues Gross profit Gross profit margin Stock-based compensation expense Restructuring charges Production transfer costs Other ® Non-GAAP gross profit Non-GAAP gr
Slide 31: Reconciliation of GAAP Financial Measures to Non-GAAP Financial Measures
Reconciliation of GAAP Financial Measures to Non-GAAP Financial Measures (Continuing operations, in millions, except per share amounts) Net (loss) earnings Interest expense, net Provision for (benefit from) income taxes (Loss) earnings before interest and income taxes Non-GAAP reconciling adjustment
Slide 32: Historical Segment Data
Historical Segment Data (Continuing operations, in millions) Revenues Gross profit Gross profit margin Stock-based compensation expense Restructuring charges Production trensfer costs Other Non-GAAP gross profit, Non-GAAP gross profit as 2 % of revenues Research and development expenses Research and
Slide 33: Historical Segment Data
Historical Segment Data 4« knowles Precision Device: MedTech & Specialty Audio Consumer MEMS Microphones Year Ended December 31, Year Ended December 31, Year Ended December 3t, (Continuing operations, in millions) 5 9 2019 Operating earnings (loss) $587 $ 429 $ 313 $303 $ 277 $845 $767 $ 221 $ 579 $
Slide 34: Reconciliation of Segment EBIT to Consolidated Net Earnings
Reconciliation of Segment EBIT to Consolidated Net Earnings 4& knowles (Continuing operations, in millions) (Loss) earnings before interest and income taxes Precision Devices MedTech & Specialty Audio Consumer MEMS Audio Total segments Corporate expense / other Interest expense, net (Loss) earnings
Slide 35: Free Cash Flow and Free Cash Flow as a % of revenues
Free Cash Flow and Free Cash Flow as a % of revenues 4« knowles Years Ended December 31, (in millions) 2020 Cash provided by operating activities $ 86.3 $ 1821 $ 128.1 $ 123.9 $ 985 Less: Capital expenditures (32.1) (48.6) (31.9) (41.2) (80.1) Free cash flow 54.2 133.5 96.2 82.7 18.4 Free cash flow
Slide 36: Reconciliation of Net Debt
Reconciliation of Net Debt 4€ knowles Year Ended December 31, (Continuing operations, in millions) 2022 Current maturities of long-term debt $ — Long-term debt 45.0 Total debt 45.0 Less: Cash and cash equivalents (48.2) Net debt $ (3.2)
Slide 37: Reconciliation of Liquidity
Reconciliation of Liquidity 4« knowles Year Ended December 31, (in millions) aeeb! Maximum borrowings permitted on revolving credit facility $ 400.0 Less: Outstanding borrowings on revolving credit facility (45.0) Availability on revolving credit facility 355.0 Cash and cash equivalents 48.2 Liquidi