Knowles Corporation Reports 31.8% Revenue Growth, Challenges in Profitability in Q3 2024

Knowles Corporation (NYSE: KN) reported significant financial results for the third quarter and nine months ended September 30, 2024, reflecting both growth in revenues and challenges in profitability. For the third quarter, revenues reached $142.5 million, a 31.8% increase from $108.1 million in the same period of 2023. This growth was primarily driven by the Precision Devices (PD) segment, which saw revenues rise to $78.8 million, up from $50.2 million, largely due to the acquisition of Cornell Dubilier Electronics (CD). The MedTech & Specialty Audio (MSA) segment also contributed, with revenues increasing to $63.7 million from $57.9 million.

Despite the revenue growth, Knowles faced a decline in net earnings from continuing operations, which fell to $9.2 million in Q3 2024 from $15.2 million in Q3 2023. The decrease in profitability was attributed to increased operating expenses related to the CD acquisition, including higher intangible amortization costs. Gross profit for the quarter was $62.9 million, up from $50.4 million, but the gross profit margin decreased to 44.1% from 46.6% due to the impact of the acquisition.

For the nine months ended September 30, 2024, total revenues were $411.0 million, compared to $317.6 million in the prior year, marking a 29.4% increase. However, net earnings from continuing operations dropped to $13.0 million from $39.0 million in the same period of 2023. The company reported a substantial net loss of $256.3 million for the nine months, primarily due to a goodwill impairment charge of $262.5 million related to the CMM segment, which has been reclassified to discontinued operations following the announcement of its sale to Syntiant Corp. for approximately $150.0 million.

In terms of strategic developments, Knowles completed the acquisition of Kaplan Electronics and certain assets of CD for $259.8 million on November 1, 2023. The company also repurchased 1,686,253 shares for $29.5 million during the nine months ended September 30, 2024, as part of its ongoing share repurchase program.

Financially, Knowles reported total current assets of $436.0 million as of September 30, 2024, with cash and cash equivalents increasing to $92.6 million. The company’s long-term debt decreased to $175.5 million from $224.1 million at the end of 2023. The effective tax rate for the third quarter was 24.6%, a significant change from the negative rate of (34.5)% in the prior year, reflecting changes in tax liabilities and benefits.