Knowles Corp (KN)·Q1 2014 Earnings Summary

Executive Summary

• Q1 2014 revenue was $273.4M, coming in above the high end of the original analyst day projection ($260–$265M) and within the updated April 17 guidance range ($270–$275M) .
• GAAP diluted EPS was $0.09; net earnings were $7.6M, with GAAP gross profit of $83.1M and gross margin of ~30% .
• The company reaffirmed non-GAAP operating profit guidance of $31–$33M on April 17 and highlighted the earnings release/call on April 28; the 8-K emphasized non-GAAP reporting frameworks and forward-looking statements .
• Street consensus (S&P Global) for Q1 2014 EPS and revenue was unavailable due to an SPGI request limit; comparisons to estimates cannot be made this quarter (S&P Global data unavailable).

What Went Well and What Went Wrong

What Went Well

• Revenue strength above the original analyst day range, supported by an April 17 update raising Q1 revenue guidance to $270–$275M: “above the high end of the projected range” .
• Segment mix was healthy: Mobile Consumer Electronics revenue $164.0M and Specialty Components revenue $109.4M; segment EBIT totaled $22.5M (MCE EBIT $6.8M; SC EBIT $15.7M) .
• Management continued to emphasize margin expansion via footprint consolidation and cost savings initiatives presented at the February analyst day (targeting $40–$50M annualized savings) .

What Went Wrong

• GAAP gross profit and margins compressed vs prior year (gross profit $83.1M vs $94.5M in Q1 2013; gross margin ~30% vs ~34%), despite revenue finishing above initial projections .
• GAAP EPS of $0.09 declined versus Q1 2013 EPS of $0.14, indicating earnings pressure year over year even as revenue remained resilient .
• Non-GAAP operating profit did not get raised on April 17 (maintained $31–$33M); management emphasized non-GAAP reporting, signaling adjustments around restructuring/production transfer costs and spin-related items .

Financial Results

Segment breakdown (Q1 2014):

Actual vs estimates (S&P Global):

Guidance Changes

Earnings Call Themes & Trends

Note: The Q1 2014 earnings call transcript was not available in our document set; themes above reflect investor day materials and reported segment performance .

Management Commentary

• “Knowles updates Q1 2014 financial projections… revenue for the first quarter of 2014 to be between $270 and $275 million, above the high end of the projected range… Non-GAAP operating profit is expected to be between $31 and $33 million.” (Press release, Apr 17) .
• “In addition to the GAAP results… Knowles has presented non-GAAP operating profit… to assess core operating performance.” (Non-GAAP framework reiterated) .
• “Knowles Corporation… debuted… following its spin-off from Dover… common stock began trading ‘regular way’ on the NYSE under ‘KN’.” (Strategic independence context) .

Q&A Highlights

• Not available; Q1 2014 earnings call transcript was not found in SEC filings or our document catalog. We searched for “earnings-call-transcript” for KN in Apr–May 2014 and did not locate a transcript [ListDocuments results showing 0 for earnings-call-transcript Apr–May 2014]. The Apr 10 and Apr 17 releases provide call logistics and guidance updates .

Estimates Context

• S&P Global consensus estimates for Q1 2014 EPS and revenue were not retrievable due to a daily request limit on the estimates feed; therefore, beat/miss analysis versus Street consensus is unavailable this quarter (S&P Global data unavailable).

Key Takeaways for Investors

• Revenue execution was solid at $273.4M, finishing above the original analyst day range and within the April 17 update; however, GAAP margin compression and EPS downshift versus prior year indicate ongoing cost/mix pressures that management is addressing through footprint actions .
• Segment profile shows SC as the higher-margin contributor (Q1 segment EBIT $15.7M) while MCE remains the revenue driver but with lower Q1 EBIT ($6.8M), underscoring the importance of integrated audio and premium product transitions to expand MCE margins .
• Guidance discipline: revenue was raised mid-quarter (Apr 17) while non-GAAP operating profit was maintained—watch for how operational savings and mix affect non-GAAP profitability over subsequent quarters .
• With the spin-off complete and independent listing on NYSE, capital allocation and margin expansion initiatives from the analyst day remain central to the medium-term thesis (targeting $40–$50M annualized cost savings) .
• Near-term trading: absent Street consensus, focus on reported margin trajectory and any subsequent disclosures on restructuring/production transfer cost run-off that could bolster non-GAAP operating leverage .
• Medium-term: sustained share gains in MEMS microphones and intelligent audio modules remain a key lever for ASP/content growth and margin uplift; SC stability provides ballast through cycles .

Sources Read

• 8-K (Apr 17, 2014): Knowles updates Q1 2014 projections; full press release and non-GAAP discussion .
• 8-K (Feb 19, 2014): Investor presentation with quarterly history and Q1’14E ranges –.
• Investor site press release (Apr 10, 2014): earnings release/call timing details .
• Annual Report (2014): Quarterly Data (Unaudited) table showing Q1 2014 revenue, gross profit, net earnings, EPS and 2013 quarterly figures .
• Q1 2015 investor supplement: provides comparative Q1 2014 segment revenue/EBIT details .