Knowles Corporation

Good afternoon, and welcome to the Knowles Corporation Third Quarter 2022 Financial Results Conference Call. My name is Harry Nobby, your operator today. To ask a question during the Q&A, please dial star 401 on your telephone keypad. With that said, here with opening remarks is Sloan Bolin, Investor Relations. Please go ahead.

Thank you, Harry. Welcome to our Q3 earnings call. I'm Sloan Bolin. Presenting with me on the call today are Jeffrey New, our President and CEO, and John Anderson, our Senior Vice President and CFO. Please be advised that today's conference call is being recorded. By now, you should have received a copy of our earnings release and webcast slides. If you have not received both documents, they are available on the IR section of our website at NOLS.com. Our call today will include remarks about future expectations, plans, and prospects for NOLS, which constitute forward-looking statements for purposes of the safe harbor provisions under applicable federal securities law. Such forward-looking statements include comments about demand for company products, anticipated trends in company sales, expenses and profits, and future financial outlook, and involve a number of risks and uncertainties that could cause actual results to differ materially from current expectations. The company urges investors to review the risks and uncertainties in the company's SEC filings, including but not limited to the annual report on Form 10-K for the fiscal year ended December 31st, 2021, Periodic reports filed from time to time thereafter with the SEC and the risks and uncertainties identified in today's earnings release. All forward-looking statements are made as of the date of this call and NOLS disclaims any duty to update such statements except as required by law. In addition, we have provided both GAAP and non-GAAP financial measures this quarter. As referenced on this call, all references on this call will be non-GAAP on a continuing operations basis unless otherwise indicated. Please see our earnings release and webcast slides available at our website at knolls.com and in our most current report on Form 8K files with the SEC today for a reconciliation to the most directly comparable GAAP measures. And with that, let me turn the call over to Jeff, who will provide some details on our results. Jeff.

Thank you, Sloan, and thank you to everyone for joining us this afternoon. The third quarter was above our expectations, but clearly a difficult one for markets and industries around the world. Before I get into the results and market commentary, I'd like to highlight the aggressive stance we have taken in response to this backdrop. As announced on our last call, we are accelerating the strategic repositioning of our MEMS microphone business to further de-emphasize our exposure to commodity products. We have been very proactive and are already seeing the benefits of this strategy in our second half results. Now let me get into the financials for the quarter. Knowles generated $178 million consolidated revenue, which was down 24% versus the prior year, driven primarily by very challenging market conditions in the consumer electronics portion of our audio segment. In contrast, precision devices delivered record revenues of $64 million and grew 16% year-over-year as we continue to see robust demand across most end markets. While challenging, audio segment revenue finished largely in line with our expectations due to factors we cited last quarter, specifically a weak backdrop for consumer electronics demand, excess channel inventory across most markets, and persistent COVID-related shutdowns in China. On a consolidated basis, loans delivered against each of our guided performance metrics for the third quarter. Revenue, gross margins, and adjusted EBIT margins were all above the midpoint, and EPS was above the guided range. Cash generated by operations was near the low end of our range this quarter due to higher than expected inventories, and timing of collections. We anticipate strong sequential improvement in cash flow in the fourth quarter and remain confident in our previously stated view of a faster path to a medium-term free cash flow margin target of 15% to 17%. Now I'd like to provide perspective on the current dynamics in each of our end markets. We understand tracking demand of our products is challenging, especially given the diversity of our markets and the cross-currents such as inventory corrections and strategic mix decisions like the ones we have made in our MEMS microphone business. Today, I would like to provide additional color to help understand our business. First, in precision devices, we continue to see strong end market demand driven by secular trends across defense, med tech, and EV. We still see organic growth in the mid to high single digits going forward for an addressable market that is over $1 billion and growing. In addition to strong growth, this segment continues to show resilience in the face of market uncertainty, with bookings in the quarter continuing to exceed expectation. Both of our product categories, high-performance capacitors and RF filters, continue to demonstrate our superior technical capabilities, which provide a competitive advantage for Knowles in markets where we have strong tailwinds today and in the future. Now I'll turn to our audio segment. First, the hearing health market continues to be much less volatile in the face of weak consumer demand, similar to the pattern we have observed in previous downturns. In fact, we remain confident business will provide 3% to 5% annual growth over a cycle and are increasingly optimistic about the over-the-counter hearing aid demand based on recent customer announcements and partnerships. Given these market dynamics and our strong competitive offering for acoustic solutions, we will continue to invest in hearing health and believe it is an underappreciated asset in our portfolio. Now onto our MEMS microphone business. While we expect sequential revenue improvement in Q4, the growth is driven primarily by new product introductions by our customers, as opposed to positive changes in end market demand or sentiment. These headwinds are across most end markets and geographies, including PCs and smartphones. Additionally, inventory in the channel is still being worked through, which presents additional obstacles to resume year-over-year growth. We feel validated in our decision to move quickly to reposition the MEMS business for the future by further de-emphasizing the commodity portion of this business. I am pleased to see the impact of our strategy show up in our second half results, and I am confident the MEMS microphone business is well positioned to improve our revenue and profitability when the market recovers. On that point, let me speak to the drivers and considerations that went into our strategic repositioning and why we believe it will add significant value for shareholders in the quarters and years ahead. Over the last few years, we have taken the challenging global market conditions to accelerate our transformation. This transformation is already delivering results with more than 60% of our revenue coming from products with above average corporate gross margins. The strategy to focus on higher value products and markets has been coupled with strong execution and dedication from the NOLS team in the face of significant macro challenges caused by the pandemic and its unpredictable after effects. I want to thank everyone in the organization for their hard work and execution in the face of these challenges. Our strategy is working, which gives me strong conviction in our ability to achieve the midterm financial targets we introduced last November sooner than expected. With that, let me turn the call over to John to provide more detail on our quarter.

Thanks, Jeff. We reported third quarter revenues of $178 million in line with expectations and down 24% from the same period a year ago, driven by weak demand for microphones, partially offset by continued strength in the precision devices segment. Audio revenues of $114 million were down 36% from the same period a year ago, due primarily to weak global microphone demand for consumer electronics, continued COVID-related lockdowns in China, and excess PC and smartphone channel inventory. In addition, hearing health market demand was lower in the quarter as our customers pulled forward orders into the first six months of the year. The precision devices segment delivered record revenues of $64 million, up 16% from prior year, with growth driven by increased demand in defense, medtech, and EV end markets. Third quarter gross profit margins were 38.5%. above the midpoint of our guidance range and down 330 basis points from the same period a year ago. Audio segment gross margins finished 670 basis points below 2021 levels, driven by lower factory capacity utilization and unfavorable mix in our MEMS microphone business, partially offset by lower factory spending and favorable foreign exchange rate impacts. Precision devices segment gross margins were 47.5%, up 50 basis points from the prior year, driven by favorable mix and productivity gains. R&D expense in the quarter was $17 million, down more than $3 million from the prior year, driven by lower incentive compensation costs for structuring savings and timing of project spending in MEMS microphones. SG&A expenses were $26 million, $1 million lower than prior year levels, driven by lower incentive compensation cost. For the quarter, adjusted EBIT margin was 15.8%, 280 basis points above the high end of the guided range, driven by the timing of project spending, favorable foreign currency impacts, and higher than expected savings from the restructuring program we announced early in the third quarter. EPS was 25 cents, which was 4 cents above the high end of our guidance range, driven by higher EBIT and a lower than expected share count. Now, I'll turn to our balance sheet and cash flow. Cash and cash equivalents totaled $42 million at the end of the quarter. Cash from operations was $19 million, near the low end of our expectations, primarily due to higher than expected net working capital. Capital spending was $11 million in the quarter, and we repurchased approximately 1.1 million shares at a total cost of $18.6 million. Year-to-date, we've repurchased 2.3 million shares at a cost of 44 million. Moving to guidance for the fourth quarter. We expect total company revenue to be between 200 and 220 million, up nearly 20% sequentially, driven by growth in both the audio and precision device segments. Precision device segment is expected to deliver another quarter of record revenues and be up more than 3% sequentially, driven by continued strength in med tech and defense. Audio segment revenues are expected to increase 26% sequentially, driven by the timing of our customers' new product introductions and typical seasonal patterns in hearing health. We estimate gross margins for the fourth quarter to be approximately 36.5% to 38.5%, down 100 basis points sequentially, driven primarily by lower factory capacity utilization and a higher proportion of microphone sales in our audio segment, partially offset by benefits of the restructuring program announced in the third quarter. R&D expense is expected to be between $16 and $18 million, and selling at administrative expense is expected to be between $25 and $27 million. We're projecting adjusted EBIT margin for the quarter to be approximately 17%, and EPS to be within a range of 31 to 35 cents per share. This assumes weighted average shares outstanding during the quarter of 94 million on a fully diluted basis. We're forecasting effective tax rate of 12 to 16% for the quarter. And for the fourth quarter, we expect cash generated from operations to be between 40 and 50 million, capital spending to be 10 million, and we expect to exit 2022 with zero net debt. I'll now turn the call back to our operator to open the line for questions. Operator?

Thank you very much. As a reminder, if you'd like to ask a question, please dial star-1 on your telephone keypad now. Our first question of the day is from Anthony Stoss of Craig Alumni. Anthony, your line is now open.

Hi, guys. Nice results, all things considered. Maybe let me start with John. I'm curious just the moves you're making strategically. Can you give us a glimpse into what you think gross margins might look like in 2023 or just a range of how much they might be up kind of year over year? And then after that, Jeff, I'd love to hear kind of your view on the PD division, the visibility you have for 2023 lead times, anything on the order cancellations, et cetera, would be helpful.

I want to take the first one first. If you don't mind, I'll take the PD question first. You know, I would sit there and say, you know, right now, if you look at what's been happening, the bookings are still exceeding the expectation. Obviously, you know, the bookings can be canceled in some cases, but the reality is a lot of our business and defense and med are custom products. So when we receive these orders, these are for, like, they're non-cancelable orders, really. They may be, like, slightly pushed out. We're not seeing really anything in that. going down. EV, I would sit there and say the bookings have been very strong. The deliveries have probably been a little less strong. And it's been, we think, but we're hearing a lot of still some chip shortages that are still holding back the demand. But as I look into 23, our design pipeline for EV looks very good for 23. I'd say the only market, I would say that we see a little bit of weakness It's kind of like our catch-all, which we call it industrial, which is kind of really other. But I wouldn't say it's dramatic at this point. We're not seeing a massive drop-off. We're just seeing it's not growing at the rate that we had seen earlier in the year. So overall, if I think about the way bookings are with PD and going into the fourth quarter, I feel very comfortable, at least at this point, through the first quarter and probably even the second where things are headed based on the backlog that we have.

Tony, in terms of gross margins, we reported gross margins of 38.5% in Q3. The midpoint of the guide is 37.5% in Q4. Those are lower than we had prior year. The delta is really related to our men's microphone business capacity utilization. You know, we're working down inventory. We're actually in Q3 and Q4. We're running at close to 50% capacity utilization. If you went back to a more normalized level, it had 200 to 300 basis points to the total company gross margins. You'd see in both quarters slightly above 40%. That's really the biggest item. And I see that continuing at least in the first quarter of Q1 2023. Just outside of the MEMS microphone, I mean, you can see the PD margins are holding steady. Last five quarters, they've been above 45%. I see that continuing, maybe even some potential improvement there. And you don't see it, but our hearing health margins, too, well above the corporate... Stable. Stable and well above the corporate average. So hopefully that provides some play.

If I just would add one more thing, I think, as John kind of said, our sales are higher than our capacity would reflect, or our units sold are higher than our capacity might reflect. But you can see in our balance sheet, the inventory has grown. We felt it was pretty prudent for us right now and into the first quarter to really kind of slow down production and work on the inventory situation. In our mind. In our mind. Got it.

And maybe one last one for John. When you look at OpEx, say, exiting, or the December quarter of 2023, what's the rough kind of quarterly OpEx ballpark?

Yeah, I mean, actually, based on the guide I provided today, you know, we're kind of in that 42, 43 million level in Q2 and Q3 and Q4. You know, in Q1, we will have normalized incentive comp levels. We'll have some merit increases. I would say like the 45 million range is a good starting point for a run rate going into 2023. And that should be fairly stable over the course of the year.

About $45 million you're saying? So it's up year over year and not down?

Up to $45 million. What's that, Tony? Sorry.

Not down year over year? I thought you guys were making some moves to try to cut costs.

Well, the incentive comp is the biggest. We have to be very clear that the incentive comp is not going to pay out that well this year. So we're going to be below plan, and we're going to take that back up to the plan. in 23. So that's why you're seeing kind of this little bit of a rise.

But I feel like kind of in that 45 million run rate is a good range given, you know, we will have some merit increases and going back to a more normalized level of incentive comp costs. Okay. Thanks, guys. Appreciate it.

Our next question is from the line of Bob Labick of CJS Securities. Bob, your line is now open.

Thanks. Yeah, good afternoon and congratulations on strong operations in the face of a tough market. Thanks. Thanks, Mark. I wanted to just maybe dig in a little further on this question in terms of give us a sense of, you know, inventory versus end market demand, kind of when you see the balance and how much, you know, impact is kind of built into expectations for Q4. And I think, John, you just said maybe there'll be still a little bit of a headwind in Q1. But give us a sense of, like, when you see this becoming imbalanced.

Yeah, let me kind of talk about this, and I guess I would focus a little bit probably back into the PC market, because that one's got the data that's most readily available. And I think it's somewhat representative, although some things may be a little bit worse, some things may be a little bit better. But I think if you look at what the market is saying right now, the PC market itself, end unit demand, is going to be down a little over 20% now. That's what people are saying. Remember, when we started this year, the PC market was planning for 5% to 10% growth. They were buying and we were ordering and buying for 5% to 10% growth. Our estimate is there's somewhere in the neighborhood of four to six months of excess inventory out there. It's clearly starting to be worked down, but to see the exact data, it all depends on demand. Yeah, I guess what I would sit there and say for right now, what we see is it's probably going to continue through Q1, this inventory overhang. That's, again, our customer's inventory overhang. Now, I'll let John come, because our inventory overhang is a little bit different, but why don't you comment on that?

Yeah, Bob, you probably haven't had a lot of time to see our queue, but our inventory actually increased about $40 million from the end of 2021. We're 150 up to about 194 at the end of Q3. We do expect some reductions to inventory in Q4. So our selling volume is going to be higher than our production volume as we kind of work this inventory down. And so that should be a little tailwind for us in Q4 in cash flow. And I would expect, you know, as we go into 23, we won't have the headwind on inventory that we had this year. Again, we had a a $40 million build and headwind in the first three quarters of this year. And it's really given that pretty abrupt demand drop starting kind of in the second quarter. And on top of that, we have commitments with most of our material suppliers and we were unable to cancel those commitments. So we still had material coming in, but again, we do expect reductions in inventory beginning this quarter.

But again, I just highlight again, and I know to the last question, I think it's an important point, that if we were not dealing with this inventory situation and running our capacity at a more optimized level, you would have saw our gross margin as a company well over 40% in Q4. Okay, great. And then...

I know we can't really kind of dig in and see this entirely, but maybe give us a sense of the kind of the demand expectations for hearing health next year and also in another different but similar and truly wireless. How's that market kind of evolving and what do you see, you know, for it as well for next year in general?

Yeah. So I think just to be clear on the true wireless, you're talking about the balanced armature receivers in the true wireless, correct? That's what you're referring to?

Yes, yes.

Yeah, okay. So first, I'm hearing health. You know, I'm not prepared to give the exact number for hearing health, but I think, you know, we look at the data pretty regularly, and, you know, what I would sit there and say is, you know, if you go back, and I don't have the exact numbers in front of me, but if you go back to 18 and you look where we're going to finish in 22, the hearing health business has been growing at a kager, about 3%, and that's through the pandemic, right? You know, and so, you know, I'm not going to sit there and say it won't be It could be four, four and a half. It could be 2.5. It depends on inventory and channel. You know, there's like, what's new products go to production? But I just, we keep saying, you know, that this is a GDP plus business over a cycle. And that's how we view it. It's very resilient. It's very resilient. It's very resilient. You know, I make the comment, you know, I spend a lot of time with hearing aid customers. Their expectations for this year have come down a little bit. But to kind of give you an idea, when I talk to our customers, they expected 4% to 6% unit growth this year. Now they're expecting maybe 2% to 3%. So that's kind of what we're talking about in terms of instability due to market conditions. So GEP+, that's kind of what we think about. On the OTC market also, though, I think this could be an upside. I don't know if you saw, there's been a lot of recent announcements. Walmart, Best Buy, Sony. You can look up some of these announcements, but more and more people are starting to look at this market. We'll see how it develops, but I'm incrementally more optimistic about the next GDP plus when it's grown at GDP in the past. Last question on the true wireless. I think where we are here is we've got a number of things in production. I think next year we're focused on trying to fill its capacity, but we're also focused on making sure we keep ASPs high. and that the gross margin on the balanced armature speakers for the true wireless headsets are high. So, you know, I think the expectations are probably modest relative in size to the whole hearing health business, but it has the ability to be pretty accretive in terms of adding to our gross margin.

Okay, great. Thank you. Thank you. And our next question is from the line of Tristan Guerra-Baird. Tristan, your line is now open.

Hi, this is Tyler on for Tristan. Thanks for taking the questions. Digging a little deeper into the OTC market, should we expect a potential inventory ramp for retail over the next few quarters?

Yeah, I would sit there and say there may be some, but I think the level may be different than you think of like a traditional consumer product. We do expect, as we look at the people who are introducing over-the-counter hearing aids, we think we have probably higher than we share than we even have in our hearing aid business based on the design ones that we know about. The content is very similar to what it is in our hearing aid business. So we don't see any difference in ASP or gross margin. But yeah, there will be a modest inventory ramp next year. I think we just have to watch how this develops and how customers take to these over-the-counter hearing aids. You know, I think one of the things you see on the positive course, you don't have to go to an audiologist, so it's easier for someone to get access. But on the reverse side, you can sit there and see, like, the hearing aids are being introduced somewhere in the neighborhood of a pair for $799 all the way we've seen $1199. So these aren't at a tremendous discount to what you could buy a couple hearing aids from an audiologist at, say, a Costco in the retail channel.

Great, thanks. And then as we think about more of the longer term, how should we look at the potential for M&A?

Yeah, I mean, I think we've shown a definite desire to do M&A through action in our PD organization. Our PD group, we've done I think now five acquisitions in 17, our last one being about a year and a half ago. We acquired IMC at our filter company in California. I would sit there and say the valuations have been very high and we want to be very disciplined about what we do, but it is a target rich environment and we are continuing on a regular basis to assess and if we find something, That makes sense strategically for us. It fits either expanding our product portfolio, moving us into new markets. We're going to be active. But I temper everyone's expectation that we're going to be disciplined in what we buy and making sure that it makes sense from a multiple. It fits our profile of what we're looking for.

Yeah, Tyler, I just add, as I mentioned in my script, We're going to exit 2022 with essentially no net debt. We've got very strong expectations for cash flow in 2023, so we can continue our stock repurchase program and make strategic acquisitions. This isn't an either-or.

Yeah, I mean, that's a good point. I think, you know, we've got to fare up because of the fact that we really kept the balance sheet clean. We've got a fair amount of dry powder here to do M&A, but, again, that doesn't mean we should. We've got to find the right opportunities.

Great. I appreciate it, guys.

As a reminder, if you would like to ask a question, please ask staff level one on your telephone keypad now. Our next question is from the line of Suji De Silva of Roth Capital. Suji, your line's open.

Hi, Jeff. Hi, John. Can you remind us in the audio microphone business, can you remind us the gross margin mix dynamic that was unfavorable this quarter? I figured with the restructuring, you're going to structurally improve the mix. Can you talk about what the near-term audio mix was?

Yeah, there is some mix that's impacting the business. There is some. But I would say the overwhelming thing that we're really looking at here, and again, the company gross margin would have been over 40%, close to 41% without the capacity utilization issues. So, Suji, when I think about this, We're starting to see some of the benefits, of course, of the restructuring. The majority will be in there. But when you're running 50% of capacity, it's very difficult to be super efficient with your fixed overhead. And so, again, we're selling a lot more mics than that, than that 50% of capacity. And I think, again, this will go probably into the first quarter as we try to work on inventory. But once this is done, I think we will pick up where we kind of left off in terms of having the right mix, focusing on higher margin business with new products, and we'll have a cost structure that fits that we think we can keep relatively full the whole year.

And just to add just a little bit of clarity, the mobile business, men's microphone for mobile, we expect to be below 20% of total revenues in 2022. Got it. Okay.

And then switching over to PD, the automotive end market, I'm curious if the nature of customer engagement there are multi-year sort of commitments or whether you kind of have to go year by year and if you can start to see programs and pipeline layering on there for visibility, multi-year visibility?

Yeah, I would sit there and say it is platform-based, so they are kind of, but I think the difference you think of these multi-year visibility, it's a lot more challenging in the EV market than it would be in the traditional combustion engine market. And I'll tell you why, Suji. You sit there and you see all the platforms we're working on. It's a who's who of the automotive industry. But the question is, who is going to be the winners in three or four years? Who's going to be selling a lot of these EVs? It's much more difficult to predict that right now. Our goal, as we view this, is Greenfield. It's a brand new high-voltage application that had not existed even in older versions of EVs. And we're trying to, again, capture as much of the green field as we can in terms of design wins. And I would say one of our pieces, we also have different levels of content per platform as well. So it's a little bit more challenging to look at and say, what does my business look like? Again, it's going to be a little north of $15 million this year. If you go back a couple years ago, it was half that. We think it can double again in the next two to three years, and I think that's probably on the conservative side. And that's based on existing designs. That's based on existing designs. And so I think if we win with the winners, it could be a lot bigger. But I think doubling that business in the next two to three years is very realistic on the conservative side.

Okay. Helpful callers. Thanks, guys.

Thank you, and our next question is from the line of Christopher Rowland of Susquehanna Group. Christopher, your line is now open.

Thanks, and I'll just piggyback on Suji's for a second there, his question. So in precision devices, you just gave us EEV, but I was wondering if you could talk about kind of the size of defense and med tech and their relative growth rates for each and how you see it over the next year or two.

Yeah, so first on defense, the defense is becoming a larger and larger portion of our business. I think it's going to be approaching 40% of PD, about a $100 million business now. And that's up pretty significantly since 20. The thing I have here, it was a little over $70 million a couple years ago. So that business has been growing at a pretty rapid rate. And the combination, there is one acquisition in there, but it's also organic. It's organically growing pretty rapidly, too. I'd say, just generally speaking, Chris, is The defense market is looking very positive for the type of products we sell, which are regular frequency filters for radar, jammers. I mean, it's looking very positive. And so, as we look into next year, we see another strong organic growth year for defense. And I would say, just from my perspective, this is pretty banked. This is not like there's a lot of risk that these orders are going to come in. And so, we feel pretty good about that. On the med business, not counting hearing health, I think this is another business that's been growing pretty rapidly. Now, I'll caution you, these growth rates are probably a little higher than they will be in the future, because remember, we kind of had this downward pressure on the business during COVID that kind of brought that business down. But this was a little over a $20 million business in 2020. It's approaching $40 million in 2022. And so I wouldn't expect that growth rate going forward, but you could see 5%, 6%, 7% growth going forward based on the design wins we have and where we're at. So I think it's very positive, the MedTech business portion of PD.

I'd just add too, Chris, the defense and medical attractive gross margins.

Yes, very attractive.

For sure. Yeah, PD overall is excellent. Thanks, guys. As a follow-up, first a clarification. You talked in the MEMS microphone business about new product introductions. Wanted to know what the deal there is. Is it just higher SNR or is there something else and are there better ASPs with that? Any details there would be great. And then just a bigger picture question, what's the kind of next big thing for you guys? I mean... Previously, we've talked about, you know, balanced armature speakers or OTC hearing aids. You know, if there was any upside, to call it street models or something like that, from next year, is there a product or something like that that could accelerate growth for you guys?

Yeah, and you're talking specifically in the men's microphone business. You know, in the men's microphone business, we have a constant group of introduction of new products. But when I was referring to new product introductions, Ashley, Chris, I was referring what was driving was our customers' new product introductions as opposed to our new product introductions. But I would just say in terms of new products, I don't want to get too far ahead of ourselves. We've got some exciting developments in terms of different types of microphones. I'm not sure we're ready to discuss this yet, but we've got some exciting stuff that we're working on that I think Hopefully next year we'll be able to begin talking about, but it's a different class of microphone than anything that we do today. And so we're working on this very hard in our R&D group. I would say that's probably of interest. And then the other one is we still think that there's going to be some opportunity over the next two to three years to grow in AR, VR type applications. They are requiring microphones, and they are in some cases requiring like a different type of microphone. And so I think that might be an opportunity for us to have some growth in the MEMS microphone business, you know, at, you know, I would say hopefully very good gross margins.

That's exciting. Thanks, guys.

Great.

And we have no further questions registered for today. So this concludes the Knowles Corporation third quarter 2022 presentation. Financial Results Conference School. Thank you all for joining and you may now disconnect your lines.