Knowles Corporation

Again, press the star and 1. I would now like to turn the call over to Vice President of Investor Relations, Patton Hofer.

Thank you, Kayla, and welcome to our Q3 2023 earnings call. I'm Patton Hofer, Vice President of Investor Relations, and presenting with me on the call today are Jeffrey New, our President and CEO, and John Anderson, our Senior Vice President and CFO. 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. Forward-looking statements in this call will include comments about demand for company products, anticipated trends in company sales, expenses, and profits, and involve a number of risks and uncertainties that can 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 a report on Form 10-K for the fiscal year ended December 31, 2022, periodic reports filed from time to time 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, pursuant to Reg. G, any non-GAAP financial measures referenced during today's conference call can be found in our press release posted on our website at NOLS.com. and in our current report on Form 8-K filed today with the SEC, including a reconciliation to the most directly comparable GAAP measures. All financial references on this call will be on a non-GAAP continuing operations basis unless otherwise indicated. Also, we've made selected financial information available in webcast slides, which can be found in the investor relations section of our website. With that, let me turn the call over to Jeff, who will provide some details on our results. Jeff? Thanks, Patton, and thanks to all of you for joining us today.

Those delivered solid third quarter results with earnings and cash flow above our expectations. Revenue of $175 million was in line with guidance, while adjusted EBIT margins of 21%, EPS of $0.31, and cash from operations of $40 million finished above the high end of our guidance ranges. In Q3, we took strategic actions to advance our transformation into an industrial technology company by announcing the acquisition of a Cornell Doublier and the exploration of strategic alternatives for our consumer MEMS microphone business. These actions reflect our ongoing efforts to increase exposure to high-growth markets and higher-value opportunities. The Cornell W8 acquisition, which was successfully completed yesterday, bolsters our precision device segment and is a testament to our commitment to growth, innovation, and delivering greater value to shareholders. This transaction significantly expands our serviceable available market through CDs capacitor offerings and will enable us to deliver a wider portfolio of products and solutions to both existing and new customers. CDs and markets are aligned with key growth tailwinds, including increasing defense budgets, med tech, and critical care application growth. They're also well positioned in industrial electrification, clean energy, and the implementation of next generation fast charging architectures. We are thrilled to welcome Cornell AA's talented employees to NOLS and look forward to realizing the tremendous benefits of this transaction for our customers and our shareholders. The acquisition is expected to be accretive to our EPS in 2024. Importantly, we continue to have a strong balance sheet allowing us to focus on balancing organic investment in R&D and CapEx with accretive M&A while continuing to return cash to shareholders through share repurchases. While we won't be getting into the specifics today relative to the exploration of strategic alternatives of the Consumer Mems My Business, what I will say is the process is progressing. Turning to segment results, Precision Advice's Q3 revenue improved sequentially and was down 22% from the prior year. Demand weakness associated with XX channel inventory continued in Q3, leading to low manufacturing capacity utilization. Demand has improved since Q2, and we are encouraged by the positive ordering trends in PD as book-to-bill finished above 1 for the first time in six quarters. We expect orders to continue to rebound in Q4, which gives us confidence in a return to growth in 2024. In MedTech and specialty audio, revenue was up 20% versus the prior year, and market demand remains resilient. Based on our projected sequential growth and strong execution over the quarter, we believe we are past the inventory correction we experienced in the first half of 23. We remain confident in our ability to grow MSA in 2024. In the consumer MEMS microphone business, revenue was up 2% from last year and earnings were slightly better than expected as consumer electronics markets have stabilized and demand for non-mobile products grew year over year. We expect Q4 will be the strongest quarter for CMM this year, including the highest quarter for mobile shipments driven by timing of customer product launches and improved share of position. To summarize briefly, MSA continues to perform well and we expect another strong quarter in Q4 with solid momentum heading into 2024. In PD, ordering trends have improved, but due to timing of the recovery, margins continue to be impacted by low-capacity dualization. With the robust secular trends in defense, medtech, and EV markets, complemented by the Cornell AA acquisition, we believe we are well-positioned for return to growth in PD. For CMM, consumer electronics markets have stabilized, and we expect second-half revenues to be up year-over-year. Q4 is expected to be the peak quarter for the year, driven by strong shipments of to mobile. We expect 2024 to benefit from the improving market trends and for CMM to return to full year revenue growth. While 2023 has been a challenging year, we are performing well in the second half. On the last earnings call, we laid out a target of 19% adjusted EBIT margins for the second half. Excluding Cornell Doublier, we expect to achieve that target. Although there has been some shift in earnings between Q3 and Q4, our second half EPS is expected to be in line with our previous expectations. As we enter the next phase of our transformation into an industrial technology company, I am confident the strategic actions we've taken will drive long-term shareholder value. Before I turn it over to John, I want to highlight the change in our guidance metrics starting in the fourth quarter. We will be providing revenue, EPS, and cash from operations guidance which is inclusive of the Cornell WBA acquisition. We believe these metrics are the best measure for our business and are aligned to the company's focus. Now let me turn the call over to John to detail our quarterly results and guidance.