Knowles Corporation

Thank you for standing by and welcome to the first quarter 2024 Knowles Corporation earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one again. Thank you. I would now like to turn the call over to Sarah Cook. Please go ahead.

Thank you, and welcome to our Q1 2024 earnings call. I'm Sarah Cook, Vice President of Investor Relations, and presenting with me 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 laws. 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 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 filing, including but not limited to the annual report on Form 10-K for the fiscal year ended December 31, 2023, periodic reports filed from time to time with the SEC, and the risks and uncertainties identified in today's earnings relief. 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 measure. All financial references on this call will be made on a non-GAAP, continuing operations basis, unless otherwise indicated. 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 details on our results. Jeff?

Thanks, Sarah, and thanks to all of you for joining us today. I'm very pleased with the start of 2024, as our first quarter results showed the potential of our businesses to expand EBIT margins and drive strong free cash flow. We are continuing our transformation to focus on high growth and markets where we have differentiated solutions, and our Q1 financial performance is evidence that our strategy is working. In the first quarter, we delivered revenue of $196 million above the midpoint of our guided range, EPS of 20 cents at the high end of our guided range, and cash from operations of $17 million, which exceeded the high end of our guided range. Turning to segment results, MedTech and specialty audio revenue was up 26%, with over 90% adjusted EBIT growth versus the same period a year ago. The end markets for our hearing health products remain robust as market dynamics such as aging populations, expansion of middle class globally, and improved hearing aid penetration all remain favorable. Second, our operational excellence continues to produce strong margin performance. This coupled with our success in new product adoption is driving revenue growth with expanding EBIT margins and cash flow for 2024. Precision device revenue was up 38% from a year ago, driven by the acquisition of Cornell. As we expected, the end market challenges we experienced in the back half of 2023 continue into the first half of 2024, as inventory levels within distribution and the industrial end markets remain high. We remain focused on design activity, which continues to be robust in defense, life sciences, industrial, and EV, and positions us well for future growth. We continue to be excited about the performance, synergistic opportunities, and total available market expansion Cornell brings to the PD segment. With the beginning of an anticipated recovery in the second half of the year and the addition of Cornell, we expect to see double-digit revenue and adjusted EBIT growth within this segment in 2024. Before moving to the results for the consumer MEMS microphone business, I will provide some brief commentary on the status of the strategic alternatives process that we announced last year. We are taking into consideration all the stakeholders from customers to suppliers and shareholders to employees, and I believe we are progressing to a conclusion. From an operational standpoint, CMM's financial results in the quarter were solid. Revenue was up 44% from the same period a year ago as the business has returned to more stabilized levels. We've expanded our mobile and ear share and expecting to continue to see revenue growth in the second quarter and for the full year of 2024 as compared to 2023 levels. In closing, we expect to continue to generate robust cash from operations in Q2 and the remainder of 2024, despite excess channel inventory negatively impacting demand within our PD segment. Our cash generation and strong balance sheet will allow us to explore acquisition opportunity, buyback shares, and keep our debt at manageable levels. I am pleased with the financial performance to date in 2024, and I am excited about the opportunities we have ahead of us. We are confident in our ability to deliver shareholder value as we continue to drive operational excellence, execute on design wins in all three segments, and expand our share across our businesses. Now let me turn the call over to John to detail our quarterly results and provide QQ guidance.