Knowles提交截至2026年9月30日的10-Q：前九个月收入5.039亿美元，净收益5,070万美元
10-Q - Knowles Corp (0001587523) (Filer)
Knowles Corporation提交截至2026年9月30日的季度10-Q；截至该日的九个月，收入为5.039亿美元，持续经营净收益为5,090万美元，摊薄每股收益为0.58美元。同期经营活动净现金流入7,210万美元，资本开支2,460万美元，并回购1,387,421股、支出4,750万美元。材料所引中期财务报表未经审计，且节选未涵盖完整文件内容。
材料提供了Knowles截至2026年9月30日的九个月业绩、现金流及回购信息，可用于了解报告期经营表现与资本使用情况。
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2026.
or
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number: 001-36102
Knowles Corporation
(Exact name of registrant as specified in its charter)
| Delaware | 90-1002689 | ||||
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | ||||
1151 Maplewood Drive, Itasca, IL
(Address of Principal Executive Offices)
60143
(Zip Code)
(630) 250-5100
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading symbol | Name of each exchange on which registered | ||||||||||||
| Common stock, $0.01 par value per share | KN | New York Stock Exchange | ||||||||||||
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes ☑ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Yes ☑ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☑ | Accelerated filer | ☐ | |||||||||||
| Non-accelerated filer | ☐ | Smaller reporting company | ☐ | |||||||||||
| Emerging growth company | ☐ | |||||||||||||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes ☐ No ☑
The number of shares outstanding of the registrant’s common stock as of October 23, 2026 was 84,720,988.
Knowles Corporation
Form 10-Q
Table of Contents
PART I — FINANCIAL INFORMATION
Item 1. Financial Statements
KNOWLES CORPORATION
CONSOLIDATED STATEMENTS OF EARNINGS
(in millions, except per share amounts)
(unaudited)
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| Revenues | $ | 184.0 | $ | 152.9 | $ | 503.9 | $ | 431.0 | |||||||||||||||
| Cost of goods sold | 102.2 | 82.8 | 280.2 | 242.9 | |||||||||||||||||||
| Impairment charges | — | — | — | 3.6 | |||||||||||||||||||
| Restructuring charges - cost of goods sold | 0.5 | 0.2 | 0.7 | 0.7 | |||||||||||||||||||
| Gross profit | 81.3 | 69.9 | 223.0 | 183.8 | |||||||||||||||||||
| Research and development expenses | 11.1 | 10.0 | 33.4 | 29.7 | |||||||||||||||||||
| Selling and administrative expenses | 39.4 | 34.0 | 118.0 | 107.1 | |||||||||||||||||||
| Restructuring charges | 0.1 | 0.1 | 0.3 | 2.5 | |||||||||||||||||||
| Operating expenses | 50.6 | 44.1 | 151.7 | 139.3 | |||||||||||||||||||
| Operating earnings | 30.7 | 25.8 | 71.3 | 44.5 | |||||||||||||||||||
| Interest expense, net | 1.6 | 2.3 | 4.8 | 7.5 | |||||||||||||||||||
| Other expense, net | 1.3 | 1.2 | 5.1 | 2.6 | |||||||||||||||||||
| Earnings before income taxes and discontinued operations | 27.8 | 22.3 | 61.4 | 34.4 | |||||||||||||||||||
| Provision for income taxes | 6.6 | 4.3 | 10.5 | 9.0 | |||||||||||||||||||
| Earnings from continuing operations | 21.2 | 18.0 | 50.9 | 25.4 | |||||||||||||||||||
| Earnings (loss) from discontinued operations, net | 0.4 | (0.6) | (0.2) | (2.2) | |||||||||||||||||||
| Net earnings | $ | 21.6 | $ | 17.4 | $ | 50.7 | $ | 23.2 | |||||||||||||||
| Earnings per share from continuing operations: | |||||||||||||||||||||||
| Basic | $ | 0.25 | $ | 0.21 | $ | 0.60 | $ | 0.29 | |||||||||||||||
| Diluted | $ | 0.24 | $ | 0.21 | $ | 0.58 | $ | 0.29 | |||||||||||||||
| Earnings (loss) per share from discontinued operations: | |||||||||||||||||||||||
| Basic | $ | — | $ | (0.01) | $ | (0.01) | $ | (0.02) | |||||||||||||||
| Diluted | $ | 0.01 | $ | (0.01) | $ | — | $ | (0.03) | |||||||||||||||
| Net earnings per share: | |||||||||||||||||||||||
| Basic | $ | 0.25 | $ | 0.20 | $ | 0.59 | $ | 0.27 | |||||||||||||||
| Diluted | $ | 0.25 | $ | 0.20 | $ | 0.58 | $ | 0.26 | |||||||||||||||
| Weighted-average common shares outstanding: | |||||||||||||||||||||||
| Basic | 85.3 | 85.8 | 85.5 | 86.8 | |||||||||||||||||||
| Diluted | 87.7 | 87.3 | 87.9 | 88.1 | |||||||||||||||||||
See accompanying Notes to Consolidated Financial Statements
1
KNOWLES CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE EARNINGS
(in millions)
(unaudited)
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| Net earnings | $ | 21.6 | $ | 17.4 | $ | 50.7 | $ | 23.2 | |||||||||||||||
| Other comprehensive earnings, net of tax | |||||||||||||||||||||||
| Foreign currency translation | (0.2) | 0.4 | 4.7 | 6.5 | |||||||||||||||||||
| Employee benefit plans: | |||||||||||||||||||||||
Amortization or settlement of actuarial losses and prior service costs | 0.2 | 0.1 | 0.5 | 0.4 | |||||||||||||||||||
| Net change in employee benefit plans | 0.2 | 0.1 | 0.5 | 0.4 | |||||||||||||||||||
| Changes in fair value of cash flow hedges: | |||||||||||||||||||||||
| Unrealized net (losses) gains arising during period | (0.2) | (0.6) | — | 1.9 | |||||||||||||||||||
| Net (gains) losses reclassified into earnings | (0.1) | (0.3) | — | 0.1 | |||||||||||||||||||
| Total cash flow hedges | (0.3) | (0.9) | — | 2.0 | |||||||||||||||||||
| Other comprehensive (loss) earnings, net of tax | (0.3) | (0.4) | 5.2 | 8.9 | |||||||||||||||||||
| Comprehensive earnings | $ | 21.3 | $ | 17.0 | $ | 55.9 | $ | 32.1 | |||||||||||||||
See accompanying Notes to Consolidated Financial Statements
2
KNOWLES CORPORATION
CONSOLIDATED BALANCE SHEETS
(in millions, except share and per share amounts)
(unaudited)
| September 30, 2026 | December 31, 2025 | ||||||||||
| Current assets: | |||||||||||
| Cash and cash equivalents | $ | 46.6 | $ | 54.2 | |||||||
Receivables, net of allowances of $0.4 and $0.0 | 122.5 | 102.8 | |||||||||
| Inventories | 150.3 | 124.6 | |||||||||
| Prepaid and other current assets | 10.7 | 9.8 | |||||||||
| Total current assets | 330.1 | 291.4 | |||||||||
| Property, plant, and equipment, net | 145.9 | 140.2 | |||||||||
| Goodwill | 270.3 | 270.3 | |||||||||
| Intangible assets, net | 129.1 | 141.1 | |||||||||
| Operating lease right-of-use assets | 17.6 | 19.1 | |||||||||
| Investment in affiliate | 83.4 | 83.4 | |||||||||
| Other assets and deferred charges | 98.8 | 105.6 | |||||||||
| Total assets | $ | 1,075.2 | $ | 1,051.1 | |||||||
| Current liabilities: | |||||||||||
| Accounts payable | $ | 44.6 | $ | 42.9 | |||||||
| Accrued compensation and employee benefits | 30.8 | 29.7 | |||||||||
| Operating lease liabilities | 4.4 | 4.1 | |||||||||
| Other accrued expenses | 25.5 | 28.2 | |||||||||
| Federal and other taxes on income | 7.1 | 1.0 | |||||||||
| Total current liabilities | 112.4 | 105.9 | |||||||||
| Long-term debt | 116.0 | 114.0 | |||||||||
| Deferred income taxes | 1.1 | 1.1 | |||||||||
| Long-term operating lease liabilities | 13.9 | 16.1 | |||||||||
| Other liabilities | 33.5 | 38.2 | |||||||||
| Commitments and contingencies (Note 14) | |||||||||||
| Stockholders' equity: | |||||||||||
Preferred stock - $0.01 par value; 10,000,000 shares authorized; none issued | — | — | |||||||||
Common stock - $0.01 par value; 400,000,000 shares authorized; 100,872,803 and 84,720,988 shares issued and outstanding at September 30, 2026, respectively, and 99,651,892 and 84,887,498 shares issued and outstanding at December 31, 2025, respectively | 1.0 | 1.0 | |||||||||
Treasury stock - at cost; 16,151,815 and 14,764,394 shares at September 30, 2026 and December 31, 2025, respectively | (318.4) | (270.7) | |||||||||
| Additional paid-in capital | 1,753.9 | 1,739.6 | |||||||||
| Accumulated deficit | (518.7) | (569.4) | |||||||||
| Accumulated other comprehensive loss | (119.5) | (124.7) | |||||||||
| Total stockholders' equity | 798.3 | 775.8 | |||||||||
| Total liabilities and stockholders' equity | $ | 1,075.2 | $ | 1,051.1 | |||||||
See accompanying Notes to Consolidated Financial Statements
3
KNOWLES CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(in millions, except share amounts)
(unaudited)
| Common Stock | Treasury Stock | Additional Paid-In Capital | Accumulated Deficit | Accumulated Other Comprehensive Loss | Total Stockholders' Equity | ||||||||||||||||||||||||||||||||||||||||||
| Shares Issued | Amount | Shares | Amount | ||||||||||||||||||||||||||||||||||||||||||||
| Balance at June 30, 2026 | 100,867,089 | $ | 1.0 | (15,456,763) | $ | (293.2) | $ | 1,747.2 | $ | (540.3) | $ | (119.2) | $ | 795.5 | |||||||||||||||||||||||||||||||||
| Net earnings | — | — | — | — | — | 21.6 | — | 21.6 | |||||||||||||||||||||||||||||||||||||||
| Other comprehensive loss, net of tax | — | — | — | — | — | — | (0.3) | (0.3) | |||||||||||||||||||||||||||||||||||||||
| Repurchase of common stock | — | — | (695,052) | (25.0) | — | — | — | (25.0) | |||||||||||||||||||||||||||||||||||||||
| Excise tax on repurchase of common stock | — | — | — | (0.2) | — | — | — | (0.2) | |||||||||||||||||||||||||||||||||||||||
| Stock-based compensation expense | — | — | — | — | 6.8 | — | — | 6.8 | |||||||||||||||||||||||||||||||||||||||
| Restricted stock unit settlement, net of tax | 5,714 | — | — | — | (0.1) | — | — | (0.1) | |||||||||||||||||||||||||||||||||||||||
| Balance at September 30, 2026 | 100,872,803 | $ | 1.0 | (16,151,815) | $ | (318.4) | $ | 1,753.9 | $ | (518.7) | $ | (119.5) | $ | 798.3 | |||||||||||||||||||||||||||||||||
| Common Stock | Treasury Stock | Additional Paid-In Capital | Accumulated Deficit | Accumulated Other Comprehensive Loss | Total Stockholders' Equity | ||||||||||||||||||||||||||||||||||||||||||
| Shares Issued | Amount | Shares | Amount | ||||||||||||||||||||||||||||||||||||||||||||
| Balance at June 30, 2025 | 99,262,597 | $ | 1.0 | (13,374,991) | $ | (240.4) | $ | 1,722.1 | $ | (607.8) | $ | (128.8) | $ | 746.1 | |||||||||||||||||||||||||||||||||
| Net earnings | — | — | — | — | — | 17.4 | — | 17.4 | |||||||||||||||||||||||||||||||||||||||
| Other comprehensive loss, net of tax | — | — | — | — | — | — | (0.4) | (0.4) | |||||||||||||||||||||||||||||||||||||||
| Repurchase of common stock | — | — | (938,112) | (20.0) | — | — | — | (20.0) | |||||||||||||||||||||||||||||||||||||||
| Excise tax on repurchase of common stock | — | — | — | (0.3) | — | — | — | (0.3) | |||||||||||||||||||||||||||||||||||||||
| Stock-based compensation expense | — | — | — | — | 5.9 | — | — | 5.9 | |||||||||||||||||||||||||||||||||||||||
| Exercise of stock options | 197,758 | — | — | — | 3.3 | — | — | 3.3 | |||||||||||||||||||||||||||||||||||||||
| Restricted stock unit settlement, net of tax | 4,632 | — | — | — | (0.2) | — | — | (0.2) | |||||||||||||||||||||||||||||||||||||||
| Balance at September 30, 2025 | 99,464,987 | $ | 1.0 | (14,313,103) | $ | (260.7) | $ | 1,731.1 | $ | (590.4) | $ | (129.2) | $ | 751.8 | |||||||||||||||||||||||||||||||||
See accompanying Notes to Consolidated Financial Statements
4
KNOWLES CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(in millions, except share amounts)
(unaudited)
| Common Stock | Treasury Stock | Additional Paid-In Capital | Accumulated Deficit | Accumulated Other Comprehensive Loss | Total Stockholders' Equity | ||||||||||||||||||||||||||||||||||||||||||
| Shares Issued | Amount | Shares | Amount | ||||||||||||||||||||||||||||||||||||||||||||
| Balance at December 31, 2025 | 99,651,892 | $ | 1.0 | (14,764,394) | $ | (270.7) | $ | 1,739.6 | $ | (569.4) | $ | (124.7) | $ | 775.8 | |||||||||||||||||||||||||||||||||
| Net earnings | — | — | — | — | — | 50.7 | — | 50.7 | |||||||||||||||||||||||||||||||||||||||
| Other comprehensive earnings, net of tax | — | — | — | — | — | — | 5.2 | 5.2 | |||||||||||||||||||||||||||||||||||||||
| Repurchase of common stock | — | — | (1,387,421) | (47.5) | — | — | — | (47.5) | |||||||||||||||||||||||||||||||||||||||
| Excise tax on repurchase of common stock | — | — | — | (0.2) | — | — | — | (0.2) | |||||||||||||||||||||||||||||||||||||||
| Stock-based compensation expense | — | — | — | — | 23.4 | — | — | 23.4 | |||||||||||||||||||||||||||||||||||||||
| Exercise of stock options | 339,178 | — | — | — | 5.8 | — | — | 5.8 | |||||||||||||||||||||||||||||||||||||||
| Restricted and performance stock unit settlement, net of tax | 881,733 | — | — | — | (14.9) | — | — | (14.9) | |||||||||||||||||||||||||||||||||||||||
| Balance at September 30, 2026 | 100,872,803 | $ | 1.0 | (16,151,815) | $ | (318.4) | $ | 1,753.9 | $ | (518.7) | $ | (119.5) | $ | 798.3 | |||||||||||||||||||||||||||||||||
| Common Stock | Treasury Stock | Additional Paid-In Capital | Accumulated Deficit | Accumulated Other Comprehensive Loss | Total Stockholders' Equity | ||||||||||||||||||||||||||||||||||||||||||
| Shares Issued | Amount | Shares | Amount | ||||||||||||||||||||||||||||||||||||||||||||
| Balance at December 31, 2024 | 98,551,188 | $ | 1.0 | (11,192,529) | $ | (205.2) | $ | 1,711.9 | $ | (613.6) | $ | (138.1) | $ | 756.0 | |||||||||||||||||||||||||||||||||
| Net earnings | — | — | — | — | — | 23.2 | — | 23.2 | |||||||||||||||||||||||||||||||||||||||
| Other comprehensive earnings, net of tax | — | — | — | — | — | — | 8.9 | 8.9 | |||||||||||||||||||||||||||||||||||||||
| Repurchase of common stock | — | — | (3,120,574) | (55.0) | — | — | — | (55.0) | |||||||||||||||||||||||||||||||||||||||
| Excise tax on repurchase of common stock | — | — | — | (0.5) | — | — | — | (0.5) | |||||||||||||||||||||||||||||||||||||||
| Stock-based compensation expense | — | — | — | — | 22.4 | — | — | 22.4 | |||||||||||||||||||||||||||||||||||||||
| Exercise of stock options | 241,118 | — | — | — | 3.9 | — | — | 3.9 | |||||||||||||||||||||||||||||||||||||||
| Restricted and performance stock unit settlement, net of tax | 672,681 | — | — | — | (7.1) | — | — | (7.1) | |||||||||||||||||||||||||||||||||||||||
| Balance at September 30, 2025 | 99,464,987 | $ | 1.0 | (14,313,103) | $ | (260.7) | $ | 1,731.1 | $ | (590.4) | $ | (129.2) | $ | 751.8 | |||||||||||||||||||||||||||||||||
See accompanying Notes to Consolidated Financial Statements
5
KNOWLES CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions)
(unaudited)
| Nine Months Ended September 30, | |||||||||||
| 2026 | 2025 | ||||||||||
| Operating Activities | |||||||||||
| Net earnings | $ | 50.7 | $ | 23.2 | |||||||
| Adjustments to reconcile net earnings to cash from operating activities: | |||||||||||
| Depreciation and amortization | 28.8 | 27.1 | |||||||||
| Stock-based compensation | 23.4 | 22.4 | |||||||||
| Deferred income taxes | 7.8 | 4.3 | |||||||||
| Non-cash interest expense and amortization of debt issuance costs | 0.4 | 4.2 | |||||||||
| Impairment charges on fixed assets | — | 3.6 | |||||||||
| (Gain) loss on sale of business | (0.8) | 1.6 | |||||||||
| Loss on sale of fixed assets | 0.1 | 0.1 | |||||||||
| Other, net | 6.9 | 5.2 | |||||||||
| Changes in assets and liabilities (excluding effects of foreign exchange): | |||||||||||
| Receivables, net | (20.0) | (3.8) | |||||||||
| Inventories | (26.5) | (4.8) | |||||||||
| Prepaid and other current assets | (1.8) | (1.5) | |||||||||
| Accounts payable | 2.3 | (20.8) | |||||||||
| Accrued compensation and employee benefits | 1.1 | (3.4) | |||||||||
| Other accrued expenses | (7.0) | (7.8) | |||||||||
| Accrued taxes | 5.6 | 3.2 | |||||||||
| Other non-current assets and non-current liabilities | 1.1 | 14.0 | |||||||||
| Net cash provided by operating activities | 72.1 | 66.8 | |||||||||
| Investing Activities | |||||||||||
| Capital expenditures | (24.6) | (16.8) | |||||||||
| Purchase of investments | — | (1.6) | |||||||||
| Proceeds from the sale of investments | — | 1.6 | |||||||||
| Proceeds from seller loan repayment | — | 0.5 | |||||||||
| Net cash used in investing activities | (24.6) | (16.3) | |||||||||
| Financing Activities | |||||||||||
| Borrowings under revolving credit facility | 105.0 | — | |||||||||
| Proceeds from exercise of stock options | 5.8 | 3.9 | |||||||||
| Payments under revolving credit facility | (103.0) | (30.0) | |||||||||
| Repurchase of common stock | (47.5) | (55.0) | |||||||||
| Tax on restricted stock and performance share unit vesting and stock option exercises | (14.9) | (7.1) | |||||||||
| Payments of finance lease obligations | (0.3) | (0.4) | |||||||||
| Net cash used in financing activities | (54.9) | (88.6) | |||||||||
| Effect of exchange rate changes on cash and cash equivalents | (0.2) | 0.5 | |||||||||
| Net decrease in cash and cash equivalents | (7.6) | (37.6) | |||||||||
| Cash and cash equivalents at beginning of period | 54.2 | 130.1 | |||||||||
| Cash and cash equivalents at end of period | $ | 46.6 | $ | 92.5 | |||||||
| Supplemental information - cash paid for: | |||||||||||
| Income taxes | $ | 8.9 | $ | 7.5 | |||||||
| Interest | $ | 5.9 | $ | 6.2 | |||||||
See accompanying Notes to Consolidated Financial Statements
6
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS | ||||||||
| (unaudited) | ||||||||
1. Basis of Presentation
Background - Knowles Corporation (NYSE:KN) is a leading manufacturer of specialty electronic components. The Company designs parts that perform unique and critical functions for innovative technologies. Through extreme reliability, custom engineering, and scalable manufacturing, the Company enables businesses to succeed in the most demanding applications across medtech, defense, industrial, and electrification markets. Knowles high performance capacitors, radio frequency ("RF") filters, advanced medtech microphones, and balanced armature speakers enhance the performance of customer products. The Company's focus on the customer, combined with unique technology, proprietary manufacturing techniques, and global operational expertise, enable the Company to deliver innovative solutions across multiple applications. References to "Knowles," "the Company," "we," "our," and "us" refer to Knowles Corporation and its consolidated subsidiaries.
Financial Statement Presentation - The accompanying unaudited interim Consolidated Financial Statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC") for quarterly reports on Form 10-Q and do not include all of the information and note disclosures required by U.S. generally accepted accounting principles (“GAAP” or “U.S. GAAP”) for complete financial statements. These unaudited interim Consolidated Financial Statements should therefore be read in conjunction with the Consolidated Financial Statements and Notes thereto for the year ended December 31, 2025 included in the Company’s Annual Report on Form 10-K.
The accompanying unaudited interim Consolidated Financial Statements have been prepared in accordance with U.S. GAAP, which requires management to make estimates and assumptions that affect amounts reported in the Consolidated Financial Statements and accompanying disclosures. Although these estimates are based on management’s best knowledge of current events and actions that the Company may undertake in the future, actual results may differ from those estimates. Management uses historical experience and all available information to make these estimates. The unaudited interim Consolidated Financial Statements reflect all adjustments of a normal, recurring nature that are, in the opinion of management, necessary for a fair statement of results for these interim periods.
On December 27, 2024, the Company completed the sale of the Consumer MEMS Microphones ("CMM") business to Syntiant Corp. ("Syntiant"). See Note 3. Discontinued Operations for additional information related to this transaction. The results of operations for CMM, including the impacts of the sale, have been classified as discontinued operations for all periods presented.
Transactions with Syntiant - As partial consideration for the sale of CMM on December 27, 2024, the Company received Series D-2 preferred stock of Syntiant. See Note 3. Discontinued Operations for additional information related to this transaction. The Company accounts for this investment using the cost method, measured at its historical cost, which was the fair value of the consideration received from Syntiant for the sale of CMM, plus any non-cash dividend earned. The balance of this investment was $83.4 million as of both September 30, 2026 and December 31, 2025, and is classified as “Investment in affiliate” on the Consolidated Balance Sheet.
In connection with the sale of CMM, the Company provided financing of $6.4 million to Syntiant, which was utilized to fund Syntiant's requirement to have $40.0 million of cash on its balance sheet at closing. This note is junior to Syntiant's debt financing and matures on March 28, 2029. This note bore interest at the prime rate until June 28, 2025, at which time the interest rate increased to 13.0%. The interest rate on this note was reduced to 8.0% effective May 11, 2026 in connection with an amendment executed at the time. The balance of this note was $5.9 million as of both September 30, 2026 and December 31, 2025 and is classified within "Other assets and deferred charges" on the Consolidated Balance Sheet.
The Company shared in certain separation costs with Syntiant related to the sale of CMM pursuant to a credit for up to $13.5 million. Under the terms of the separation cost credit, the Company was required to reimburse Syntiant 100% for the first $7.0 million of separation costs incurred and 50% for those costs in excess of $7.0 million, up to the maximum established separation cost credit of $13.5 million. The balance of the separation credit was $4.8 million at December 31, 2025 and was classified within "Other accrued expenses" on the Consolidated Balance Sheet; the remaining separation credit was paid to Syntiant in the third quarter of 2026.
7
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS | ||||||||
| (unaudited) | ||||||||
The Company leases portions of its facilities to Syntiant, for which lease payments of $0.3 million and $2.6 million were applied to the separation credit for the nine months ended September 30, 2026 and 2025, respectively. The Company also subleases portions of its manufacturing facilities to Syntiant at cost. The portion of operating lease right-of-use assets subleased by Syntiant totaled approximately $5.1 million and $5.2 million as of September 30, 2026 and December 31, 2025, respectively.
The Company recognized revenue for transactions with Syntiant totaling $1.2 million and $4.4 million during the three months ended September 30, 2026 and 2025, respectively, and $8.3 million and $12.7 million during the nine months ended September 30, 2026 and 2025, respectively. These revenues are reflected in the results of the MedTech & Specialty Audio segment. Receivables, net include $0.7 million and $4.2 million due from Syntiant at September 30, 2026 and December 31, 2025, respectively.
During the second quarter of 2025, the Company engaged with Syntiant to sell certain machinery and equipment associated with the MedTech & Specialty Audio segment for a nominal selling price. The Company recorded an impairment charge of $3.6 million for the nine months ended September 30, 2025 to write down the carrying value of these assets to fair value based on the selling price.
Share Repurchase Program - The Company maintains a share repurchase program, that was initially approved by its Board of Directors in February 2020, authorizing the repurchase of up to $100.0 million of the Company's common stock. The share repurchase program does not have an expiration date, and the Board of Directors has authorized the expansion of the program over the years. The authorization was increased by $150.0 million in April 2022, and increased by an additional $150.0 million in February 2025, for a total of $400.0 million in aggregate value. The timing and amount of any shares repurchased will be determined by the Company based on its evaluation of market conditions and other factors, and will be made in accordance with applicable securities laws in either the open market or in privately negotiated transactions. The Company is not obligated to purchase any shares under the program, and the program may be suspended or discontinued at any time. Any shares repurchased will be held as treasury stock.
During the nine months ended September 30, 2026 and 2025, the Company repurchased 1,387,421 and 3,120,574 shares of common stock for a total of $47.5 million and $55.0 million, respectively. At September 30, 2026, the Company had $81.5 million remaining that may yet be repurchased under the share repurchase program.
Non-cash Operating Activities - Operating lease liabilities arising from obtaining right-of-use assets for the nine months ended September 30, 2026 and 2025 were $1.5 million and $15.6 million, respectively.
Non-cash Investing Activities - Purchases of property, plant, and equipment included in accounts payable at September 30, 2026 and 2025 were $1.4 million and $3.4 million, respectively.
2. Recent Accounting Standards
In November 2024, the Financial Accounting Standards Board issued Accounting Standards Update ("ASU") 2024-03 to provide additional information about specific expense categories in the notes to the financial statements at interim and annual reporting periods. This guidance requires that a public business entity disclose amounts of purchases of inventory, employee compensation, depreciation, and intangible asset amortization included in each relevant expense caption presented on the face of the income statement and a qualitative description of the amounts remaining in relevant expense captions that are not separately disaggregated quantitatively. This standard also requires an entity disclose the total amount of selling expenses and, in annual reporting periods, an entity's definition of selling expenses. In accordance with the requirements of the standard, the Company intends to adopt ASU 2024-03 prospectively for its annual reporting for the year ended December 31, 2027 and for its interim reporting for the three months ended March 31, 2028. The Company expects that the adoption of ASU 2024-03 will expand its disclosures, but does not expect it to have a material impact on its financial position, results of operations, or cash flows.
8
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS | ||||||||
| (unaudited) | ||||||||
3. Discontinued Operations
On December 27, 2024, the Company completed the sale of CMM to Syntiant. The total consideration for this transaction was approximately $140.8 million, consisting of $63.6 million in cash ($58.0 million net of cash sold), and Syntiant Series D-2 preferred stock with a fair value of $77.2 million. The Company shared in certain separation costs pursuant to a credit for up to $13.5 million, which the buyer applied to specified separation costs post-closing. The Company recorded a gain on sale of $0.8 million for the nine months ended September 30, 2026 and a loss on sale of $1.6 million for the nine months ended September 30, 2025 related to working capital adjustments and costs associated with this transaction. The purchase price for this transaction has now been finalized.
During the nine months ended September 30, 2026, the Company recorded net expense of $1.0 million to update its estimates regarding certain tax liabilities related to CMM's historical operations.
The disposition of CMM meets the criteria described in ASC 205-20, Presentation of Financial Statements – Discontinued Operations. In accordance with this guidance, the Company has classified the results of operations of CMM, including the impacts of the sale, as discontinued operations for all periods presented as this disposal represents a strategic shift that has a major effect on the Company’s results of operations.
Results of the Company’s discontinued operations were as follows:
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| (in millions) | 2026 | 2025 | 2026 | 2025 | |||||||||||||||||||
| Research and development expenses | $ | — | $ | — | $ | — | $ | 0.4 | |||||||||||||||
| Selling and administrative expenses | — | — | — | 0.4 | |||||||||||||||||||
| Operating expenses | — | — | — | 0.8 | |||||||||||||||||||
| Operating loss | — | — | — | (0.8) | |||||||||||||||||||
| (Gain) loss on sale of business | — | — | (0.8) | 1.6 | |||||||||||||||||||
| Earnings (loss) from discontinued operations before taxes | — | — | 0.8 | (2.4) | |||||||||||||||||||
| (Benefit from) provision for income taxes | (0.4) | 0.6 | 1.0 | (0.2) | |||||||||||||||||||
| Earnings (loss) from discontinued operations, net | $ | 0.4 | $ | (0.6) | $ | (0.2) | $ | (2.2) | |||||||||||||||
There was no depreciation, amortization of intangible assets, or capital expenditures related to discontinued operations during the three and nine months ended September 30, 2026 or 2025.
4. Inventories
The following table details the major components of inventories:
| (in millions) | September 30, 2026 | December 31, 2025 | |||||||||
| Raw materials | $ | 103.8 | $ | 103.4 | |||||||
| Work in progress | 35.7 | 27.1 | |||||||||
| Finished goods | 47.7 | 40.5 | |||||||||
| Subtotal | 187.2 | 171.0 | |||||||||
Less reserves (1) | (36.9) | (46.4) | |||||||||
| Total | $ | 150.3 | $ | 124.6 | |||||||
(1) The decrease in reserves during the nine months ended September 30, 2026 includes the disposal of previously reserved inventory.
9
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS | ||||||||
| (unaudited) | ||||||||
5. Property, Plant, and Equipment, net
The following table details the major components of property, plant, and equipment, net:
| (in millions) | September 30, 2026 | December 31, 2025 | |||||||||
| Land | $ | 13.8 | $ | 14.1 | |||||||
| Buildings and improvements | 112.5 | 99.1 | |||||||||
| Machinery, equipment, and other | 295.6 | 294.4 | |||||||||
| Subtotal | 421.9 | 407.6 | |||||||||
| Less accumulated depreciation | (276.0) | (267.4) | |||||||||
| Total | $ | 145.9 | $ | 140.2 | |||||||
Depreciation expense totaled $5.9 million and $5.0 million for the three months ended September 30, 2026 and 2025, respectively. For the nine months ended September 30, 2026 and 2025 depreciation expense totaled $16.8 million and $15.0 million, respectively.
During the nine months ended September 30, 2025, the Company recorded an impairment charge of $3.6 million to write down the carrying value of certain machinery and equipment to its expected selling price. See also "Transactions with Syntiant" in Note 1. Basis of Presentation.
6. Goodwill and Other Intangible Assets
There were no changes in the carrying value of goodwill by reportable segment for the nine months ended September 30, 2026.
Other Intangible Assets
The gross carrying value and accumulated amortization for each major class of intangible assets are as follows:
| September 30, 2026 | December 31, 2025 | ||||||||||||||||||||||
| (in millions) | Gross Carrying Amount | Accumulated Amortization | Gross Carrying Amount | Accumulated Amortization | |||||||||||||||||||
| Amortized intangible assets: | |||||||||||||||||||||||
| Trademarks | $ | 15.2 | $ | 3.6 | $ | 15.2 | $ | 2.8 | |||||||||||||||
| Customer relationships | 118.4 | 48.7 | 118.4 | 39.5 | |||||||||||||||||||
| Developed technology | 26.3 | 10.8 | 26.3 | 8.8 | |||||||||||||||||||
| Other | 0.8 | 0.5 | 0.8 | 0.5 | |||||||||||||||||||
| Total | 160.7 | 63.6 | 160.7 | 51.6 | |||||||||||||||||||
| Unamortized intangible assets: | |||||||||||||||||||||||
| Trademarks | 32.0 | 32.0 | |||||||||||||||||||||
| Total intangible assets, net | $ | 129.1 | $ | 141.1 | |||||||||||||||||||
Amortization expense totaled $4.0 million for both the three months ended September 30, 2026 and 2025. For the nine months ended September 30, 2026 and 2025 amortization expense totaled $12.0 million and $12.1 million, respectively.
10
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS | ||||||||
| (unaudited) | ||||||||
Amortization expense for the next five years, based on current definite-lived intangible balances, is estimated to be as follows:
| (in millions) | |||||
| Q4 2026 | $ | 4.0 | |||
| 2027 | 15.9 | ||||
| 2028 | 15.2 | ||||
| 2029 | 12.8 | ||||
| 2030 | 11.7 | ||||
| 2031 and thereafter | 37.5 | ||||
| Total | $ | 97.1 | |||
7. Other Accrued Expenses and Other Liabilities
The following table details the major components of other accrued expenses:
| (in millions) | September 30, 2026 | December 31, 2025 | |||||||||
Deferred revenue (1) | $ | 11.3 | $ | 1.2 | |||||||
| Sales volume rebates | 4.3 | 3.3 | |||||||||
| Accrued insurance | 2.3 | 2.1 | |||||||||
| Accrued commissions (non-employee) | 2.3 | 2.1 | |||||||||
| Accrued taxes other than income taxes | 2.0 | 5.0 | |||||||||
| Current hedging liability | 0.7 | 1.5 | |||||||||
| Restructuring and exit costs | 0.4 | 6.0 | |||||||||
Accrued separation costs (2) | — | 4.8 | |||||||||
| Other | 2.2 | 2.2 | |||||||||
| Total | $ | 25.5 | $ | 28.2 | |||||||
The following table details the major components of other liabilities:
| (in millions) | September 30, 2026 | December 31, 2025 | |||||||||
Deferred revenue (1) | $ | 16.9 | $ | 19.8 | |||||||
| Deferred compensation | 13.7 | 14.9 | |||||||||
| Unrecognized tax benefits | 2.5 | 3.1 | |||||||||
| Other | 0.4 | 0.4 | |||||||||
| Total | $ | 33.5 | $ | 38.2 | |||||||
(1) The Company did not recognize any material revenue during the nine months ended September 30, 2026 that was included in deferred revenue at December 31, 2025; the majority of the remaining underlying performance obligations are expected to be fulfilled by the end of 2028.
(2) In connection with the sale of CMM on December 27, 2024, the Company shared in certain separation costs with the buyer pursuant to a credit of up to $13.5 million that the buyer applied to specified separation costs post-closing. See Note 1. Basis of Presentation.
11
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS | ||||||||
| (unaudited) | ||||||||
8. Restructuring and Related Activities
Restructuring and related activities are designed to better align the Company's operations with current market conditions through targeted facility consolidations, headcount reductions, and other measures to further optimize operations.
The Company recorded restructuring charges of $0.6 million and $1.0 million during the three and nine months ended September 30, 2026, respectively. The Company recorded charges of $0.5 million and $0.7 million within Gross profit for the three and nine months ended September 30, 2026, respectively, and $0.1 million and $0.3 million within Operating expenses for the three and nine months ended September 30, 2026, respectively.
The Company recorded restructuring charges of $0.3 million and $3.2 million during the three and nine months ended September 30, 2025, respectively, related to headcount reductions across the Company primarily to rightsize operations subsequent to the sale of CMM. The Company recorded charges of $0.2 million and $0.7 million within Gross profit for the three and nine months ended September 30, 2025, respectively, and $0.1 million and $2.5 million within Operating expenses for the three and nine months ended September 30, 2025.
The following table details restructuring charges incurred by reportable segment for the periods presented:
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| (in millions) | 2026 | 2025 | 2026 | 2025 | |||||||||||||||||||
| Precision Devices | $ | 0.3 | $ | 0.3 | $ | 0.9 | $ | 1.7 | |||||||||||||||
| MedTech & Specialty Audio | 0.3 | — | 0.3 | 0.3 | |||||||||||||||||||
| Corporate | — | — | (0.2) | 1.2 | |||||||||||||||||||
| Total | $ | 0.6 | $ | 0.3 | $ | 1.0 | $ | 3.2 | |||||||||||||||
The following table details the Company’s severance and other restructuring accrual activity:
| (in millions) | Severance Pay and Benefits | Contract Termination and Other Costs | Total | ||||||||||||||
| Balance at December 31, 2025 | $ | 1.2 | $ | 4.8 | $ | 6.0 | |||||||||||
| Restructuring charges | 1.2 | (0.2) | 1.0 | ||||||||||||||
| Payments | (2.1) | (4.6) | (6.7) | ||||||||||||||
| Other, including foreign currency | 0.1 | — | 0.1 | ||||||||||||||
| Balance at September 30, 2026 | $ | 0.4 | $ | — | $ | 0.4 | |||||||||||
All severance and restructuring accruals are reflected within "Other accrued expenses" on the Consolidated Balance Sheet at both September 30, 2026 and December 31, 2025.
12
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS | ||||||||
| (unaudited) | ||||||||
9. Borrowings
Borrowings consist of the following:
| (in millions) | September 30, 2026 | December 31, 2025 | |||||||||
| $400.0 million Revolving Credit Facility | $ | 116.0 | $ | 114.0 | |||||||
Less current maturities (1) | — | — | |||||||||
| Total long-term debt | $ | 116.0 | $ | 114.0 | |||||||
(1) There are no required principal payments due until maturity in February 2028.
Total debt principal payments over the next five years are as follows:
| (in millions) | |||||
| Q4 2026 | $ | — | |||
| 2027 | — | ||||
| 2028 | 116.0 | ||||
| 2029 | — | ||||
| 2030 | — | ||||
Revolving Credit Facility
On February 8, 2023, the Company entered into an Amended and Restated Credit Agreement (the "A&R Credit Agreement") that amends and restates the prior Credit Agreement, dated September 4, 2020, and provides for a senior secured revolving credit facility with borrowings in an aggregate principal amount at any time outstanding not to exceed $400.0 million (the "Credit Facility"). The A&R Credit Agreement, among other things, extends the maturity date of the Credit Facility from January 2, 2024 to February 8, 2028, replaces the London Inter-Bank Offered Rate (“LIBOR”) with the Term Secured Overnight Financing Rate (“Term SOFR”) as a reference rate available for borrowings, amends the minimum Interest Coverage Ratio, and amends certain other financial covenants with which the Company must comply, as described below.
On September 25, 2023, the Company amended its A&R Credit Agreement to, among other things, (a) permit the Company in connection with the acquisition of Cornell Dubilier ("CD"), to incur senior priority seller financing indebtedness (the “Seller Note”) in an aggregate principal amount of $122.9 million secured by certain assets (including equity interests) acquired in connection with such acquisition and the capital stock of Cornell Dubilier, LLC (the “Acquisition Assets”), which matured two years after the effective date of such Seller Note (the “Seller Note Maturity Date”) and (b) extend the requirement to pledge the Acquisition Assets that would otherwise constitute collateral under the Credit Agreement to the date that is 90 days after the Seller Note Maturity Date. All other terms remain the same as the A&R Credit Agreement dated February 8, 2023.
Up to $100.0 million of the Credit Facility will be available in Euro, Pounds Sterling, and other currencies requested by the Company and up to $50.0 million of the Credit Facility will be made available in the form of letters of credit. Undrawn amounts under the Credit Facility accrue a commitment fee at a per annum rate of 0.225% to 0.350%, based on a leverage ratio grid.
At any time during the term of the Credit Facility, the Company may request to increase the commitments under the Credit Facility or to establish one or more incremental term loan facilities under the Credit Facility in an aggregate principal amount not to exceed the sum of $200.0 million, plus additional amounts, so long as the senior secured leverage ratio does not exceed 2.00 to 1.00.
The A&R Credit Agreement includes requirements, to be tested quarterly, that the Company maintains (i) a minimum ratio of Consolidated EBITDA to consolidated cash interest expense of 3.00 to 1.00, (the "Interest Coverage Ratio"), (ii) a ratio of total indebtedness, minus netted cash in an aggregate amount not to exceed $50.0 million, to Consolidated EBITDA of 3.75 to 1.00 (the "Total Net Leverage Ratio"), and (iii) a maximum ratio of senior net secured indebtedness to Consolidated EBITDA of 3.25 to 1.00 (the "Senior Secured Net Leverage Ratio"). For these ratios, Consolidated EBITDA and consolidated interest expense are calculated using the most recent four consecutive fiscal quarters in a manner defined in the A&R Credit Agreement. At September 30, 2026, the Company was in compliance with these covenants and it expects to remain in compliance with all of its debt covenants over the next twelve months.
13
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS | ||||||||
| (unaudited) | ||||||||
The interest rates under the A&R Credit Facility will be, at the Borrowers' option (1) (A) in the case of borrowings denominated in U.S. dollars Term SOFR, (B) in the case of borrowings denominated in Sterling, Daily Simple Sonia, or (C) for borrowings denominated in Euro, EURIBOR, in each case, plus the rates per annum determined from time to time based on the total net leverage ratio of the Company as of the end of and for the most recent period of four fiscal quarters for which financial statements have been delivered (the "Applicable Margin"); or (2) in the case of borrowings denominated in U.S. dollars, alternate base rate ("ABR") (as defined in the A&R Credit Agreement) plus the Applicable Margin. The Applicable Margin for Term SOFR, Daily Simple Sonia, or EURIBOR could range from 1.50% to 2.50% while the Applicable Margin for ABR could range from 0.50% to 1.50%.
The weighted-average interest rate on the Company's borrowings under the Credit Facility was 5.32% and 6.18% for the nine months ended September 30, 2026 and 2025, respectively. The weighted-average commitment fee on the revolving line of credit was 0.23% and 0.25% for the nine months ended September 30, 2026 and 2025, respectively.
Seller Note
In connection with the acquisition of Cornell Dubilier on November 1, 2023, the Company obtained an interest-free Seller Note with aggregate principal payments of $122.9 million. The Company recorded the Seller Note on the acquisition date at its present value of $109.9 million by discounting the future principal payments using an imputed rate of interest of approximately 7.1% in accordance with accounting guidance in ASC 835, Interest. The Company has made a successful indemnity claim against the Seller Note of $0.2 million. The Company repaid $50.0 million of the Seller Note on November 1, 2024 and the remaining $72.7 million on October 31, 2025. The Company recognized imputed interest expense on the Seller Note of approximately $1.3 million and $3.8 million for the three and nine months ended September 30, 2025, respectively.
10. Other Comprehensive Earnings
The amounts recognized in other comprehensive (loss) earnings were as follows:
| Three Months Ended | |||||||||||||||||||||||||||||||||||
| September 30, 2026 | September 30, 2025 | ||||||||||||||||||||||||||||||||||
| (in millions) | Pre-tax | Tax | Net of tax | Pre-tax | Tax | Net of tax | |||||||||||||||||||||||||||||
| Foreign currency translation | $ | (0.2) | $ | — | $ | (0.2) | $ | 0.4 | $ | — | $ | 0.4 | |||||||||||||||||||||||
| Employee benefit plans | 0.2 | — | 0.2 | 0.1 | — | 0.1 | |||||||||||||||||||||||||||||
| Changes in fair value of cash flow hedges | (0.3) | — | (0.3) | (0.9) | — | (0.9) | |||||||||||||||||||||||||||||
| Total other comprehensive loss | $ | (0.3) | $ | — | $ | (0.3) | $ | (0.4) | $ | — | $ | (0.4) | |||||||||||||||||||||||
| Nine Months Ended | |||||||||||||||||||||||||||||||||||
| September 30, 2026 | September 30, 2025 | ||||||||||||||||||||||||||||||||||
| (in millions) | Pre-tax | Tax | Net of tax | Pre-tax | Tax | Net of tax | |||||||||||||||||||||||||||||
| Foreign currency translation | $ | 4.7 | $ | — | $ | 4.7 | $ | 6.5 | $ | — | $ | 6.5 | |||||||||||||||||||||||
| Employee benefit plans | 0.5 | — | 0.5 | 0.2 | 0.2 | 0.4 | |||||||||||||||||||||||||||||
| Changes in fair value of cash flow hedges | — | — | — | 2.0 | — | 2.0 | |||||||||||||||||||||||||||||
| Total other comprehensive earnings | $ | 5.2 | $ | — | $ | 5.2 | $ | 8.7 | $ | 0.2 | $ | 8.9 | |||||||||||||||||||||||
14
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS | ||||||||
| (unaudited) | ||||||||
The following tables summarize the changes in balances of each component of accumulated other comprehensive earnings, net of tax during the nine months ended September 30, 2026 and 2025:
| (in millions) | Cash flow hedges | Employee benefit plans | Cumulative foreign currency translation adjustments | Total | |||||||||||||||||||||||||||||||
| Balance at December 31, 2025 | $ | (0.4) | $ | (15.9) | $ | (108.4) | $ | (124.7) | |||||||||||||||||||||||||||
| Other comprehensive earnings, net of tax | — | 0.5 | 4.7 | 5.2 | |||||||||||||||||||||||||||||||
| Balance at September 30, 2026 | $ | (0.4) | $ | (15.4) | $ | (103.7) | $ | (119.5) | |||||||||||||||||||||||||||
| (in millions) | Cash flow hedges | Employee benefit plans | Cumulative foreign currency translation adjustments | Total | |||||||||||||||||||||||||
| Balance at December 31, 2024 | $ | (2.1) | $ | (16.9) | $ | (119.1) | $ | (138.1) | |||||||||||||||||||||
| Other comprehensive earnings, net of tax | 2.0 | 0.4 | 6.5 | 8.9 | |||||||||||||||||||||||||
| Balance at September 30, 2025 | $ | (0.1) | $ | (16.5) | $ | (112.6) | $ | (129.2) | |||||||||||||||||||||
The following tables summarize the amounts reclassified from accumulated other comprehensive loss to earnings:
| Three Months Ended September 30, | ||||||||||||||
| (in millions) | Statement of Earnings Line | 2026 | 2025 | |||||||||||
| Pension and post-retirement benefit plans: | ||||||||||||||
| Amortization or settlement of actuarial losses and prior service costs | Other expense, net | $ | 0.2 | $ | 0.1 | |||||||||
| Tax | Provision for income taxes | — | — | |||||||||||
| Net of tax | $ | 0.2 | $ | 0.1 | ||||||||||
| Cash flow hedges: | ||||||||||||||
| Net gains reclassified into earnings | Cost of goods sold | $ | (0.1) | $ | (0.4) | |||||||||
| Tax | Provision for income taxes | — | 0.1 | |||||||||||
| Net of tax | $ | (0.1) | $ | (0.3) | ||||||||||
| Nine Months Ended September 30, | ||||||||||||||
| (in millions) | Statement of Earnings Line | 2026 | 2025 | |||||||||||
| Pension and post-retirement benefit plans: | ||||||||||||||
| Amortization or settlement of actuarial losses and prior service costs | Other expense, net | $ | 0.5 | $ | 0.2 | |||||||||
| Tax | Provision for income taxes | — | 0.2 | |||||||||||
| Net of tax | $ | 0.5 | $ | 0.4 | ||||||||||
| Cash flow hedges: | ||||||||||||||
| Net losses reclassified into earnings | Cost of goods sold | $ | — | $ | 0.1 | |||||||||
| Tax | Provision for income taxes | — | — | |||||||||||
| Net of tax | $ | — | $ | 0.1 | ||||||||||
15
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS | ||||||||
| (unaudited) | ||||||||
11. Income Taxes
Income taxes for the interim periods presented have been included in the accompanying Consolidated Financial Statements on the basis of an estimated annual effective tax rate ("ETR"). The determination of the consolidated provision for income taxes requires management to make certain judgments and estimates. Changes in the estimated level of annual pre-tax earnings or loss, tax laws, and changes resulting from tax audits can affect the overall ETR, which impacts the level of income tax expense or benefit and net income or loss. Judgments and estimates related to the Company’s projections and assumptions are inherently uncertain and therefore, actual results could differ materially from projections.
The Company's ETR from continuing operations for the three and nine months ended September 30, 2026 was 23.7% and 17.1% (inclusive of discrete items totaling $4.7 million of tax benefit), respectively. The discrete items impacting the tax benefit for the nine months ended September 30, 2026 were primarily attributable to stock-based compensation. Absent the discrete items, the ETR from continuing operations for the nine months ended September 30, 2026 was 24.8%. The Company's ETR from continuing operations for the three and nine months ended September 30, 2025 was 19.3% (inclusive of discrete items totaling $0.2 million of tax expense) and 26.2% (inclusive of discrete items totaling $0.1 million of tax benefit), respectively. The discrete items impacting the tax provision for the three and nine months ended September 30, 2025 were primarily attributable to stock-based compensation. Absent the discrete items, the ETR from continuing operations for the three and nine months ended September 30, 2025 was 18.4% and 26.5%, respectively.
The Company accrues taxes in various countries where it generates income and applies a valuation allowance in other jurisdictions, which resulted in the provision for the nine months ended September 30, 2026 and 2025, respectively.
12. Equity Incentive Program
The following table summarizes the stock-based compensation expense recognized by the Company for the periods presented:
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| (in millions) | 2026 | 2025 | 2026 | 2025 | |||||||||||||||||||
| Total pre-tax stock-based compensation expense | $ | 6.8 | $ | 5.9 | $ | 23.4 | $ | 22.4 | |||||||||||||||
| Tax benefit | — | 0.2 | 8.2 | 3.7 | |||||||||||||||||||
| Total stock-based compensation expense, net of tax | $ | 6.8 | $ | 5.7 | $ | 15.2 | $ | 18.7 | |||||||||||||||
Stock Options
No stock options were granted during the nine months ended September 30, 2026 or 2025.
The following table summarizes the Company's stock option activity for the nine months ended September 30, 2026:
| Number of Shares | Weighted-Average Exercise Price | Aggregate Intrinsic Value (in millions) | Weighted-Average Remaining Contractual Term (Years) | ||||||||||||||||||||||||||||||||||||||||||||
Outstanding at December 31, 2025 | 413,659 | $ | 18.20 | ||||||||||||||||||||||||||||||||||||||||||||
Exercised (1) | (380,855) | 18.04 | |||||||||||||||||||||||||||||||||||||||||||||
| Expired | (1) | 16.07 | |||||||||||||||||||||||||||||||||||||||||||||
Outstanding at September 30, 2026 | 32,803 | $ | 20.07 | $ | 0.6 | 1.6 | |||||||||||||||||||||||||||||||||||||||||
Exercisable at September 30, 2026 | 32,803 | $ | 20.07 | $ | 0.6 | 1.6 | |||||||||||||||||||||||||||||||||||||||||
(1) The number of stock options exercised includes shares that the Company withheld on behalf of employees to satisfy the option exercise price (in the instances of net exercises) as well as statutory tax withholding requirements.
There was no unrecognized compensation expense related to stock options at September 30, 2026.
16
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS | ||||||||
| (unaudited) | ||||||||
Restricted Stock Units
The following table summarizes the Company's restricted stock unit ("RSU") activity for the nine months ended September 30, 2026:
| Share units | Weighted-average grant date fair value | ||||||||||
Unvested at December 31, 2025 | 1,911,526 | $ | 17.76 | ||||||||
| Granted | 699,582 | 27.48 | |||||||||
Vested (1) | (931,628) | 17.75 | |||||||||
| Forfeited | (31,134) | 22.06 | |||||||||
Unvested at September 30, 2026 | 1,648,346 | $ | 21.80 | ||||||||
(1) The number of RSUs vested includes shares that the Company withheld on behalf of employees to satisfy statutory tax withholding requirements.
At September 30, 2026, the Company had $20.5 million of unrecognized compensation expense related to its RSUs that it expects to recognize over a weighted-average period of 1.5 years.
Performance Share Units
Awards with market conditions
The Company grants performance share units (“PSUs”) to senior management for which the number of PSUs that may be earned and vest is based on total shareholder return (“TSR”) relative to the component companies of the Russell 2000 Index over a three-year performance period. These awards will cliff vest three years following the grant date. PSUs will be settled in shares of the Company's common stock. Depending on the Company's overall performance relative to the applicable measures, the size of the PSU awards are subject to adjustment, up or down, resulting in awards at the end of the performance period that can range from 0% to 225% of target. The Company ratably recognizes the expense over the applicable service period for each PSU grant. During the nine months ended September 30, 2026 and 2025, respectively, the Company granted 259,580 and 365,051 PSUs with market conditions.
The fair value of PSUs with market conditions was determined by using a Monte Carlo simulation with the following assumptions:
| Nine Months Ended September 30, | |||||||||||
| 2026 | 2025 | ||||||||||
| Risk-free interest rate | 3.44 | % | 4.28 | % | |||||||
| Dividend yield | n/a | n/a | |||||||||
| Expected life (years) | 3 | 3 | |||||||||
| Volatility | 32.90 | % | 33.43 | % | |||||||
| Knowles share price on grant date | $ | 27.14 | $ | 18.34 | |||||||
| Fair value per share on grant date | $ | 44.00 | $ | 25.50 | |||||||
Awards with performance conditions
The Company also grants PSUs to certain employees for which the number of PSUs that may be earned and vest is based on achievement of internal company targets. The fair value of each PSU with a performance condition is equal to the share price on the date of grant. The Company ratably recognizes the expense for these awards over the applicable service period and adjusts the expense for the expected achievement of performance conditions as necessary.
17
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS | ||||||||
| (unaudited) | ||||||||
During the nine months ended September 30, 2026, the Company granted 27,515 PSUs with performance conditions that had a grant date fair value of $0.7 million. During the nine months ended September 30, 2025, the Company granted 89,967 PSUs with performance conditions that had a grant date fair value of $1.7 million. The 2025 grant included a special PSU award for the Chief Executive Officer of 81,788 target PSUs with a grant date fair value of $1.5 million. This award is eligible to vest based on the achievement of a minimum non-GAAP diluted earnings per share amount and specified revenue goals over a potential five-year performance period. If the goals are not met during the initial three-year performance period, it may be extended an additional two years at a reduced payout level. Achievement of this award could range from 0% to 400% of the target number of PSUs.
The following table summarizes the Company's PSU activity for the nine months ended September 30, 2026:
Share units (1) | Weighted-average grant date fair value | ||||||||||
Unvested at December 31, 2025 | 1,076,268 | $ | 25.36 | ||||||||
| Granted | 287,095 | 42.40 | |||||||||
Vested (2) | (256,415) | 29.75 | |||||||||
Unvested at September 30, 2026 | 1,106,948 | $ | 28.76 | ||||||||
(1) The number of PSUs shown reflects 100% of the target award; actual payouts may differ based on performance.
(2) The number of PSUs vested includes shares that the Company withheld on behalf of employees to satisfy statutory tax withholding requirements.
At September 30, 2026, the Company had $13.0 million of unrecognized compensation expense related to PSUs that it expects to recognize over a weighted-average period of 1.3 years.
13. Earnings per Share
Basic and diluted earnings per share were computed as follows:
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| (in millions, except per share amounts) | 2026 | 2025 | 2026 | 2025 | |||||||||||||||||||
| Earnings from continuing operations | $ | 21.2 | $ | 18.0 | $ | 50.9 | $ | 25.4 | |||||||||||||||
| Earnings (loss) from discontinued operations, net | 0.4 | (0.6) | (0.2) | (2.2) | |||||||||||||||||||
| Net earnings | $ | 21.6 | $ | 17.4 | $ | 50.7 | $ | 23.2 | |||||||||||||||
| Basic earnings per common share: | |||||||||||||||||||||||
| Earnings from continuing operations | $ | 0.25 | $ | 0.21 | $ | 0.60 | $ | 0.29 | |||||||||||||||
| Earnings (loss) from discontinued operations, net | — | (0.01) | (0.01) | (0.02) | |||||||||||||||||||
| Net earnings | $ | 0.25 | $ | 0.20 | $ | 0.59 | $ | 0.27 | |||||||||||||||
| Weighted-average shares outstanding | 85.3 | 85.8 | 85.5 | 86.8 | |||||||||||||||||||
| Diluted earnings per common share: | |||||||||||||||||||||||
| Earnings from continuing operations | $ | 0.24 | $ | 0.21 | $ | 0.58 | $ | 0.29 | |||||||||||||||
| Earnings (loss) from discontinued operations, net | 0.01 | (0.01) | — | (0.03) | |||||||||||||||||||
| Net earnings | $ | 0.25 | $ | 0.20 | $ | 0.58 | $ | 0.26 | |||||||||||||||
Weighted-average shares outstanding (1) | 87.7 | 87.3 | 87.9 | 88.1 | |||||||||||||||||||
(1) In accordance with ASC 260, Earnings Per Share, the control number for determining whether including potential common shares in the diluted EPS computation would be antidilutive is earnings from continuing operations.
18
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS | ||||||||
| (unaudited) | ||||||||
The following table is a reconciliation of the share amounts used in computing earnings per share:
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| (in millions) | 2026 | 2025 | 2026 | 2025 | |||||||||||||||||||
| Weighted-average shares outstanding - basic | 85.3 | 85.8 | 85.5 | 86.8 | |||||||||||||||||||
| Dilutive effect of assumed vesting of PSUs, RSUs, and exercise of stock options | 2.4 | 1.5 | 2.4 | 1.3 | |||||||||||||||||||
| Weighted-average shares outstanding - diluted | 87.7 | 87.3 | 87.9 | 88.1 | |||||||||||||||||||
For the three and nine months ended September 30, 2026, the weighted-average number of antidilutive potential common shares for stock-based awards excluded from the diluted earnings per share calculation above was 0.3 million and 0.4 million, respectively. For both the three and nine months ended September 30, 2025, the weighted-average number of antidilutive potential common shares for stock-based awards excluded from the diluted earnings per share calculation above was 0.8 million.
14. Commitments and Contingent Liabilities
From time to time, the Company is involved in various legal proceedings and claims arising in the ordinary course of its business. The majority of these claims and proceedings relate to commercial, warranty, employment, and intellectual property matters. Although the ultimate outcome of any legal proceeding or claim cannot be predicted with certainty, based on present information, including management’s assessment of the merits of the particular claim, the Company believes that the disposition of these legal proceedings or claims, individually or in the aggregate, after taking into account recorded accruals and the availability and limits of insurance coverage, will not have a material adverse effect on its cash flow, results of operations, or financial condition.
The Company owns many patents and other intellectual property pertaining to its products, technology, and manufacturing processes. Some of the Company's patents have been and may continue to be infringed upon or challenged by others. In appropriate cases, the Company has taken and will take steps to protect and defend its patents and other intellectual property, including through the use of legal proceedings in various jurisdictions around the world. Such steps have resulted in and may continue to result in retaliatory legal proceedings, including litigation or other legal proceedings in various jurisdictions and forums around the world alleging infringement by the Company of patents owned by others. The costs of investigations and legal proceedings relating to the enforcement and defense of the Company’s intellectual property may be substantial. Additionally, in multi-forum disputes, the Company may incur adverse judgments with regard to certain claims in certain jurisdictions and forums while still contesting other related claims against the same opposing party in other jurisdictions and forums.
Intellectual Property Infringement Claims
The Company may, on a limited basis, provide contractual indemnities for certain losses that arise out of claims that its products infringe on the intellectual property of others. It is not possible to determine the maximum potential amount under these indemnification agreements due to the unique facts and circumstances involved in each particular agreement. Historically, the Company has not made significant payments under such indemnity arrangements. The Company’s legal accruals associated with these indemnity arrangements were not significant at September 30, 2026 and December 31, 2025.
19
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS | ||||||||
| (unaudited) | ||||||||
15. Segment Information
The Company's two reportable segments are Precision Devices and MedTech & Specialty Audio. Information regarding the Company’s reportable segments is as follows:
Three Months Ended September 30, 2026 | |||||||||||||||||
| (in millions) | Precision Devices | MedTech & Specialty Audio | Total | ||||||||||||||
| Revenues | $ | 117.0 | $ | 67.0 | $ | 184.0 | |||||||||||
| Adjusted cost of goods sold | 68.3 | 32.2 | 100.5 | ||||||||||||||
| Adjusted research and development expenses | 5.0 | 4.9 | 9.9 | ||||||||||||||
| Adjusted selling and administrative expenses | 14.9 | 4.1 | 19.0 | ||||||||||||||
Other segment items (1) | 0.1 | — | 0.1 | ||||||||||||||
| Segment adjusted earnings before interest and income taxes | $ | 28.7 | $ | 25.8 | $ | 54.5 | |||||||||||
| Less: | |||||||||||||||||
| Corporate expenses | 12.1 | ||||||||||||||||
| Stock-based compensation expense | 6.8 | ||||||||||||||||
| Intangibles amortization expense | 4.0 | ||||||||||||||||
| Interest expense, net | 1.6 | ||||||||||||||||
| Production transfer costs | 1.1 | ||||||||||||||||
| Restructuring charges | 0.6 | ||||||||||||||||
Other (2) | 0.5 | ||||||||||||||||
| Earnings before income taxes and discontinued operations | $ | 27.8 | |||||||||||||||
(1) Other segment items primarily include foreign currency exchange gains and losses and other non-operating income and expense.
(2) Other expenses primarily include certain foreign currency exchange rate adjustments.
Three Months Ended September 30, 2025 | |||||||||||||||||
| (in millions) | Precision Devices | MedTech & Specialty Audio | Total | ||||||||||||||
| Revenues | $ | 88.2 | $ | 64.7 | $ | 152.9 | |||||||||||
| Adjusted cost of goods sold | 51.6 | 30.4 | 82.0 | ||||||||||||||
| Adjusted research and development expenses | 4.2 | 4.6 | 8.8 | ||||||||||||||
| Adjusted selling and administrative expenses | 12.0 | 3.5 | 15.5 | ||||||||||||||
Other segment items (1) | 0.2 | — | 0.2 | ||||||||||||||
| Segment adjusted earnings before interest and income taxes | $ | 20.2 | $ | 26.2 | $ | 46.4 | |||||||||||
| Less: | |||||||||||||||||
| Corporate expenses | 11.9 | ||||||||||||||||
| Stock-based compensation expense | 5.9 | ||||||||||||||||
| Intangibles amortization expense | 4.0 | ||||||||||||||||
| Interest expense, net | 2.3 | ||||||||||||||||
| Production transfer costs | 0.6 | ||||||||||||||||
| Restructuring charges | 0.3 | ||||||||||||||||
| Plus: | |||||||||||||||||
| Transition services credit | 0.5 | ||||||||||||||||
| Acquisition-related costs | 0.1 | ||||||||||||||||
Other (2) | 0.3 | ||||||||||||||||
| Earnings before income taxes and discontinued operations | $ | 22.3 | |||||||||||||||
(1) Other segment items primarily include foreign currency exchange gains and losses and other non-operating income and expense.
(2) Other expenses primarily include foreign currency exchange rate impacts on restructuring balances.
20
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS | ||||||||
| (unaudited) | ||||||||
Nine Months Ended September 30, 2026 | |||||||||||||||||
| (in millions) | Precision Devices | MedTech & Specialty Audio | Total | ||||||||||||||
| Revenues | $ | 300.4 | $ | 203.5 | $ | 503.9 | |||||||||||
| Adjusted cost of goods sold | 178.9 | 95.9 | 274.8 | ||||||||||||||
| Adjusted research and development expenses | 14.2 | 14.7 | 28.9 | ||||||||||||||
| Adjusted selling and administrative expenses | 43.0 | 11.9 | 54.9 | ||||||||||||||
Other segment items (1) | 0.2 | (0.1) | 0.1 | ||||||||||||||
| Segment adjusted earnings before interest and income taxes | $ | 64.1 | $ | 81.1 | $ | 145.2 | |||||||||||
| Less: | |||||||||||||||||
| Corporate expenses | 36.6 | ||||||||||||||||
| Stock-based compensation expense | 23.4 | ||||||||||||||||
| Intangibles amortization expense | 12.0 | ||||||||||||||||
| Interest expense, net | 4.8 | ||||||||||||||||
| Production transfer costs | 2.8 | ||||||||||||||||
| Restructuring charges | 1.0 | ||||||||||||||||
Other (2) | 4.0 | ||||||||||||||||
| Plus: | |||||||||||||||||
| Transition services credit | 0.8 | ||||||||||||||||
| Earnings before income taxes and discontinued operations | $ | 61.4 | |||||||||||||||
(1) Other segment items primarily include foreign currency exchange gains and losses and other non-operating income and expense.
(2) Other expenses primarily include certain foreign currency exchange rate adjustments.
Nine Months Ended September 30, 2025 | |||||||||||||||||
| (in millions) | Precision Devices | MedTech & Specialty Audio | Total | ||||||||||||||
| Revenues | $ | 239.2 | $ | 191.8 | $ | 431.0 | |||||||||||
| Adjusted cost of goods sold | 146.3 | 94.3 | 240.6 | ||||||||||||||
| Adjusted research and development expenses | 12.1 | 13.7 | 25.8 | ||||||||||||||
| Adjusted selling and administrative expenses | 35.6 | 10.4 | 46.0 | ||||||||||||||
Other segment items (1) | 0.4 | (0.2) | 0.2 | ||||||||||||||
| Segment adjusted earnings before interest and income taxes | $ | 44.8 | $ | 73.6 | $ | 118.4 | |||||||||||
| Less: | |||||||||||||||||
| Corporate expenses | 34.5 | ||||||||||||||||
| Stock-based compensation expense | 22.4 | ||||||||||||||||
| Intangibles amortization expense | 12.1 | ||||||||||||||||
| Interest expense, net | 7.5 | ||||||||||||||||
| Impairment charges | 3.6 | ||||||||||||||||
| Restructuring charges | 3.2 | ||||||||||||||||
| Production transfer costs | 1.0 | ||||||||||||||||
| Acquisition-related costs | 0.6 | ||||||||||||||||
Other (2) | 0.8 | ||||||||||||||||
| Plus: | |||||||||||||||||
| Transition services credit | 1.7 | ||||||||||||||||
| Earnings before income taxes and discontinued operations | $ | 34.4 | |||||||||||||||
(1) Other segment items primarily include foreign currency exchange gains and losses and other non-operating income and expense.
(2) Other expenses primarily include foreign currency exchange rate impacts on restructuring balances.
21
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS | ||||||||
| (unaudited) | ||||||||
Information regarding assets of the Company's reportable segments is as follows:
| Total Assets | |||||||||||
| (in millions) | September 30, 2026 | December 31, 2025 | |||||||||
| Precision Devices | $ | 593.7 | $ | 554.7 | |||||||
| MedTech & Specialty Audio | 385.6 | 399.7 | |||||||||
| Total segments | 979.3 | 954.4 | |||||||||
Corporate (1) | 95.9 | 96.7 | |||||||||
| Total | $ | 1,075.2 | $ | 1,051.1 | |||||||
(1) Corporate assets at both September 30, 2026 and December 31, 2025 include $83.4 million of Syntiant preferred stock received in partial consideration for the sale of CMM on December 27, 2024 and a note receivable from Syntiant totaling $5.9 million. Corporate assets also include the portion of right-of-use operating lease assets subleased by Syntiant, which totaled approximately $5.1 million and $5.2 million at September 30, 2026 and December 31, 2025, respectively.
The following table details revenues by geographic location. Revenues are attributed to regions based on the location of the Company's direct customer, which in some instances is an intermediary and not necessarily the end user. The Company's businesses are based primarily in North America, Asia, and Europe.
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| (in millions) | 2026 | 2025 | 2026 | 2025 | |||||||||||||||||||
| United States | $ | 86.6 | $ | 66.8 | $ | 223.9 | $ | 180.8 | |||||||||||||||
| Asia | 63.0 | 56.7 | 181.7 | 163.2 | |||||||||||||||||||
| Europe | 27.9 | 23.9 | 80.1 | 72.1 | |||||||||||||||||||
| Other Americas | 4.0 | 3.2 | 10.9 | 8.1 | |||||||||||||||||||
| Other | 2.5 | 2.3 | 7.3 | 6.8 | |||||||||||||||||||
| Total | $ | 184.0 | $ | 152.9 | $ | 503.9 | $ | 431.0 | |||||||||||||||
Receivables, net from contracts with customers were $102.4 million and $91.7 million as of September 30, 2026 and December 31, 2025, respectively.
22
Forward-Looking Statements
This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 relating to our operations, results of operations, our continued business operations, and other matters that are based on our current expectations, estimates, assumptions, and projections. Words such as “believe,” “expect,” “anticipate,” “project,” “estimate,” “budget,” “continue,” “could,” “intend,” “may,” “plan,” “potential,” “predict,” “seek,” “should,” “will,” “would,” “objective,” “forecast,” “goal,” “guidance,” “outlook,” “effort,” “target,” and similar expressions, among others, generally identify forward-looking statements, which speak only as of the date the statements were made. The statements in this Quarterly Report on Form 10-Q are based on currently available information and the current expectations, forecasts, and assumptions of our management concerning risks and uncertainties that could cause actual outcomes or results to differ materially from those outcomes or results that are projected, anticipated, or implied in these statements. Other risks and uncertainties include, but are not limited to:
| o | fluctuations in our stock's market price; | ||||
| o | fluctuations in operating results and cash flows; | ||||
| o | our ability to prevent or identify quality issues in our products or to promptly remedy any such issues that are identified; | ||||
| o | risks associated with increasing our inventories in advance of anticipated orders by customers; | ||||
| o | escalating international trade tensions, new or increased tariffs and trade wars among countries; | ||||
| o | the impact of changes to laws and regulations that affect the Company’s ability to offer products or services to customers in different regions; | ||||
| o | our ability to achieve reductions in our operating expenses; | ||||
| o | the ability to qualify our products and facilities with customers; | ||||
| o | our ability to obtain, enforce, defend, or monetize our intellectual property rights; | ||||
| o | disruption caused by a cybersecurity incident, including a cyber attack, cyber breach, theft, or other unauthorized access (the risk of which could be exacerbated by geopolitical tensions); | ||||
| o | increases in the costs of critical raw materials and components; | ||||
| o | availability of raw materials and components; | ||||
| o | managing new product ramps and introductions for our customers; | ||||
| o | our dependence on a limited number of large customers; | ||||
| o | our ability to maintain and expand our existing relationships with leading OEMs in order to maintain and increase our revenue; | ||||
| o | increasing competition and new entrants in the market for our products; | ||||
| o | our ability to develop new or enhanced products or technologies in a timely manner that achieve market acceptance; | ||||
| o | global economic instability, including due to inflation, rising interest rates, or the impacts of geopolitical uncertainties (including the impact of the conflict with Iran); | ||||
| o | financial risks, including risks relating to currency fluctuations, credit risks, and fluctuations in the market value of the Company; | ||||
| o | a sustained decline in our stock price and market capitalization may result in the impairment of certain intangible or long-lived assets; | ||||
| o | market risk associated with fluctuations in commodity prices, particularly for various precious metals used in our manufacturing operation, | ||||
| o | changes in tax laws, changes in tax rates, and exposure to additional tax liabilities. | ||||
A more complete description of these risks, uncertainties, and other factors can be found under the heading “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2025. We do not undertake to update or revise our forward-looking statements as a result of new information, future events, or otherwise, except as required by law.
23
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis should be read in conjunction with our Consolidated Financial Statements and related Notes included elsewhere in this Quarterly Report on Form 10-Q.
Overview
We are a leading manufacturer of specialty electronic components. We design parts that perform unique and critical functions for innovative technologies. Through extreme reliability, custom engineering, and scalable manufacturing, we enable businesses to succeed in the most demanding applications across medtech, defense, industrial, and electrification markets. Our high performance capacitors, radio frequency ("RF") filters, advanced medtech microphones, and balanced armature speakers enable and enhance the performance of technologies with the power to change, improve, and save lives. Our focus on the customer, combined with unique technology, proprietary manufacturing techniques, and global operational expertise, enables us to deliver customized solutions across multiple applications. References to "Knowles," the "Company," "we," "our," or "us" refer to Knowles Corporation and its consolidated subsidiaries, unless the context otherwise requires.
We sell our products directly to original equipment manufacturers ("OEMs") and to their contract manufacturers and suppliers and through distributors worldwide.
Non-GAAP Financial Measures
In addition to the GAAP financial measures included in this item, we have presented certain non-GAAP financial measures. We use non-GAAP measures as supplements to our GAAP results of operations in evaluating certain aspects of our business, and our executive management team and Board of Directors focus on non-GAAP items as key measures of our performance for business planning purposes. These measures assist us in comparing our performance between various reporting periods on a consistent basis, as these measures remove from operating results the impact of items that, in our opinion, do not reflect our core operating performance. We believe that our presentation of non-GAAP financial measures is useful because it provides investors and securities analysts with the same information that we use internally for purposes of assessing our core operating performance. The Company does not consider these non-GAAP financial measures to be a substitute for the information provided by GAAP financial results. For a reconciliation of these non-GAAP financial measures to the most directly comparable GAAP financial measures, see the reconciliation included herein.
24
Results of Operations for the Three Months Ended September 30, 2026 compared with the Three Months Ended September 30, 2025
| Three Months Ended September 30, | ||||||||||||||||||||||||||||||||
| (in millions, except per share amounts) | 2026 | 2025 | ||||||||||||||||||||||||||||||
| Revenues | $ | 184.0 | $ | 152.9 | ||||||||||||||||||||||||||||
| Gross profit | $ | 81.3 | $ | 69.9 | ||||||||||||||||||||||||||||
| Non-GAAP gross profit | $ | 83.3 | $ | 70.7 | ||||||||||||||||||||||||||||
| Earnings from continuing operations before interest and income taxes | $ | 29.4 | $ | 24.6 | ||||||||||||||||||||||||||||
| Adjusted earnings from continuing operations before interest and income taxes | $ | 42.4 | $ | 34.5 | ||||||||||||||||||||||||||||
| Provision for income taxes | $ | 6.6 | $ | 4.3 | ||||||||||||||||||||||||||||
| Non-GAAP provision for income taxes | $ | 7.6 | $ | 3.3 | ||||||||||||||||||||||||||||
| Net earnings from continuing operations | $ | 21.2 | $ | 18.0 | ||||||||||||||||||||||||||||
| Non-GAAP net earnings from continuing operations | $ | 33.2 | $ | 28.9 | ||||||||||||||||||||||||||||
| Earnings per share from continuing operations - diluted | $ | 0.24 | $ | 0.21 | ||||||||||||||||||||||||||||
| Non-GAAP diluted earnings per share | $ | 0.38 | $ | 0.33 | ||||||||||||||||||||||||||||
Revenues
Revenues for the third quarter of 2026 were $184.0 million, compared with $152.9 million for the third quarter of 2025, an increase of $31.1 million or 20.3%. Precision Devices ("PD") revenues increased $28.8 million due to higher demand in the electrification, industrial, defense, and medtech markets, as well as higher pricing. MedTech & Specialty Audio ("MSA") revenues increased $2.3 million, primarily due to higher shipping volumes into the hearing health market, partially offset by lower shipping volumes into the specialty audio market.
Cost of Goods Sold
Cost of goods sold ("COGS") for the third quarter of 2026 was $102.2 million, compared with $82.8 million for the third quarter of 2025, an increase of $19.4 million or 23.4%. This increase was primarily due to higher shipping volumes, non-recurruing inventory adjustments, higher factory costs, unfavorable product mix, and increased production transfer costs in our ceramic capacitor business.
Restructuring Charges
During the third quarter of 2026, we recorded restructuring charges of $0.5 million within Gross profit and $0.1 million within Operating expenses related primarily to headcount reductions within our PD segment. During the third quarter of 2025, we recorded restructuring charges of $0.3 million related primarily to headcount reductions across the Company to rightsize operations subsequent to the sale of CMM. For additional information, refer to Note 8. Restructuring and Related Activities to our Consolidated Financial Statements.
Gross Profit and Non-GAAP Gross Profit
Gross profit for the third quarter of 2026 was $81.3 million, compared with $69.9 million for the third quarter of 2025, an increase of $11.4 million or 16.3%. Gross profit margin (gross profit as a percentage of revenues) for the third quarter of 2026 was 44.2%, compared with 45.7% for the third quarter of 2025. The increase in gross profit was primarily due to higher shipping volumes. The decrease in gross profit margin was primarily due to non-recurring inventory adjustments, higher factory costs, unfavorable product mix, and increased production transfer costs in our ceramic capacitor business, partially offset by higher pricing.
Non-GAAP gross profit for the third quarter of 2026 was $83.3 million, compared with $70.7 million for the third quarter of 2025, an increase of $12.6 million or 17.8%. Non-GAAP gross profit margin (non-GAAP gross profit as a percentage of revenues) for the third quarter of 2026 was 45.3% compared with 46.2% for the third quarter of 2025. The increase in non-GAAP gross profit was primarily due to higher shipping volumes. The decrease in non-GAAP gross profit margin was primarily due to non-recurring inventory adjustments, higher factory costs, and unfavorable product mix, partially offset by higher pricing.
Research and Development Expenses
Research and development expenses for the third quarter of 2026 were $11.1 million, compared with $10.0 million for the third quarter of 2025, an increase of $1.1 million or 11.0%. Research and development expenses as a percentage of revenues for the third quarter of 2026 and 2025 were 6.0% and 6.5%, respectively. The increase in expenses was primarily driven by increased development activities related to new products and applications.
Selling and Administrative Expenses
Selling and administrative expenses for the third quarter of 2026 were $39.4 million, compared with $34.0 million for the third quarter of 2025, an increase of $5.4 million or 15.9%. Selling and administrative expenses as a percentage of revenues for the third quarter of 2026 and 2025 were 21.4% and 22.2%, respectively. The increase in expenses was primarily driven by incentive compensation, stock-based compensation, sales commissions, additional headcount within the PD segment to support future growth, and annual merit increases. The decrease in expenses as a percentage of revenues was driven by higher revenues.
Interest Expense, net
Interest expense for the third quarter of 2026 was $1.6 million, compared with $2.3 million for the third quarter of 2025, a decrease of $0.7 million. The decrease is primarily due to the absence of imputed interest expense in 2026 on our Seller Note from the CD acquisition, which was paid in full in 2025. For additional information on borrowings and interest expense, refer to Note 9. Borrowings to our Consolidated Financial Statements.
Other Expense, net
Other expense for the third quarter of 2026 was $1.3 million, compared with $1.2 million for the third quarter of 2025, a change of $0.1 million. Expense in 2026 is primarily due to unfavorable foreign currency exchange rate changes. Expense in 2025 is primarily due to unfavorable foreign currency exchange rate changes, partially offset by unrealized gains in our investment balances.
Provision for Income Taxes and Non-GAAP Provision for Income Taxes
The effective tax rate ("ETR") from continuing operations for the third quarter of 2026 and 2025 was 23.7% and 19.3%, respectively. The ETR from continuing operations for the third quarter of 2025 includes a discrete impact of $0.2 million of tax expense. The discrete items impacting the tax provision for 2025 are primarily attributable to stock-based compensation and the deferred tax impact of a tax rate change. Absent the discrete items, the ETR from continuing operations for the third quarter of 2025 was 18.4%. The Company accrues taxes in various countries where it generates income and applies a valuation allowance in other jurisdictions, which resulted in the provision for the third quarter of 2026 and 2025. The change in the ETR was due to the mix of earnings and losses by taxing jurisdictions.
The non-GAAP ETR from continuing operations for the third quarter of 2026 and 2025 was 18.6% and 10.2%, respectively. The non-GAAP ETR from continuing operations for the third quarter 2025 includes a discrete impact of $0.1 million of tax expense. Absent the discrete item, the non-GAAP ETR for the third quarter of 2025 was 9.9%. The change in the non-GAAP ETR was primarily due to a decreased utilization of foreign tax credits and the mix of earnings and losses by taxing jurisdictions.
Earnings from Continuing Operations
Earnings from continuing operations for the third quarter of 2026 was $21.2 million, compared with $18.0 million for the third quarter of 2025, an improvement of $3.2 million. As described above, the improvement is primarily due to higher gross profit, partially offset by higher operating expenses and income tax expense.
Earnings and Adjusted Earnings from Continuing Operations Before Interest and Income Taxes
Earnings from continuing operations before interest and income taxes ("EBIT") for the third quarter of 2026 was $29.4 million, compared with $24.6 million for the third quarter of 2025, an increase of $4.8 million. EBIT margin (EBIT as a percentage of revenues) for the third quarter of 2026 was 16.0%, compared with 16.1% for the third quarter of 2025. The increase in EBIT was primarily due to higher gross profit. The decrease in EBIT margin was primarily due to higher operating expenses, partially offset by higher revenues.
Adjusted earnings before interest and income taxes ("Adjusted EBIT") from continuing operations for the third quarter of 2026 was $42.4 million, compared with $34.5 million for the third quarter of 2025, an increase of $7.9 million. Adjusted EBIT margin (Adjusted EBIT from continuing operations as a percentage of revenues) for the third quarter of 2026 was 23.0%, compared with 22.6% for the third quarter of 2025. The increases in Adjusted EBIT and Adjusted EBIT margin were primarily due to higher non-GAAP gross profit and higher revenues, partially offset by higher non-GAAP operating expenses.
Earnings (Loss) from Discontinued Operations, net
We recorded earnings from discontinued operations of $0.4 million for the third quarter of 2026 and a loss of $0.6 million for the third quarter of 2025, which were driven by updates to estimates regarding certain tax liabilities related to CMM's historical operations. For additional information, refer to Note 3. Discontinued Operations to our Consolidated Financial Statements.
Diluted Earnings per Share from Continuing Operations and Non-GAAP Diluted Earnings per Share from Continuing Operations
Diluted earnings per share from continuing operations was $0.24 for the third quarter of 2026, compared with $0.21 for the third quarter of 2025, an improvement of $0.03. As described above, the improvement is primarily due to higher gross profit, partially offset by higher operating expenses and income tax expense.
Non-GAAP diluted earnings per share from continuing operations was $0.38 for the third quarter of 2026, compared with $0.33 for the third quarter of 2025, an improvement of $0.05. As described above, the improvement is primarily due to higher non-GAAP gross profit, partially offset by higher non-GAAP operating expenses and non-GAAP income tax expense.
Results of Operations for the Nine Months Ended September 30, 2026 compared with the Nine Months Ended September 30, 2025
| Nine Months Ended September 30, | ||||||||||||||||||||||||||||||||
| (in millions, except per share amounts) | 2026 | 2025 | ||||||||||||||||||||||||||||||
| Revenues | $ | 503.9 | $ | 431.0 | ||||||||||||||||||||||||||||
| Gross profit | $ | 223.0 | $ | 183.8 | ||||||||||||||||||||||||||||
| Non-GAAP gross profit | $ | 228.7 | $ | 190.2 | ||||||||||||||||||||||||||||
| Earnings from continuing operations before interest and income taxes | $ | 66.2 | $ | 41.9 | ||||||||||||||||||||||||||||
| Adjusted earnings from continuing operations before interest and income taxes | $ | 108.6 | $ | 83.9 | ||||||||||||||||||||||||||||
| Provision for income taxes | $ | 10.5 | $ | 9.0 | ||||||||||||||||||||||||||||
| Non-GAAP provision for income taxes | $ | 18.2 | $ | 10.1 | ||||||||||||||||||||||||||||
| Net earnings from continuing operations | $ | 50.9 | $ | 25.4 | ||||||||||||||||||||||||||||
| Non-GAAP net earnings from continuing operations | $ | 85.6 | $ | 66.3 | ||||||||||||||||||||||||||||
| Earnings per share from continuing operations - diluted | $ | 0.58 | $ | 0.29 | ||||||||||||||||||||||||||||
| Non-GAAP diluted earnings per share | $ | 0.98 | $ | 0.75 | ||||||||||||||||||||||||||||
Revenues
Revenues for the nine months ended September 30, 2026 were $503.9 million, compared with $431.0 million for the nine months ended September 30, 2025, an increase of $72.9 million or 16.9%. PD revenues increased $61.2 million due to higher demand in the industrial, electrification, defense, and medtech markets, as well as higher pricing. MSA revenues increased $11.7 million, primarily due to higher shipping volumes into the hearing health market, partially offset by lower shipping volumes into the specialty audio market.
Cost of Goods Sold
COGS for the nine months ended September 30, 2026 was $280.2 million, compared with $242.9 million for the nine months ended September 30, 2025, an increase of $37.3 million or 15.4%. This increase was primarily due to higher shipping volumes, increased production transfer costs in our ceramic capacitor business, and higher factory costs.
Impairment Charges
During the nine months ended September 30, 2025, we recorded an impairment charge of $3.6 million to write down the carrying value of certain machinery and equipment to fair value. For additional information, refer to Note 1. Basis of Presentation to our Consolidated Financial Statements.
Restructuring Charges
During the nine months ended September 30, 2026, we recorded restructuring charges of $0.7 million within Gross profit and $0.3 million within Operating expenses related primarily to headcount reductions within our PD segment.
During the nine months ended September 30, 2025, we recorded restructuring charges of $0.7 million within Gross profit and $2.5 million within Operating expenses primarily related to headcount reductions across the Company to rightsize operations subsequent to the sale of CMM. For additional information, refer to Note 8. Restructuring and Related Activities to our Consolidated Financial Statements.
Gross Profit and Non-GAAP Gross Profit
Gross profit for the nine months ended September 30, 2026 was $223.0 million, compared with $183.8 million for the nine months ended September 30, 2025, an increase of $39.2 million or 21.3%. Gross profit margin for the nine months ended September 30, 2026 was 44.3%, compared with 42.6% for the nine months ended September 30, 2025. The increases in gross profit and gross profit margin were primarily due to higher shipping volumes, impairment charges in 2025 that did not recur in 2026, and higher pricing, partially offset by increased production transfer costs in our ceramic capacitor business and higher factory costs.
Non-GAAP gross profit for the nine months ended September 30, 2026 was $228.7 million, compared with $190.2 million for the nine months ended September 30, 2025, an increase of $38.5 million or 20.2%. Non-GAAP gross profit margin for the nine months ended September 30, 2026 was 45.4% compared with 44.1% for the nine months ended September 30, 2025. The increases in non-GAAP gross profit and non-GAAP gross profit margin were primarily due to higher shipping volumes and pricing, partially offset by higher factory costs.
Research and Development Expenses
Research and development expenses for the nine months ended September 30, 2026 were $33.4 million, compared with $29.7 million for the nine months ended September 30, 2025, an increase of $3.7 million or 12.5%. Research and development expenses as a percentage of revenues for the nine months ended September 30, 2026 and 2025 were 6.6% and 6.9%, respectively. The increase in expenses was primarily driven by increased development activities related to new products and applications.
Selling and Administrative Expenses
Selling and administrative expenses for the nine months ended September 30, 2026 were $118.0 million, compared with $107.1 million for the nine months ended September 30, 2025, an increase of $10.9 million or 10.2%. Selling and administrative expenses as a percentage of revenues for the nine months ended September 30, 2026 and 2025 were 23.4% and 24.8%, respectively. The increase in expenses was primarily driven by incentive compensation, sales commissions, additional headcount within the PD segment to support future growth, annual merit increases, stock-based compensation, and travel. The decrease in expenses as a percentage of revenues was driven by higher revenues.
Interest Expense, net
Interest expense for the nine months ended September 30, 2026 was $4.8 million, compared with $7.5 million for the nine months ended September 30, 2025, a decrease of $2.7 million. The decrease is primarily due to the absence of imputed interest expense in 2026 on our Seller Note from the CD acquisition, which was paid in full in 2025. For additional information on borrowings and interest expense, refer to Note 9. Borrowings to our Consolidated Financial Statements.
Other Expense, net
Other expense for the nine months ended September 30, 2026 was $5.1 million, compared with $2.6 million for the nine months ended September 30, 2025, a change of $2.5 million. Expense in 2026 and 2025 is primarily due to unfavorable foreign currency changes, partially offset by unrealized gains in our investment balances.
Provision for Income Taxes and Non-GAAP Provision for Income Taxes
The ETR from continuing operations for the nine months ended September 30, 2026 and 2025 was 17.1% and 26.2%, respectively. The ETR from continuing operations for the nine months ended September 30, 2026 and 2025 includes discrete items totaling $4.7 million and $0.1 million of tax benefit, respectively. The discrete items impacting the tax benefit and provision for 2026 and 2025 are primarily attributable to stock-based compensation. Absent the discrete items, the ETR from continuing operations for the nine months ended September 30, 2026 and 2025 was 24.8% and 26.5%, respectively. The Company accrues taxes in various countries where it generates income and applies a valuation allowance in other jurisdictions, which resulted in the provision for the nine months ended September 30, 2026 and 2025. The change in the ETR was due to the mix of earnings and losses by taxing jurisdictions and net discrete items, primarily stock-based compensation.
The non-GAAP ETR from continuing operations for the nine months ended September 30, 2026 and 2025 was 17.5% and 13.2%, respectively. The non-GAAP ETR from continuing operations includes discrete items totaling $0.1 million of tax benefit and $0.1 million of tax expense for the nine months ended September 30, 2026 and 2025, respectively. Absent the discrete items, the non-GAAP ETR from continuing operations for nine months ended September 30, 2026 and 2025 was 17.6% and 13.1%, respectively. The change in the non-GAAP ETR was primarily due to a decreased utilization of foreign tax credits and the mix of earnings and losses by taxing jurisdictions.
Earnings from Continuing Operations
Earnings from continuing operations for the nine months ended September 30, 2026 was $50.9 million, compared to $25.4 million for the nine months ended September 30, 2025, an improvement of $25.5 million. As described above, the improvement is primarily due to higher gross profit, partially offset by higher operating expenses.
Earnings and Adjusted Earnings from Continuing Operations Before Interest and Income Taxes
Earnings from continuing operations before interest and income taxes for the nine months ended September 30, 2026 was $66.2 million, compared with $41.9 million for the nine months ended September 30, 2025, an increase of $24.3 million. EBIT margin for the nine months ended September 30, 2026 was 13.1%, compared with 9.7% for the nine months ended September 30, 2025. The increases in EBIT and EBIT margin were primarily due to higher gross profit, partially offset by higher operating expenses.
Adjusted earnings before interest and income taxes from continuing operations for the nine months ended September 30, 2026 was $108.6 million, compared with $83.9 million for the nine months ended September 30, 2025, an increase of $24.7 million. Adjusted EBIT margin for the nine months ended September 30, 2026 was 21.6%, compared with 19.5% for the nine months ended September 30, 2025. The increases in Adjusted EBIT and Adjusted EBIT margin were primarily due to higher non-GAAP gross profit, partially offset by higher non-GAAP operating expenses.
Loss from Discontinued Operations, net
We recorded a loss from discontinued operations of $0.2 million and $2.2 million for the nine months ended September 30, 2026 and 2025, respectively. The loss from discontinued operations for the nine months ended September 30, 2026 was driven by updates to estimates regarding certain tax liabilities related to CMM's historical operations, partially offset by final adjustments to the CMM sale transaction. The loss from discontinued operations for the nine months ended September 30, 2025 was primarily driven by unfavorable working capital adjustments for the disposal of CMM. For additional information, refer to Note 3. Discontinued Operations to our Consolidated Financial Statements.
Diluted Earnings per Share from Continuing Operations and Non-GAAP Diluted Earnings per Share from Continuing Operations
Diluted earnings per share from continuing operations was $0.58 for the nine months ended September 30, 2026, compared with $0.29 for the nine months ended September 30, 2025, an improvement of $0.29. As described above, the improvement is primarily due to higher gross profit, partially offset by higher operating expenses.
Non-GAAP diluted earnings per share from continuing operations was $0.98 for the nine months ended September 30, 2026, compared with $0.75 for the nine months ended September 30, 2025, an improvement of $0.23. As described above, the improvement is primarily due to higher non-GAAP gross profit, partially offset by higher non-GAAP operating expenses and non-GAAP income tax expense.
Reconciliation of GAAP Financial Measures to Non-GAAP Financial Measures (1)
| Three Months Ended | Nine Months Ended | |||||||||||||||||||||||||
| September 30, | September 30, | |||||||||||||||||||||||||
| (in millions, except per share amounts) | 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||||
| Gross profit | $ | 81.3 | $ | 69.9 | $ | 223.0 | $ | 183.8 | ||||||||||||||||||
Stock-based compensation expense | 0.4 | 0.3 | 1.3 | 1.1 | ||||||||||||||||||||||
| Impairment charges | — | — | — | 3.6 | ||||||||||||||||||||||
| Restructuring charges | 0.5 | 0.2 | 0.7 | 0.7 | ||||||||||||||||||||||
Production transfer costs (2) | 1.1 | 0.6 | 2.8 | 0.9 | ||||||||||||||||||||||
Transition services credit (3) | — | (0.3) | (0.5) | (0.7) | ||||||||||||||||||||||
Other (4) | — | — | 1.4 | 0.8 | ||||||||||||||||||||||
| Non-GAAP gross profit | $ | 83.3 | $ | 70.7 | $ | 228.7 | $ | 190.2 | ||||||||||||||||||
| Net earnings from continuing operations | $ | 21.2 | $ | 18.0 | $ | 50.9 | $ | 25.4 | ||||||||||||||||||
Interest expense, net | 1.6 | 2.3 | 4.8 | 7.5 | ||||||||||||||||||||||
Provision for income taxes | 6.6 | 4.3 | 10.5 | 9.0 | ||||||||||||||||||||||
| Earnings from continuing operations before interest and income taxes | 29.4 | 24.6 | 66.2 | 41.9 | ||||||||||||||||||||||
Stock-based compensation expense | 6.8 | 5.9 | 23.4 | 22.4 | ||||||||||||||||||||||
Intangibles amortization expense | 4.0 | 4.0 | 12.0 | 12.1 | ||||||||||||||||||||||
| Impairment charges | — | — | — | 3.6 | ||||||||||||||||||||||
Restructuring charges | 0.6 | 0.3 | 1.0 | 3.2 | ||||||||||||||||||||||
Production transfer costs (2) | 1.1 | 0.6 | 2.8 | 1.0 | ||||||||||||||||||||||
Acquisition-related costs (5) | — | (0.1) | — | 0.6 | ||||||||||||||||||||||
Transition services credit (3) | — | (0.5) | (0.8) | (1.7) | ||||||||||||||||||||||
Other (4) | 0.5 | (0.3) | 4.0 | 0.8 | ||||||||||||||||||||||
| Adjusted earnings from continuing operations before interest and income taxes | $ | 42.4 | $ | 34.5 | $ | 108.6 | $ | 83.9 | ||||||||||||||||||
| Provision for income taxes | $ | 6.6 | $ | 4.3 | $ | 10.5 | $ | 9.0 | ||||||||||||||||||
Income tax effects of non-GAAP reconciling adjustments (6) | 1.0 | (1.0) | 7.7 | 1.1 | ||||||||||||||||||||||
| Non-GAAP provision for income taxes | $ | 7.6 | $ | 3.3 | $ | 18.2 | $ | 10.1 | ||||||||||||||||||
| Net earnings from continuing operations | $ | 21.2 | $ | 18.0 | $ | 50.9 | $ | 25.4 | ||||||||||||||||||
Non-GAAP reconciling adjustments (7) | 13.0 | 9.9 | 42.4 | 42.0 | ||||||||||||||||||||||
Income tax effects of non-GAAP reconciling adjustments (6) | 1.0 | (1.0) | 7.7 | 1.1 | ||||||||||||||||||||||
| Non-GAAP net earnings | $ | 33.2 | $ | 28.9 | $ | 85.6 | $ | 66.3 | ||||||||||||||||||
| Diluted earnings per share from continuing operations | $ | 0.24 | $ | 0.21 | $ | 0.58 | $ | 0.29 | ||||||||||||||||||
Earnings per share non-GAAP reconciling adjustment (6) (7) | 0.14 | 0.12 | 0.40 | 0.46 | ||||||||||||||||||||||
| Non-GAAP diluted earnings per share | $ | 0.38 | $ | 0.33 | $ | 0.98 | $ | 0.75 | ||||||||||||||||||
| Diluted average shares outstanding | 87.7 | 87.3 | 87.9 | 88.1 | ||||||||||||||||||||||
Non-GAAP adjustment (8) | (0.8) | 0.6 | (0.6) | 0.7 | ||||||||||||||||||||||
Non-GAAP diluted average shares outstanding (8) | 86.9 | 87.9 | 87.3 | 88.8 | ||||||||||||||||||||||
(1) In addition to the GAAP financial measures included herein, Knowles has presented certain non-GAAP financial measures that exclude certain amounts that are included in the most directly comparable GAAP measures. Knowles believes that non-GAAP measures are useful as supplements to its GAAP results of operations to evaluate certain aspects of its operations and financial performance, and its management team primarily focuses on non-GAAP items in evaluating Knowles' performance for business planning purposes. Knowles also believes that these measures assist it with comparing its performance between various reporting periods on a consistent basis, as these measures remove from operating results the impact of items that, in Knowles' opinion, do not reflect its core operating performance. Knowles believes that its presentation of non-GAAP financial measures is useful because it provides investors and securities analysts with the same information that Knowles uses internally for purposes of assessing its core operating performance.
(2) Production transfer costs represent duplicate costs incurred to migrate manufacturing to existing facilities.
(3) Transition services represent amounts charged to Syntiant in connection with post-closing transition and separation costs.
(4) Other expenses include foreign currency exchange rate impacts on restructuring balances. Other expenses in 2026 also include foreign currency exchange rate adjustments related to certain balances retained subsequent to the disposal of CMM; these adjustments were not deemed material for 2025 periods.
(5) These expenses include ongoing costs to facilitate integration of the CD acquisition by the PD segment.
(6) Income tax effects of non-GAAP reconciling adjustments are calculated using the applicable tax rates in the jurisdictions of the underlying adjustments.
(7) The non-GAAP reconciling adjustments include stock-based compensation expense, intangibles amortization expense, impairment charges, restructuring charges, production transfer costs, acquisition-related costs, and other expenses, partially offset by a credit to transition services.
(8) The number of shares used in the diluted average shares outstanding calculations on a non-GAAP basis excludes the impact of stock-based compensation expense expected to be incurred in future periods and not yet recognized in the financial statements, which would otherwise be assumed to be used to repurchase shares under the GAAP treasury stock method. Non-GAAP diluted average shares outstanding also excludes the impact of certain equity awards that are not yet earned.
25
Segment Results of Operations for the Three Months Ended September 30, 2026 compared with the Three Months Ended September 30, 2025
The following is a summary of the results of operations of our two reportable segments: Precision Devices and Medtech & Specialty Audio.
See Note 15. Segment Information to the Consolidated Financial Statements for (i) a reconciliation of segment revenues to our consolidated revenues and (ii) a reconciliation of segment adjusted earnings before interest and income taxes to our consolidated earnings before income taxes and discontinued operations.
Precision Devices
| Three Months Ended September 30, | ||||||||||||||||||||||||||||||||
| (in millions) | 2026 | Percent of Revenues | 2025 | Percent of Revenues | ||||||||||||||||||||||||||||
| Revenues | $ | 117.0 | $ | 88.2 | ||||||||||||||||||||||||||||
| Earnings from continuing operations before interest and income taxes | $ | 22.0 | 18.8% | $ | 14.3 | 16.2% | ||||||||||||||||||||||||||
| Stock-based compensation expense | 1.3 | 1.1 | ||||||||||||||||||||||||||||||
| Intangibles amortization expense | 4.0 | 4.0 | ||||||||||||||||||||||||||||||
| Restructuring charges | 0.3 | 0.3 | ||||||||||||||||||||||||||||||
Production transfer costs (1) | 1.1 | 0.6 | ||||||||||||||||||||||||||||||
Acquisition-related costs (2) | — | (0.1) | ||||||||||||||||||||||||||||||
| Adjusted earnings from continuing operations before interest and income taxes | $ | 28.7 | 24.5% | $ | 20.2 | 22.9% | ||||||||||||||||||||||||||
(1) Production transfer costs represent costs incurred to migrate manufacturing to existing facilities. | ||||||||||||||||||||||||||||||||
(2) These expenses include ongoing costs to facilitate integration of the CD acquisition. | ||||||||||||||||||||||||||||||||
Revenues
PD revenues were $117.0 million for the third quarter of 2026, compared with $88.2 million for the third quarter of 2025, an increase of $28.8 million or 32.7%. Revenues increased due to higher demand in the electrification, industrial, defense, and medtech markets, as well as higher pricing.
Earnings and Adjusted Earnings from Continuing Operations Before Interest and Income Taxes
PD EBIT was $22.0 million for the third quarter of 2026, compared with $14.3 million for the third quarter of 2025, an increase of $7.7 million. EBIT margin for the third quarter of 2026 was 18.8%, compared to 16.2% for the third quarter of 2025. The increases were due to higher gross profit, partially offset by higher operating expenses driven by additional headcount to support future growth, sales commissions, and incentive compensation. The gross profit increase was primarily driven by higher shipping volumes and pricing, partially offset by non-recurring inventory adjustments, unfavorable product mix, increased production transfer costs in our ceramic capacitor business, and higher factory costs.
PD Adjusted EBIT was $28.7 million for the third quarter of 2026, compared with $20.2 million for the third quarter of 2025, an increase of $8.5 million. Adjusted EBIT margin for the third quarter of 2026 was 24.5%, compared with 22.9% for the third quarter of 2025. The increases were due to higher non-GAAP gross profit, partially offset by higher non-GAAP operating expenses driven by additional headcount to support future growth, sales commissions, and incentive compensation. The non-GAAP gross profit increase was primarily driven by higher shipping volumes and pricing, partially offset by non-recurring inventory adjustments, unfavorable product mix, and higher factory costs.
26
MedTech & Specialty Audio
| Three Months Ended September 30, | ||||||||||||||||||||||||||
| (in millions) | 2026 | Percent of Revenues | 2025 | Percent of Revenues | ||||||||||||||||||||||
| Revenues | $ | 67.0 | $ | 64.7 | ||||||||||||||||||||||
| Earnings from continuing operations before interest and income taxes | $ | 24.1 | 36.0% | $ | 25.0 | 38.6% | ||||||||||||||||||||
| Stock-based compensation expense | 1.4 | 1.2 | ||||||||||||||||||||||||
| Restructuring charges | 0.3 | — | ||||||||||||||||||||||||
| Adjusted earnings from continuing operations before interest and income taxes | $ | 25.8 | 38.5% | $ | 26.2 | 40.5% | ||||||||||||||||||||
Revenues
MSA revenues were $67.0 million for the third quarter of 2026, compared with $64.7 million for the third quarter of 2025, an increase of $2.3 million or 3.6%. Revenues increased primarily due to higher shipping volumes into the hearing health market, partially offset by lower shipping volumes into the specialty audio market.
Earnings and Adjusted Earnings from Continuing Operations Before Interest and Income Taxes
MSA EBIT was $24.1 million for the third quarter of 2026, compared with $25.0 million for the third quarter of 2025, a decrease of $0.9 million. EBIT margin for the third quarter of 2026 was 36.0%, compared with 38.6% for the third quarter of 2025. The decreases in EBIT and EBIT margin were primarily due to higher operating expenses driven by incentive compensation, partially offset by higher gross profit. The increase in gross profit was driven by higher shipping volumes and favorable product mix, partially offset by lower pricing and higher factory costs.
MSA Adjusted EBIT was $25.8 million for the third quarter of 2026, compared with $26.2 million for the third quarter of 2025, a decrease of $0.4 million. Adjusted EBIT margin for the third quarter of 2026 was 38.5%, compared to 40.5% for the third quarter of 2025. The decreases in adjusted EBIT and adjusted EBIT margin were primarily due to higher non-GAAP operating expenses driven by incentive compensation, partially offset by higher non-GAAP gross profit. Higher non-GAAP gross profit was driven by higher shipping volumes and favorable product mix, partially offset by lower pricing and higher factory costs.
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Segment Results of Operations for the Nine Months Ended September 30, 2026 compared with the Nine Months Ended September 30, 2025
Precision Devices
| Nine Months Ended September 30, | ||||||||||||||||||||||||||||||||
| (in millions) | 2026 | Percent of Revenues | 2025 | Percent of Revenues | ||||||||||||||||||||||||||||
| Revenues | $ | 300.4 | $ | 239.2 | ||||||||||||||||||||||||||||
| Earnings from continuing operations before interest and income taxes | $ | 43.5 | 14.5% | $ | 25.7 | 10.7% | ||||||||||||||||||||||||||
| Stock-based compensation expense | 4.9 | 3.7 | ||||||||||||||||||||||||||||||
| Intangibles amortization expense | 12.0 | 12.1 | ||||||||||||||||||||||||||||||
| Restructuring charges | 0.9 | 1.7 | ||||||||||||||||||||||||||||||
Production transfer costs (1) | 2.8 | 1.0 | ||||||||||||||||||||||||||||||
Acquisition-related costs (2) | — | 0.6 | ||||||||||||||||||||||||||||||
| Adjusted earnings from continuing operations before interest and income taxes | $ | 64.1 | 21.3% | $ | 44.8 | 18.7% | ||||||||||||||||||||||||||
(1) Production transfer costs represent costs incurred to migrate manufacturing to existing facilities. | ||||||||||||||||||||||||||||||||
(2) These expenses include ongoing costs to facilitate integration of the CD acquisition. | ||||||||||||||||||||||||||||||||
Revenues
PD revenues were $300.4 million for the nine months ended September 30, 2026, compared with $239.2 million for the nine months ended September 30, 2025, an increase of $61.2 million or 25.6%. Revenues increased due to higher demand in the industrial, electrification, defense, and medtech markets, as well as higher pricing.
Earnings and Adjusted Earnings from Continuing Operations Before Interest and Income Taxes
PD EBIT was $43.5 million for the nine months ended September 30, 2026, compared with $25.7 million for the nine months ended September 30, 2025, an increase of $17.8 million. EBIT margin for the nine months ended September 30, 2026 was 14.5%, compared to 10.7% for the nine months ended September 30, 2025. The increases were due to higher gross profit, partially offset by higher operating expenses driven by additional headcount to support future growth, sales commissions, and incentive compensation. The gross profit increase was primarily driven by higher shipping volumes and pricing, partially offset by unfavorable product mix, higher production transfer costs in our ceramic capacitor business, and higher factory costs.
PD Adjusted EBIT was $64.1 million for the nine months ended September 30, 2026, compared with $44.8 million for the nine months ended September 30, 2025, an increase of $19.3 million. Adjusted EBIT margin for the nine months ended September 30, 2026 was 21.3%, compared with 18.7% for the nine months ended September 30, 2025. The increases were due to higher non-GAAP gross profit, partially offset by higher non-GAAP operating expenses driven by additional headcount to support future growth, sales commissions, and incentive compensation. The non-GAAP gross profit increase was driven by higher shipping volumes and pricing, partially offset by unfavorable product mix and higher factory costs.
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MedTech & Specialty Audio
| Nine Months Ended September 30, | ||||||||||||||||||||||||||
| (in millions) | 2026 | Percent of Revenues | 2025 | Percent of Revenues | ||||||||||||||||||||||
| Revenues | $ | 203.5 | $ | 191.8 | ||||||||||||||||||||||
| Earnings from continuing operations before interest and income taxes | $ | 76.4 | 37.5% | $ | 65.3 | 34.0% | ||||||||||||||||||||
| Stock-based compensation expense | 4.4 | 4.4 | ||||||||||||||||||||||||
| Impairment charges | — | 3.6 | ||||||||||||||||||||||||
| Restructuring charges | 0.3 | 0.3 | ||||||||||||||||||||||||
| Adjusted earnings from continuing operations before interest and income taxes | $ | 81.1 | 39.9% | $ | 73.6 | 38.4% | ||||||||||||||||||||
Revenues
MSA revenues were $203.5 million for the nine months ended September 30, 2026, compared with $191.8 million for the nine months ended September 30, 2025, an increase of $11.7 million or 6.1%. Revenues increased primarily due to higher shipping volumes into the hearing health market, partially offset by lower shipping volumes into the specialty audio market.
Earnings and Adjusted Earnings from Continuing Operations Before Interest and Income Taxes
MSA EBIT was $76.4 million for the nine months ended September 30, 2026, compared with $65.3 million for the nine months ended September 30, 2025, an increase of $11.1 million. EBIT margin for the nine months ended September 30, 2026 was 37.5%, compared with 34.0% for the nine months ended September 30, 2025. The increases in EBIT and EBIT margin were primarily due to higher gross profit, partially offset by higher operating expense driven by incentive compensation. The increase in gross profit was driven by higher shipping volumes, impairment charges in 2025 that did not recur in 2026, and favorable product mix, partially offset by higher factory costs and lower pricing.
MSA Adjusted EBIT was $81.1 million for the nine months ended September 30, 2026, compared with $73.6 million for the nine months ended September 30, 2025, an increase of $7.5 million. Adjusted EBIT margin for the nine months ended September 30, 2026 was 39.9%, compared to 38.4% for the nine months ended September 30, 2025. The increases in adjusted EBIT and adjusted EBIT margin were primarily due to higher non-GAAP gross profit, partially offset by higher non-GAAP operating expense driven by incentive compensation. The increase in gross profit was driven by higher shipping volumes and favorable product mix, partially offset by higher factory costs and lower pricing.
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Liquidity and Capital Resources
Historically, we have generated and expect to continue to generate positive cash flow from operations. Our ability to fund our operations and capital needs will depend on our ongoing ability to generate cash from operations and access capital markets. We believe that our future cash flow from operations and access to capital markets will provide adequate resources to fund our working capital needs, capital expenditures, strategic investments, and share repurchases. We have secured a revolving line of credit in the United States from a syndicate of commercial banks to provide additional liquidity. Furthermore, if we were to require additional cash above and beyond our cash on the balance sheet, the free cash flow generated by the business, and availability under our revolving credit facility, we would most likely seek to raise long-term financing through the U.S. debt or bank markets.
On December 27, 2024, we completed the sale of CMM to Syntiant for approximately $140.8 million in total consideration, consisting of $63.6 million in cash ($58.0 million net of cash sold) and Syntiant Series D-2 preferred stock with a fair value of $77.2 million. For additional information, refer to Note 3. Discontinued Operations to our Consolidated Financial Statements. The Company shared in certain separation costs pursuant to a credit for up to $13.5 million that Syntiant applied to specified separation costs post-closing. For additional information, refer to Note 1. Basis of Presentation.
We maintain a share repurchase program, that was initially approved by the Board of Directors in February 2020, authorizing the repurchase of up to $100.0 million of our common stock. The share repurchase program does not have an expiration date, and the Board of Directors has authorized the expansion of the program over the years. The authorization was increased by $150.0 million in April 2022, and increased by an additional $150.0 million in February 2025, for a total of $400.0 million in aggregate value. At September 30, 2026, we have $81.5 million remaining that may yet be repurchased under our share repurchase program. The timing and amount of any shares repurchased will be determined by us based on our evaluation of market conditions and other factors, and will be made in accordance with applicable securities laws in either the open market or in privately negotiated transactions. We are not obligated to purchase any shares under the program, and the program may be suspended or discontinued at any time. Any shares repurchased will be held as treasury stock. During the nine months ended September 30, 2026 and 2025, the Company repurchased 1,387,421 and 3,120,574 shares of common stock, respectively, for a total of $47.5 million and $55.0 million, respectively.
Cash flows from operating, investing, and financing activities as reflected in our Consolidated Statements of Cash Flows and are presented on a consolidated basis, including discontinued operations. Cash flows are summarized in the following table:
| Nine Months Ended September 30, | ||||||||||||||
| (in millions) | 2026 | 2025 | ||||||||||||
| Net cash flows provided by (used in): | ||||||||||||||
| Operating activities | $ | 72.1 | $ | 66.8 | ||||||||||
| Investing activities | (24.6) | (16.3) | ||||||||||||
| Financing activities | (54.9) | (88.6) | ||||||||||||
| Effect of exchange rate changes on cash and cash equivalents | (0.2) | 0.5 | ||||||||||||
| Net decrease in cash and cash equivalents | $ | (7.6) | $ | (37.6) | ||||||||||
Operating Activities
Cash provided by operating activities adjusts net earnings for certain non-cash items, including depreciation expense, amortization of intangible assets, stock-based compensation, changes in deferred income taxes, impairment charges, and the effects of changes in operating assets and liabilities. The increase in cash provided by operating activities for the nine months ended September 30, 2026 is primarily due to higher earnings from continuing operations, less cash used in 2026 to settle obligations related to CMM, and favorable changes in accrual balances, partially offset by an increase in working capital in 2026 and lower customer prepayments in 2026.
Investing Activities
The increase in cash used in investing activities during the nine months ended September 30, 2026 was driven by higher capital expenditures. Our increased capital expenditures in 2026 were due to capacity expansion in our PD segment, including our specialty film product line.
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In 2026, we expect capital expenditures to be approximately 5% of revenues.
Financing Activities
Cash used in financing activities during the nine months ended September 30, 2026 was primarily related to $47.5 million of repurchases of common stock and $14.9 million of tax payments related to net share settlement of equity awards, partially offset by proceeds of $5.8 million from the exercise of options and $2.0 million of net proceeds on the revolving credit facility. Cash used in financing activities during 2025 was primarily related to $55.0 million of repurchases of common stock, $30.0 million of payments on the revolving credit facility, and $7.1 million of tax payments related to net share settlement of equity awards, partially offset by proceeds of $3.9 million from the exercise of options.
Adjusted Free Cash Flow
In addition to measuring cash flow generation based on the operating, investing, and financing classifications included in the Consolidated Statement of Cash Flows (including discontinued operations), Knowles also measures adjusted free cash flow and adjusted free cash flow as a percentage of revenues. Adjusted free cash flow is defined as non-GAAP net cash attributable to continuing operations less non-GAAP capital expenditures attributable to continuing operations. Non-GAAP net cash attributable to continuing operations is defined as net cash provided by operating activities less amounts generated or utilized by discontinued operations. Non-GAAP capital expenditures attributable to continuing operations is defined as capital expenditures less amounts attributable to discontinued operations. Knowles believes these measures are helpful in measuring its cash generated from its continuing operations that is available to repay debt, fund acquisitions, and repurchase Knowles common stock. Adjusted free cash flow and adjusted free cash flow as a percentage of revenues are not presented in accordance with GAAP and may not be comparable to similarly titled measures used by other companies in our industry. As such, adjusted free cash flow and adjusted free cash flow as a percentage of revenues should not be considered in isolation from, or as an alternative to, any other liquidity measures determined in accordance with GAAP.
The following table reconciles our adjusted free cash flow to cash flow provided by operating activities:
| Nine Months Ended September 30, | ||||||||||||||
| (in millions) | 2026 | 2025 | ||||||||||||
| Net cash provided by operating activities | $ | 72.1 | $ | 66.8 | ||||||||||
| Amounts utilized in discontinued operations | 14.9 | 31.2 | ||||||||||||
| Non-GAAP net cash attributable to continuing operations | 87.0 | 98.0 | ||||||||||||
| Capital expenditures | (24.6) | (16.8) | ||||||||||||
| Amounts attributable to discontinued operations | — | — | ||||||||||||
| Non-GAAP capital expenditures attributable to continuing operations | (24.6) | (16.8) | ||||||||||||
| Non-GAAP net cash attributable to continuing operations | 87.0 | 98.0 | ||||||||||||
| Non-GAAP capital expenditures attributable to continuing operations | (24.6) | (16.8) | ||||||||||||
| Adjusted free cash flow | $ | 62.4 | $ | 81.2 | ||||||||||
| Adjusted free cash flow as a % of revenues | 12.4 | % | 18.8 | % | ||||||||||
During the nine months ended September 30, 2026 we generated adjusted free cash flow of $62.4 million compared to $81.2 million during the nine months ended September 30, 2025. The decrease in adjusted free cash flow in 2026 was primarily due to an increase in working capital, lower customer prepayments, and higher capital expenditures, partially offset by higher earnings from continuing operations and favorable changes in accrual balances.
Contingent Obligations
We are involved in various legal proceedings, claims, and investigations arising in the ordinary course of business. Legal contingencies are discussed in Note 14. Commitments and Contingent Liabilities to our Consolidated Financial Statements.
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Critical Accounting Estimates
This discussion and analysis of results of operations and financial condition is based on our Consolidated Financial Statements, which have been prepared in conformity with U.S. GAAP. The preparation of these financial statements requires the use of estimates and assumptions related to the reporting of assets, liabilities, revenues, expenses, and related disclosures. In preparing these financial statements, we have made our best estimates and judgments of certain amounts included in the financial statements. Estimates are revised periodically. Actual results could differ from these estimates.
The information concerning our critical accounting estimates can be found under Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended December 31, 2025 filed with the Securities and Exchange Commission on February 9, 2026. There are no material changes in our previously reported critical accounting estimates.
Recent Accounting Standards
The issuance of recent accounting standards, as included in Note 2. Recent Accounting Standards to our Consolidated Financial Statements, is not expected to have a significant impact on our revenue, earnings, or liquidity.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
During the nine months ended September 30, 2026, there were no material changes to the information on market risk exposure disclosed in our Annual Report on Form 10-K for the year ended December 31, 2025. For a discussion of our exposure to market risk as of December 31, 2025, refer to Item 7A, Quantitative and Qualitative Disclosures about Market Risk, contained in our Annual Report on Form 10-K for the year ended December 31, 2025.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Our management has evaluated, under the supervision and with the participation of our chief executive officer ("CEO") and chief financial officer ("CFO"), the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act")) as of the end of the period covered by this report. Based on that evaluation, our CEO and CFO have concluded that, as of the end of the period covered by this report, our disclosure controls and procedures are effective in ensuring that information required to be disclosed in our Exchange Act reports is (1) recorded, processed, summarized, and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and (2) accumulated and communicated to our management, including our CEO and CFO, as appropriate to allow timely decisions regarding required disclosure.
Changes in Internal Control Over Financial Reporting
There has been no change in our internal control over financial reporting that occurred during the third quarter of 2026 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
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Inherent Limitations on Effectiveness of Controls
Our management, including the CEO and CFO, do not expect that our disclosure controls or our internal control over financial reporting will prevent or detect all error and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. The design of a control system must reflect the fact that the benefits of controls must be considered relative to their costs. Further, because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, will be detected. These inherent limitations include the realities that judgments in decision making can be faulty and that breakdowns can occur because of simple error or mistake. Controls can also be circumvented by the individual acts of some persons, by intentionally falsified documentation, by collusion of two or more individuals within Knowles or third parties, or by management override of the controls. The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Projections of any evaluation of controls effectiveness to future periods are subject to risks. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures.
PART II — OTHER INFORMATION
Item 1. Legal Proceedings
For a discussion of contingencies related to legal proceedings, see Note 14. Commitments and Contingent Liabilities to our Consolidated Financial Statements, which is incorporated herein by reference.
Except as otherwise noted above, there have been no material developments in legal proceedings.
Item 1A. Risk Factors
There have been no material changes from the risk factors previously disclosed under the heading “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2025.
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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Issuer Purchases of Equity Securities
The Company maintains a share repurchase program, that was initially approved by its Board of Directors in February 2020, authorizing the repurchase of up to $100.0 million of the Company's common stock. The share repurchase program does not have an expiration date, and the Board of Directors has authorized the expansion of the program over the years. The authorization was increased by $150.0 million in April 2022, and increased by an additional $150.0 million in February 2025, for a total of $400.0 million in aggregate value. The timing and amount of any shares repurchased will be determined by the Company based on its evaluation of market conditions and other factors, and will be made in accordance with applicable securities laws in either the open market or in privately negotiated transactions. The Company is not obligated to purchase any shares under the program, and the program may be suspended or discontinued at any time. Any shares repurchased will be held as treasury stock.
Below is a summary of share repurchases for the three months ended September 30, 2026:
| (in millions, except share and per share amounts) | ||||||||||||||||||||||||||
| Period | Total Number of Shares Purchased | Average Price Paid per Share | Total Number of Shares Purchased as Part of Publicly Announced Program | Approximate Dollar Value of Shares That May Yet Be Purchased Under The Program | ||||||||||||||||||||||
| July 2026 | 83,474 | $ | 35.94 | 83,474 | $ | 103.4 | ||||||||||||||||||||
| August 2026 | 468,325 | $ | 36.30 | 468,325 | $ | 86.4 | ||||||||||||||||||||
| September 2026 | 143,253 | $ | 34.90 | 143,253 | $ | 81.5 | ||||||||||||||||||||
| Total Activity | 695,052 | $ | 35.97 | 695,052 | ||||||||||||||||||||||
Item 5. Other Information
Director and Officer Trading Plans and Arrangements
| Name (Title) | Action | Date | Trading Arrangement | Total Shares to be Sold | Expiration Date | |||||||||||||||||||||||||||||||||
| Rule 10b5-1* | Non-Rule 10b5-1** | |||||||||||||||||||||||||||||||||||||
Daniel Giesecke Senior Vice President & Chief Operating Officer | Adopt | 8/26/2026 | X | 30,253 | 2/12/2027 | |||||||||||||||||||||||||||||||||
* Intended to satisfy the affirmative defense conditions of Rule 10b5-1(c)
** Not intended to satisfy the affirmative defense of Rule 10b5-1(c)
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Item 6. Exhibits
| 101 | The following financial information from Knowles Corporation's Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2026 formatted in Inline XBRL: (i) Consolidated Statements of Earnings (Unaudited) for the three and nine months ended September 30, 2026 and 2025, (ii) Consolidated Statements of Comprehensive Earnings (Unaudited) for the three and nine months ended September 30, 2026 and 2025, (iii) Consolidated Balance Sheets (Unaudited) as of September 30, 2026 and December 31, 2025, (iv) Consolidated Statements of Stockholders’ Equity (Unaudited) for the three and nine months ended September 30, 2026 and 2025, (v) Consolidated Statements of Cash Flows (Unaudited) for the nine months ended September 30, 2026 and 2025, and (vi) the Notes to the Consolidated Financial Statements (Unaudited) tagged as blocks of text and including detailed tags. | ||||
| 104 | The cover page from the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2026, formatted in Inline XBRL and contained in Exhibit 101. | ||||
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Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| KNOWLES CORPORATION | ||||||||
| Date: | October 27, 2026 | /s/ John S. Anderson | ||||||
| John S. Anderson | ||||||||
| Senior Vice President & Chief Financial Officer | ||||||||
| (Principal Financial Officer) | ||||||||
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