Key Highlights

  • Revenue rose 20% to USD 184.0 million, above the high end of guidance.
  • Precision Devices Revenue rose 33% to USD 117 million; book-to-bill was 1.5.
  • Non-GAAP diluted Earnings were USD 0.38 per share, up 15% year over year.
  • Fourth-quarter revenue is guided at USD 180 million to USD 190 million.

Quarter Results

Knowles (NYSE:KN) reported third-quarter 2026 results on Thursday for the period ended Sept. 30. Revenue from continuing operations was USD 184.0 million against USD 152.9 million a year earlier and USD 166.8 million in the second quarter. GAAP gross Margin was 44.2%, against 45.7% a year ago, and non-GAAP gross margin was 45.3%, against 46.2%.

GAAP diluted earnings were USD 0.24 per share and non-GAAP diluted earnings were USD 0.38, against USD 0.21 and USD 0.33 a year earlier. Operating Cash Flow was USD 44.6 million, against USD 29.1 million. Adjusted EBITDA margin was 26.3%, up 50 basis points. Research and Development was USD 10 million, and selling, general and administrative expense was USD 30 million, up USD 4 million on commissions, incentive pay and headcount.

Precision Devices Demand

Precision Devices revenue was USD 117 million, up 33%, with Demand across medtech, defense, industrial and electrification. Quarterly orders reached nearly USD 180 million and are scheduled into the first half of 2027. The book-to-bill ratio has been above one for eight straight quarters. A USD 15 million defense order for RF filters is to be delivered over 36 months. CEO Jeffrey Niew said new design wins and bookings support a 2027 outlook that exceeds the growth targets from the May 2025 investor day.

MedTech and Specialty Audio revenue was USD 67 million, up 4%. Management said hearing health customers launched AI-featured products earlier than usual, which pulled demand into the third quarter and shifted typical seasonality.

Capacity, Margins and Capital

Niew said the segment is close to a capacity constraint, with sequential Precision Devices revenue projected flat through the first quarter of 2027. New lines begin coming online in late first quarter 2027 and reach full availability in the second half. Capital expenditures for 2027 are projected at 5% to 7% of revenue, up from the historical 3% to 5% range. The sale of a stamping Business with the consumer unit creates a 2% to 3% revenue headwind in 2027.

The chief financial officer said the company aims to lift gross margin by 100 basis points a year. Management identified a path to a 30% EBITDA margin in two to three years, up from about 25% now. The specialty film business is projected in the mid-30% gross margin range exiting 2026 with a target above 40%.

The company repurchased 695,000 shares for USD 25 million, cut bank borrowings by USD 15 million to USD 116 million, and had USD 330 million of liquidity.

Outlook

For the fourth quarter, revenue is guided at USD 180 million to USD 190 million, 14% growth at the midpoint, and non-GAAP diluted earnings at USD 0.39 to USD 0.43 per share. Full-year 2026 revenue is projected at USD 689 million, up 16%, and adjusted EBITDA is projected up 24%.

Markers to Follow

Gross margin slipped about 90 basis points year over year even as revenue rose 20%, while adjusted EBITDA margin rose 50 basis points. The 1.5 book-to-bill ratio sits against flat sequential Supply in Precision Devices until new lines arrive. Reference points are order volume, the timing of new capacity, 2027 capital spending at 5% to 7% of revenue, specialty film margins and the fourth-quarter guided range.