Knowles (NYSE:KN) reported first-quarter 2026 results that executives said reflected strong organic growth and improving profitability, supported by demand across the company’s end markets and a growing backlog. Management also issued second-quarter guidance calling for year-over-year revenue and earnings gains.
First-quarter results and momentum into 2026
President and CEO Jeffrey Niew said the company “started 2026 with solid financial results in Q1 and great momentum entering the rest of the year,” pointing to organic growth and improving earnings. Knowles posted revenue of $153 million, up 16% year-over-year and at the high end of its guided range. Earnings per share were $0.27, up 50% year-over-year and above the high end of guidance, while cash utilized in operations was $1 million, within the company’s range.
Segment performance: MedTech & Specialty Audio and Precision Devices
MedTech & Specialty Audio (MSA) revenue in the quarter was $68 million, up 14% year-over-year. Niew attributed the stronger-than-expected growth to customers’ new product introductions and Knowles’ positioning on those platforms. Despite the outsized first-quarter growth relative to the company’s stated annual target, Niew said the hearing health market is expected to grow at normal historical rates in 2026, and Knowles is projecting MSA growth of 2% to 4% for the full year.
Chief Financial Officer John Anderson said MSA gross margin was 53.5%, up 480 basis points from the prior-year quarter, driven by higher factory capacity utilization and favorable mix. For full-year 2026, Anderson said the company expects MSA gross margins to be in line with 2025 levels of about 51%.
Precision Devices (PD) revenue was $85 million, up 17% year-over-year, with growth across MedTech, Defense, Industrial, and Electrification end markets, according to Niew. He said the defense market saw strength across product families, citing demand for capacitors tied to OEM investments, production ramps for new products, and share gains, as well as “broad-based orders” for RF and microwave products. Niew also noted Knowles is a sole supplier on “a number of key defense programs.”
In industrial, Niew pointed to strong order activity across capacitor products serving varied applications and industries at both distribution partners and OEMs, including ceramic capacitor demand in semiconductor equipment and downhole applications. He added that distributor inventory challenges experienced last year are “behind us,” and said orders appear aligned with end-market demand.
Anderson said PD segment gross margin was 39.2%, up 350 basis points from the first quarter of 2025, reflecting improved pricing and higher demand driving factory utilization. Those gains were “partially offset” by higher factory costs in the specialty film line as Knowles ramps capacity to support a $75 million-plus energy order. Anderson said he expects further PD margin improvement in the second half of 2026 as specialty film production volume increases.
Orders, book-to-bill, and demand commentary
Niew highlighted PD’s book-to-bill of 1.19, calling it “very strong” and noting it marked the sixth consecutive quarter above one. He said ordering strength was broad-based across end markets and channels, and added that April order rates were already strong, with the company expecting another strong month of bookings.
On the outlook for defense, Niew said demand is high given geopolitical conditions, and executives discussed expectations for increasing demand in 2027 and beyond tied to the “replenishment of stocks” connected with the Iran conflict. In the Q&A, Niew said he expected 2026 defense strength to be “probably stronger than we expected” and said 2027 looked “even better for defense.”
When asked about customer interest in securing capacity into 2027, Niew said distribution orders are largely short lead time, but in OEM channels—especially defense—there have been more discussions about larger and longer commitments, including potential “3- or 5-year” orders rather than the more typical one-year structure. He also said the 1.19 book-to-bill did not include any unusual multi-year orders and that “97%” of it would be shipped within 12 months.
Margins, pricing, and the energy order ramp
In response to questions about margin expansion and pricing, Niew said pricing strategy has become “a big part of our opportunity” in Precision Devices. He said actions taken to date should support roughly 2% to 4% annual pricing improvement in PD, while MSA has a more limited customer base and already “very strong margins,” leading the company not to anticipate meaningful price increases there.
Executives also discussed the specialty film ramp tied to the energy order. Niew said the order is expected to be “fully ramped up by the end of Q2” and was not a significant contributor in Q1. He said the company was on track on both ramp and yield and expected “$25 million+” contribution for the rest of the year “at pretty good gross margins,” especially in the back half once fully ramped. He characterized remaining work as “blocking and tackling,” with equipment on-site and the primary tasks involving qualification and scaling volume, although he mentioned one piece of equipment that “may not arrive on time.”
Asked about capacity utilization in PD, Niew said utilization varies by product line, but the business is “probably running on average in the 80% range right now” and could raise output without significant equipment additions, though more direct labor may be needed as volumes rise. On the margin impact of the energy ramp, Anderson provided directional guidance, saying PD margins could be “maybe 200-250 basis points better than we’re doing today” once the ramp-related headwind is removed, driven heavily by the energy order.
On potential headwinds from global conflict, Niew cited modest input-cost pressures, including some resin-based products, and said transportation costs are relatively low given small component sizes and regional manufacturing. He added that in many cases customers take possession at Knowles’ dock, limiting exposure to shipping costs.
Capital allocation, balance sheet, and Q2 guidance
Anderson said first-quarter R&D expense was $10 million, up $1.4 million year-over-year on higher project spending in both segments. SG&A was $28 million, up $3 million, driven by higher sales commissions, timing of expenses, and added headcount in Precision Devices to support future growth. Interest expense was $2 million, down $1 million from last year due to lower average debt balances.
On cash flow and the balance sheet, Anderson said capital spending was $11 million in Q1 and operating cash flow included $8 million of outflows related to the CMM business divested at the end of 2024, with related payments now “substantially complete.” Knowles repurchased 276,000 shares for $7.5 million and ended the quarter with $41 million in cash and $131 million of revolver borrowings. Net leverage was 0.6x trailing 12-month adjusted EBITDA, and Anderson said liquidity exceeded $310 million (cash plus unused revolver capacity).
For the second quarter of 2026, Knowles guided to:
- Revenue: $152 million to $162 million
- R&D: $9 million to $11 million
- SG&A: $26 million to $28 million
- Adjusted EBIT margin: 20% to 22%
- Interest expense: about $2 million
- Effective tax rate: 15% to 19%
- EPS: $0.28 to $0.32 (based on 87 million diluted shares)
- Operating cash flow: $20 million to $30 million
- Capex: about $8 million
Niew added that full-year capital spending is expected to be about 4% to 5% of revenue, reflecting first-half investments tied to capacity expansion for the large energy order received in 2025. He said first-quarter performance, along with backlog and order activity in the first four months of the year, supported management’s confidence in delivering 2026 adjusted EBITDA growth above its cumulative annual target of 10% to 14%.
About Knowles (NYSE:KN)
Knowles Corporation (NYSE: KN) is a leading developer and manufacturer of advanced micro-acoustic, audio processing and precision device solutions. The company’s product portfolio includes microelectromechanical systems (MEMS) microphones, balanced armature receivers, acoustic filters, and custom audio processing integrated circuits. These solutions are designed to enable clear speech, enhanced voice capture and intelligent audio performance in a variety of end markets.
Founded in 1946, Knowles has evolved from its roots in vacuum tube components to become a pure-play audio technology provider following its spin-off from Dover Corporation in 2014.
