Knowles (NYSE:KN) reported second-quarter 2026 results above its guidance range, with management pointing to broad-based demand across its Precision Devices business and steady performance in MedTech & Specialty Audio.
President and CEO Jeffrey Niew said the company delivered “another quarter of strong, broad-based organic growth” and is seeing momentum in newer growth platforms that could support expansion in 2027 and beyond. The company reported second-quarter revenue of $167 million, up 14% from the prior year, and non-GAAP earnings per share of $0.33, up 38% year over year. Cash generated from operations was $28 million.
Precision Devices Drives Growth
Knowles’ Precision Devices segment posted revenue of $98 million, up 25% from the year-earlier period. Niew said all of the segment’s end markets — MedTech, defense, industrial and electrification — grew year over year.
In MedTech, growth was supported by sales across applications including defibrillators and MRI machines. In defense, Niew said RF microwave products continued to support growth across communications applications. He also noted that more defense customers are seeking multi-year orders to secure capacity.
As one example, Niew said the company received an order of more than $15 million in early July for a radar application, expected to ship over 36 months starting in 2027. He said Knowles intends to continue identifying large multi-year orders as they are received.
The company also reported significant growth in industrial sales, with demand from both distribution partners and original equipment manufacturers. Niew cited strong sales tied to a new product introduction in the HVAC repair market. In electrification, Knowles delivered more than $5 million against a previously announced energy order and said it was fully ramped heading into the third quarter, with yields better than planned.
Precision Devices posted a book-to-bill ratio of 1.4, marking the seventh consecutive quarter above 1. Niew said orders in the segment were nearly $140 million in the quarter, above first-quarter bookings.
MedTech & Specialty Audio Posts Modest Increase
The MedTech & Specialty Audio segment generated second-quarter revenue of $69 million, up 2% year over year and slightly better than expected. Niew said Knowles continues to expect the hearing health market to grow at historical rates in 2026.
He said the company remains positioned to win next-generation designs for MEMS microphones and balanced armature speakers, and he expects Knowles to increase content per device in future hearing health products. Niew also cited the Micro Solutions Group as a platform that could expand the company’s reach and support growth above historical segment rates in the future.
During the question-and-answer portion of the call, Niew said the MedTech & Specialty Audio segment had a strong first quarter and that inventory building in the first half of the year is expected to create a headwind in the fourth quarter. He said the segment is still expected to grow in the 2% to 4% range for the full year, adding that recent hearing aid industry data could suggest the end market is closer to the high end of that range, though he said it was too early to draw firm conclusions.
Margins Improve as Volumes Rise
Chief Financial Officer John Anderson said gross margins in MedTech & Specialty Audio were 53.1%, up 250 basis points from the prior-year quarter, driven by factory productivity gains. Precision Devices gross margins were 40.1%, up 140 basis points from the second quarter of 2025, largely due to higher production volume and increased factory capacity utilization.
Anderson said Knowles delivered more than 200 basis points of year-over-year gross margin improvement in Precision Devices during the first half of 2026 and expects further improvement in the second half of the year from higher pricing, favorable mix and increased factory capacity utilization.
Companywide, research and development expense was $9 million, up slightly from the year-earlier period due to higher project spending in both segments. Selling, general and administrative expenses were $31 million, up $3 million, primarily due to higher sales commissions, annual merit increases and expenses tied to new product initiatives. Interest expense was $2 million, down $1 million from the prior year because of lower average debt balances.
Knowles repurchased 416,000 shares during the quarter at a total cost of $15 million. The company ended the quarter with $50 million in cash and $131 million of borrowings outstanding under its revolving credit facility. Anderson said Knowles had a net leverage ratio of 0.5 times trailing 12-month adjusted EBITDA and liquidity of more than $315 million, measured as cash plus unused revolver capacity.
Guidance Raised Above Investor Day Targets
For the third quarter of 2026, Knowles expects revenue of $167 million to $177 million, representing year-over-year growth of 12.5% at the midpoint. The company projected adjusted EBIT margin of 22% to 24%, interest expense of $2 million and an effective tax rate of 15% to 19%.
Third-quarter EPS is expected to range from $0.34 to $0.38, up 9% year over year at the midpoint, based on 87 million fully diluted weighted average shares outstanding. Knowles expects cash from operations of $35 million to $45 million and capital spending of $10 million in the quarter.
For the full year, management now expects revenue growth of 10% to 12% and adjusted EBITDA growth of 20% to 24% over 2025 levels. Anderson said both metrics are well above the high end of the target ranges provided at the company’s May 2025 Investor Day. The company expects full-year capital spending to be about 5% of revenue as it invests in capacity for Precision Devices.
Defense, Industrial Demand Seen Strengthening
Niew said Knowles’ end-market outlook has improved since its Investor Day, particularly in defense and industrial. He said defense demand is growing faster than management anticipated in May 2025, supported by global conflicts and increased spending on electronic warfare. He cited RF filters and capacitors used in communications, radar detection and jamming, munitions and other harsh applications.
In response to a question from Anthony Stoss of Craig-Hallum, Niew said Knowles has increased visibility in defense, with more customers seeking capacity commitments for the next 24 to 36 months. Anderson said the filter business is roughly $80 million, with about 90% tied to defense, while Niew and Anderson estimated defense-related capacitor revenue at roughly $40 million to $50 million.
Niew also said potential drivers of future defense growth include a larger U.S. defense budget, replenishment of missile and munition stocks and increased defense spending by U.S. allies. He said quote activity, design activity and orders are “super high,” with a possibility of acceleration in the market about a year from now.
On mergers and acquisitions, Niew said Knowles is not taking a back seat but is being selective, looking for deals that would be additive to the company’s existing platforms. Anderson said that absent M&A, the company will continue its capital allocation program, including share repurchases and debt reduction.
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.
