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What changed in Knowles Corp's 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of Knowles Corp's 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+304 added−319 removedSource: 10-K (2025-02-13) vs 10-K (2024-02-21)

Top changes in Knowles Corp's 2024 10-K

304 paragraphs added · 319 removed · 207 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changeFor products that were introduced in prior years, we strive to offset anticipated price erosion through bill of material cost reductions, productivity improvements, and equipment efficiency. Customers, Sales, and Distribution We serve customers in the medtech, defense, electric vehicle, industrial, communications, and consumer electronics markets. Our customers include some of the largest OEMs and operators in these markets.
Biggest changeOur customers are adopting these high-value microphones and balanced armature speakers to improve the overall audio performance of their devices which in turn improves the end user experience. For products that were introduced in prior years, we strive to offset anticipated price erosion through bill of material cost reductions, productivity improvements, and equipment efficiency.
Additional information regarding Knowles' activities related to its people and sustainability, as well as workforce diversity data, can be found in the Knowles 2023 Corporate Sustainability Report, which is located on our website. The contents of our website and our Corporate Sustainability Report are referenced for general information only and are not incorporated into this Annual Report on Form 10-K.
Additional information regarding Knowles' activities related to its people and sustainability, as well as workforce diversity data, can be found in the Knowles 2024 Corporate Sustainability Report, which is located on our website. The contents of our website and our Corporate Sustainability Report are referenced for general information only and are not incorporated into this Annual Report on Form 10-K.
In 2023, we continued our partnership with PEAK (Partnership to Educate and Advance Kids), a Chicago-based nonprofit that is focused on providing academically average students from the city's most challenging and under-served neighborhoods with financial, educational, and personal support through their high school years.
In 2024, we continued our partnership with PEAK (Partnership to Educate and Advance Kids), a Chicago-based nonprofit that is focused on providing academically average students from the city's most challenging and under-served neighborhoods with financial, educational, and personal support through their high school years.
In PD, we operate 10 facilities in North America and 1 facility in Asia for the manufacturing of products that support our global customers, as well as their suppliers and contract manufacturers. In MSA, we currently operate 4 facilities in Asia to serve the leading hearing health manufacturers largely based in Europe, China, and North America.
In PD, we operate 8 facilities in North America and 1 facility in Asia for the manufacturing of products that support our global customers, as well as their suppliers and contract manufacturers. In MSA, we currently operate 4 facilities in Asia to serve the leading hearing health manufacturers largely based in Europe, China, and North America.
We do not anticipate any material effect on our business due to any patents expiring in 2024, and we continue to obtain new patents through our ongoing research and development. We have maintained U.S. federal trademark registrations for KNOWLES and Knowles logo designs, along with various other trademarks.
We do not anticipate any material effect on our business due to any patents expiring in 2025, and we continue to obtain new patents through our ongoing research and development. We have maintained U.S. federal trademark registrations for KNOWLES and Knowles logo designs, along with various other trademarks.
Knowles has a formal Succession Planning initiative with the primary objective of identifying and developing our next generation leaders. Our Chief Human Resources Officer annually reviews with the Board of Directors our overall talent management strategy and progress.
Knowles has a formal Succession Planning program with the primary objective of identifying and developing our next generation leaders. Our Chief Human Resources Officer annually reviews with the Board of Directors our overall talent management strategy and progress.
Commitment To Diversity, Inclusion, and Equality We believe our diverse teams, with their unique ideas, thoughts, and perspectives, form the building blocks for our culture of innovation at Knowles. We strive to create and maintain a workplace environment that embraces the diversity of thoughts, ideas, beliefs, and experiences, brought by our team members.
We believe our diverse teams, with their unique ideas, thoughts, and perspectives, form the building blocks for our culture of innovation at Knowles. We strive to create and maintain a workplace environment that embraces the diversity of thoughts, ideas, beliefs, and experiences, brought by our team members.
Intellectual Property and Intangible Assets We rely on patent, copyright, trademark, and trade secret laws to protect our intellectual property, products, and technology. Our U.S. patents expire in calendar years 2024 through 2043. While our patents are an important element of our success, our business as a whole is not dependent on any one patent or group of patents.
Intellectual Property and Intangible Assets We rely on patent, copyright, trademark, and trade secret laws to protect our intellectual property, products, and technology. Our U.S. patents expire in calendar years 2025 through 2044. While our patents are an important element of our success, our business as a whole is not dependent on any one patent or group of patents.
The Company's customers that accounted for 10% or more of total revenues were as follows: Revenues Years Ended December 31, 2023 2022 2021 Apple Inc. 16 % 15 % 16 % WS Audiology A/S 10 % * * * Less than 10% of total revenues. 5 Table of Contents We manufacture and develop our products and maintain sales and technical customer support offices in North America, Europe, and Asia.
The Company's customers that accounted for 10% or more of total revenues were as follows: Revenues Years Ended December 31, 2024 2023 2022 WS Audiology A/S 14 % 16 % 13 % Sonova Holding AG * * 12 % * Less than 10% of total revenues. 4 Table of Contents We manufacture and develop our products as well as maintain sales and technical customer support offices in North America, Europe, and Asia.
To complement our own research and development efforts, we have also licensed and expect to continue to license, a variety of intellectual property and technologies important to our business from third parties. See Item 1A. Risk Factors for additional information regarding risks related to our business. Seasonality Our PD segment is not typically subject to seasonality.
To complement our own research and development efforts, we have also licensed and expect to continue to license, a variety of intellectual property and technologies important to our business from third parties. See Item 1A. Risk Factors for additional information regarding risks related to our business. Cybersecurity We regularly perform risk assessments relating to cybersecurity and technology risks.
We recognize that nurturing an inclusive workplace enables us to attract, develop, and retain our team members regardless of their race, color, gender identity, language, national origin, religion, orientation, or age.
We recognize that nurturing an inclusive workplace enables us to attract, develop, and retain our team members regardless of their race, color, gender identity, language, national origin, religion, orientation, or age. We have commemorated and celebrated numerous diversity, cultural, and historical events throughout the year.
Knowles has pledged $10,000 annually to provide a PEAK student the opportunity to pursue a high-quality high school education. In addition, Knowles piloted the PEAK Student Tutoring Program, where our employees assist students with STEM-related subjects.
Knowles has pledged $10,000 annually to provide a PEAK student the opportunity to pursue a high-quality high school education. In addition, Knowles piloted the PEAK Student Tutoring Program, where our employees assist students with STEM-related subjects. To be able to attract and retain the best employees, Knowles provides a competitive total rewards program that incorporates our pay for performance philosophy.
Although end-user demand for consumer electronics and hearing aids is global and marketing activities occur globally, the majority of our manufacturing is located in China, Malaysia, and the Philippines. 4 Table of Contents Competitive Landscape Success in the electronic components industry is primarily driven by innovation and flexibility as customers compete to gain a share of the growing consumer device market.
Although end-user demand for hearing aids is global and marketing activities occur globally, the majority of our manufacturing is located in the Philippines and Malaysia. Competitive Landscape Success in the electronic components industry is primarily driven by innovation and flexibility. We compete across consumer platforms to deliver superior acoustic performance through customized products.
Prior period segment results and related disclosures have been conformed to reflect our current reportable segments. 3 Table of Contents Our reportable segments are as follows: • PD Segment Our PD segment specializes in the design and delivery of high performance capacitor products and RF solutions primarily serving the defense, medtech, electric vehicle, and industrial markets.
Our reportable segments are as follows: • PD Segment Our PD segment specializes in the design and delivery of high performance capacitor products and RF solutions primarily serving the defense, medtech, electrification, and industrial markets.
Commodity pricing for various metals, such as palladium, gold, brass, stainless steel, and copper, fluctuates. As a result, our operating results are exposed to such fluctuations. Although some cost increases may be recovered through increased prices to customers, if commodity prices trend upward, we attempt to control such costs through fixed-price contracts with suppliers and various other programs.
Although some cost increases may be recovered through increased prices to customers, if commodity prices trend upward, we attempt to control such costs through fixed-price contracts with suppliers and various other programs.
ITEM 1. BUSINESS Unless the context otherwise requires, references in this Annual Report on Form 10-K to “Knowles,” the “Company,” “we,” “our,” or “us” refer to Knowles Corporation and its consolidated subsidiaries.
ITEM 1. BUSINESS Unless the context otherwise requires, references in this Annual Report on Form 10-K to “Knowles,” the “Company,” “we,” “our,” or “us” refer to Knowles Corporation and its consolidated subsidiaries. Our Company We are a leading manufacturer of specialty electronic components. We design parts that perform unique, critical functions for innovative technologies.
Portions of this segment face much greater exposure to capital investment cycles and government spending, both direct and indirect, as some of these end markets are largely dependent on project upgrades, expansion, and government contracts. Excess customer and channel inventory has resulted in decreased demand for some of our products.
Portions of this segment face much greater exposure to capital investment cycles and government spending, both direct and indirect, as some of these end markets are largely dependent on project upgrades, expansion, and government contracts. We have been experiencing increased demand for our products driven by the upgrading of large rotary radar and deployment of communication satellites.
Fostering a Safe Work Environment We believe it is important to provide a healthy and safe workplace for our employees. As part of our Environmental, Health, and Safety Policy, we train employees and managers on preventing work-related injuries and illnesses.
As part of our Environmental, Health, and Safety Policy, we train employees and managers on preventing work-related injuries and illnesses.
Our Chief Human Resources Officer is responsible for developing and executing on our human capital strategy, with oversight by the Compensation Committee of our Board of Directors. Our key initiatives with respect to human capital management include: Recruitment, Training, and Development We understand that our most important resource is our people.
An important component of achieving this goal is fostering a workplace environment that embraces diversity and inclusion. Our Chief Human Resources Officer is responsible for developing and executing on our human capital strategy, with oversight by the Compensation Committee of our Board of Directors. We understand that our most important resource is our people.
We understand the importance of gender diversity and with it, the need for advancing women in Science, Technology, Engineering, and Mathematics ("STEM") careers. We continue to partner with local organizations to help bridge the gender gap in STEM and shape the next generation of women who aspire to be leaders in the new era of technology.
We continue to partner with local organizations to help bridge the gender gap in STEM and shape the next generation of women who aspire to be leaders in the new era of technology. For example, Knowles is the perennial sponsor of the University of Illinois at Chicago's ("UIC") Women in Engineering Summer Program.
We supplement our direct sales force with external sales representatives and distributors. We ship our products primarily from our global distribution center located in Penang, Malaysia or directly from certain manufacturing sites. Our worldwide sales force provides geographically specific support to our customers and specialized selling of product lines to various customer bases.
We supplement our direct sales force with external sales representatives and distributors. Our global distribution center is located in Penang, Malaysia. Our worldwide sales force provides geographically specific support to our customers and specialized selling of product lines to various customer bases. For further detail and for additional disclosures regarding sales and long-lived assets by geographic location, see Note 17.
We compete across consumer platforms to deliver superior acoustic performance through customized products. Our investments in research and development enable us to capture new design wins across consumer OEMs. Our ability to balance and shift between full and semi-automation is key to our ability to optimize our operations and operating expenses.
Our investments in research and development enable us to capture new design wins across consumer OEMs. Our ability to balance and shift between full and semi-automation is key to our ability to optimize our operations and operating expenses. Additionally, it is important for suppliers to have flexibility and quick time-to-market to meet clients’ needs.
Providing a Competitive Total Rewards Program To be able to attract and retain the best employees, Knowles provides a competitive total rewards program that incorporates our pay for performance philosophy. Our total rewards program includes market-competitive base pay, broad-based short-term and long-term incentive plans, healthcare benefits, retirement plans, paid time off, family leave, and employee assistance programs.
Our total rewards program includes market-competitive base pay, broad-based short-term and long-term incentive plans, healthcare benefits, retirement plans, paid time off, family leave, and employee assistance programs. 6 Table of Contents We believe it is important to provide a healthy and safe workplace for our employees.
We see a fragmented set of competitors across high end capacitors and filters for a diverse set of end markets including defense, medtech, industrial, electric vehicle, and communications. Our leading technology and our investments in research and development enable us to design products to solve customer-specific challenges. Our proprietary manufacturing processes provide advantages in speed, flexibility, and product customization.
We see a fragmented set of competitors across high end capacitors and filters for a diverse set of end markets including defense, medtech, industrial, and electrification. In the MSA segment, our leading technology and our investments in research and development enable us to introduce new products focused on high reliability, size, broad frequency response, and low power.
For further detail and for additional disclosures regarding sales and long-lived assets by geographic location, see Note 18. Segment Information to our Consolidated Financial Statements under Item 8, "Financial Statements and Supplementary Data." Raw Materials We use a wide variety of raw materials, primarily metals, ceramic powder, and semi-processed or finished components.
Segment Information to our Consolidated Financial Statements under Item 8, "Financial Statements and Supplementary Data." Raw Materials We use a wide variety of raw materials, primarily metals, ceramic powder, and semi-processed or finished components. Commodity pricing for various metals, such as palladium, gold, brass, stainless steel, and copper, fluctuates. As a result, our operating results are exposed to such fluctuations.
We are also working to increase diversity within our professional and management positions and have implemented customized development programs to meet the unique needs of our employees' growth trajectories. We also invest in the ongoing training and development of our employees by offering tuition and continuous education reimbursement, leveraging an e-learning platform, and implementing formal mentorship programs.
We utilize a variety of recruitment strategies to source top talent who possess the required competencies and experience to execute our strategy. We also invest in the ongoing training and development of our employees by offering tuition and continuous education reimbursement, leveraging an e-learning platform, and implementing formal mentorship programs.
In addition, in 2023 approximately 37% of our new hires in the United States were women. 7 Table of Contents We are fully committed to supporting our communities and the advancement of underrepresented minority groups.
For our 2024 summer internship program, approximately 55% of our corporate intern class consisted of minority and/or women students, and approximately 20% of our corporate tech interns were women. In addition, in 2024 approximately 46% of our new hires in the United States were women. We are fully committed to supporting our communities.
For example, Knowles is the perennial sponsor of the University of Illinois at Chicago's ("UIC") Women in Engineering Summer Program. We have also supported UIC's women engineering students with programs such as academic scholarships, summer internship programs, mentorship programs, and full-time employment opportunities.
We have also supported UIC's women engineering students with programs such as academic scholarships, summer internship programs, mentorship programs, and full-time employment opportunities. We have also worked to increase underrepresented groups in our candidate pool, among our new hires, and in leadership positions.
CMM has sales, support, and engineering facilities in North America, Europe, and Asia, as well as manufacturing facilities in Asia. We sell our products directly to OEMs, their contract manufacturers, suppliers, and through sales representatives and distributors worldwide.
MSA has sales, support, and engineering facilities in North America, Europe, and Asia, as well as manufacturing facilities in Asia.
Our Strategy The Company is focused on delivering high value, differentiated solutions to a diverse set of end markets. In the Precision Devices ("PD") segment, our high performance capacitors and RF filtering solutions enable some of the most demanding applications in the defense, medtech, and electric vehicle markets.
In our Precision Devices ("PD") segment, our high-performance capacitors and RF filtering solutions enable some of the most demanding applications in the defense, medtech, and electrification markets. Our capacitor portfolio includes products with highly specialized requirements including high voltage, high temperature, and high reliability.
Under the Council's leadership, we have commemorated and celebrated numerous diversity, cultural, and historical events throughout the year. Knowles is also committed to the advancement of women in the workplace and gender diversity in engineering careers. We strive to be an employer of choice for women in engineering.
Knowles is also committed to the advancement of women in the workplace and representation in engineering careers. We strive to be an employer of choice for women in engineering. We understand the importance of diverse representation and with it, the need for advancing women in Science, Technology, Engineering, and Mathematics ("STEM") careers.
We continue to focus on sales growth and improved margins by expanding our presence in profitable markets through strategic investments and acquisitions. In the Medtech & Specialty Audio ("MSA") segment, our primary focus is to deliver high reliability and industry leading balanced armature speakers and microphones to leading hearing health manufacturers and premium audio markets.
In our Medtech & Specialty Audio ("MSA") segment, our primary focus is to deliver high reliability and industry leading balanced armature speakers and microphones to leading hearing health manufacturers and premium audio markets. We work collaboratively with customers to ensure that our solutions meet their size, broad frequency response, and low power or custom acoustic module requirements.
The timing of defense projects has also influenced demand for certain products. In our MSA segment, sales within the hearing aid market are largely driven by aging demographics, healthcare spending, increasing affluence in emerging markets, and government subsidies. Our microphones and balanced armature speakers are also utilized to produce high-definition audio for higher performance True Wireless Stereo ("TWS") applications.
In addition, demand has increased as a result of the expansion of small implantable devices to monitor and correct a host of chronic health issues. In our MSA segment, sales within the hearing aid market are largely driven by aging demographics, healthcare spending, increasing affluence in emerging markets, and government subsidies.
We believe our success is dependent upon attracting, developing, and retaining high performing employees at all levels of the organization. An important component of achieving this goal is fostering a workplace environment that embraces diversity and inclusion.
In the United States, approximately 46% of our employees identify as female and approximately 39% of our employees self-identified as belonging to a racial/ethnic minority group. We believe our success is dependent upon attracting, developing, and retaining high performing employees at all levels of the organization.
In addition, many of our OEM customers outsource to contract manufacturers. Other customers include global mobile phone manufacturers, hearing aid manufacturers, and many of the largest global contract manufacturing companies, particularly in China.
Customers, Sales, and Distribution We serve customers in the medtech, defense, electrification, and industrial markets. Our customers include some of the largest OEMs and operators in these markets. In addition, many of our OEM customers outsource to contract manufacturers.
Additionally, we deliver RF filtering solutions across a broad range of applications and frequencies primarily serving the defense market. The combination of CD's broad selection of capacitors, coupled with our organic PD offerings, significantly expands our serviceable available market.
We also deliver RF filtering solutions across a broad range of applications and frequencies primarily serving the defense market. We continue to focus on sales growth and improved margins by expanding our presence in profitable markets through organic initiatives and acquisitions.
We continue to focus on sales growth and improved margins by leveraging our core strengths in manufacturing and research and development. In the Consumer MEMS Microphones ("CMM") segment, the Company benefits from the positive audio trends across a variety of consumer products.
Our expertise in the traditional hearing aid market enables us to capitalize on emerging markets like Over the Counter ("OTC") hearing aids. We continue to focus on sales growth and improved margins by leveraging our core strengths in manufacturing and research and development.
Market Trends In our PD segment, we sell high reliability, high voltage and high temperature ceramic, high-quality film, electrolytic, and mica capacitors, and electromagnetic interference filters across diverse end markets, including mission critical applications. Our products are designed to solve customer-specific challenges and our proprietary manufacturing processes provide advantages in speed, flexibility, and customization.
We sell our products directly to original equipment manufacturers ("OEMs"), their contract manufacturers and suppliers, and through sales representatives and distributors worldwide. 3 Table of Contents Market Trends In our PD segment, we sell high reliability, high voltage and high temperature ceramic, film, mica and electrolytic capacitors, and RF filters across diverse end markets.
Our Business Segments In 2022, we determined each operating segment represents a single reportable segment; since then, we have been reporting three segments. These segments were determined in accordance with Financial Accounting Standards Board Accounting Standards Codification 280 - Segment Reporting and are comprised of (i) PD, (ii) MSA, and (iii) CMM.
Our Business Segments We have two reportable segments - Precision Devices ("PD") and MedTech & Specialty Audio ("MSA"). These segments were determined in accordance with Financial Accounting Standards Board Accounting Standards Codification 280 - Segment Reporting. The segments are aligned around similar product applications serving our key end markets to enhance focus on end market growth strategies.
Our focus on the customer, combined with unique technology, proprietary manufacturing techniques, and global operational expertise, enables us to deliver innovative solutions across multiple applications. Knowles, founded in 1946 and headquartered in Itasca, Illinois, has approximately 7,100 employees at facilities located in 14 countries around the world.
Knowles, founded in 1946 and headquartered in Itasca, Illinois, has grown into a global organization with approximately 5,500 employees at facilities located in 11 countries around the world. Our Strategy The Company is focused on delivering high value, differentiated solutions to a diverse set of end markets.
Our unique capabilities in MEMS microphones and digital signal processing place us in a competitive position to enhance audio performance and enable voice input. Geographic Trends We strive to maintain our manufacturing facilities in close proximity to our direct customers.
Our microphones and balanced armature speakers are also utilized to produce high-definition audio for higher performance True Wireless Stereo ("TWS"). Geographic Trends We strive to maintain our manufacturing facilities in close proximity to our direct customers.
Additionally, it is important for suppliers to have flexibility and quick time-to-market to meet clients’ needs. Key competitors include: • PD - Kyocera Corporation, Murata, Yageo Corporation, and TDK Corporation • MSA - Sonion • CMM - AAC Technologies, Goertek Inc., and Infineon Technologies In the PD segment, the end markets tend to have less pricing pressure.
Key competitors of our PD segment include: Kyocera AVX, Yageo Corporation's Kemet products, Vishay Intertechnology, and a broad range of specialty companies and brands. Our MSA segment's primary competitor is Sonion. In the PD segment, the end markets tend to have less pricing pressure.
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Our Company We are a market leader and global provider of high performance capacitors and radio frequency ("RF") filtering products, balanced armature speakers, advanced micro-acoustic microphones, and audio solutions serving the medtech, defense, electric vehicle, industrial, communications, consumer electronics markets.
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Through extreme reliability, custom engineering, and scalable manufacturing, we enable businesses to succeed in the most demanding applications across medtech, defense, and industrial markets. Our high-performance capacitors, radio frequency ("RF") and microwave filters, advanced medtech microphones, balanced armature speakers, and miniaturization products enable and enhance the performance of technologies with the power to change, improve, and save lives.
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The acquisition of Cornell Dubilier ("CD") on November 1, 2023 expands our portfolio offering to include high-performance film, electrolytic, and mica capacitors used in medtech, defense, and industrial electrification applications. Our capacitor portfolio includes products with highly specialized requirements, such as high voltage, high temperature, and high reliability.
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We have a risk-based cybersecurity program, dedicated to protecting our data as well as data belonging to our customers and partners. We utilize a defensive in-depth strategy, with multiple layers of security controls to protect our data and solutions.
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We work collaboratively with customers to ensure that our solutions meet their size, broad frequency response, and low power or custom acoustic module requirements. Our expertise in traditional hearing aids enables us to capitalize on emerging product spaces like Over the Counter ("OTC") hearing aids.
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We mitigate cybersecurity risks by employing extensive measures, including employee training, systems monitoring and testing, and maintenance of protective systems and contingency plans. We continually evaluate ourselves for appropriate business continuity and disaster recovery planning, with test scenarios that include simulations and penetration tests.
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With products ranging from smartphones to headsets, and from smart speakers to household appliances, improved audio quality and voice-powered interactions have emerged as critical and necessary features.
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We also install and regularly update antivirus software on all Company-managed systems to detect and prevent malicious code from impacting our systems. 5 Table of Contents Seasonality Our PD segment is not typically subject to seasonality, while our MSA segment tends to have stronger revenues in the fourth quarter of each fiscal year.
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Across mobile, ear, computing, and Internet of Things ("IoT") markets, consumers want better audio performance and to engage with technology through natural, spoken commands, and original equipment manufacturers (“OEMs") are developing and deploying the technology to enable it. Our unique capabilities in MEMS microphones place us in a competitive position to enhance audio performance and enable voice input.
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Talent, Development, and Culture As of December 31, 2024, Knowles had approximately 5,500 employees at facilities located in 11 countries around the world. Approximately 68% of our employees are in Asia and approximately 69% of our employees globally identify as female.
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The segments are aligned around similar product applications serving our key end markets to enhance focus on growth strategies. This change was made to enhance transparency into the Company's performance and to better align with how management reviews its financial results to drive business decision making.
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MSA has sales, support, and engineering facilities in North America, Europe, and Asia, as well as manufacturing facilities in Asia. • CMM Segment Our CMM segment designs and manufactures micro-electro-mechanical systems ("MEMS") microphones and audio solutions used in applications that primarily serve the ear, IoT, computing, and smartphones markets.
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In addition, we expect to be able to capitalize on the emerging Over the Counter hearing aid product space, due to our expertise in traditional hearing aids. In our CMM segment, voice has been embraced as a primary user interface across consumer electronic products.
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Voice assistants are proliferating throughout a variety of applications from smartphones to headsets, and from smart speakers to household appliances. Across ear, IoT, computing, and mobile markets, consumers want to engage with technology through natural spoken commands, and OEMs are developing and deploying the technology to enable it.
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In CMM, we currently operate 3 facilities in Asia to serve the contract manufacturers who build OEM equipment on behalf of our end-customers. These contract manufacturers are largely based in China, Taiwan, India, Singapore, Indonesia, and Vietnam.
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In the MSA segment, our leading technology and our investments in research and development enable us to introduce new products focused on high reliability, size, broad frequency response, and low power. Our customers are adopting these high-value microphones and balanced armature speakers to improve the overall audio performance of their devices which in turn improves the end user experience.
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For products that were introduced in prior years, we strive to offset anticipated price erosion through bill of material cost reductions, productivity improvements, and equipment efficiency. In the CMM segment, our investments in research and development enable us to introduce new products with improved features and performance in a highly competitive, technology-based industry.
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Our customers are adopting these high-value microphones to improve the overall audio performance of their products which in turn improves the end user experience. Typically, our new products have higher average selling prices than the products they are replacing. Once introduced, the price for these products trend lower, as is typical in the consumer electronics market.
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Our MSA segment tends to have stronger revenues in the fourth quarter of each fiscal year, while our CMM segment, which serves the consumer electronics market, varies based on the timing of OEM product launches and can impact our quarterly revenues, earnings, and cash flow. 6 Table of Contents Human Capital Management As of December 31, 2023, Knowles had approximately 7,100 employees at facilities located in 14 countries around the world.
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This includes employees from our newly acquired Cornell Dubilier business. Approximately 70% of our employees are located in Asia and approximately 68% of our employees globally identify as female. In the United States, approximately 44% of our employees identify as female and approximately 42% of our employees self-identified as belonging to a racial/ethnic minority group.
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We utilize a variety of recruitment vehicles to source top talent. We are building relationships with organizations that support the advancement of underrepresented minority groups to sustain a pipeline of diverse talent for opportunities across our Company.
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To successfully execute on our strategy, we have established a Diversity and Inclusion Council comprised of employees from various areas of the Company along with members of senior management who serve as executive sponsors. The Council is tasked with advising the management team on concrete initiatives we can undertake as an organization to strengthen diversity and inclusion at the Company.
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Our goal is to build a pipeline of multi-generational talent and accelerate the development of women engineers into advanced technical and leadership positions at Knowles. We have also worked to increase underrepresented groups in our candidate pool, among our new hires, and in leadership positions.
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For our 2023 summer internship program, 67% of our corporate intern class consisted of minority and/or women students, and 50% of our corporate tech interns were women.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

38 edited+23 added−35 removed88 unchanged
Biggest changeRisks Related To Our Business Deterioration of global economic conditions, an economic recession, periods of inflation, or economic uncertainty in key end-user markets may adversely affect customer orders as well as demand for our products. Global economic conditions can be uncertain and volatile.
Biggest changeIf we are unable to anticipate or match our competitors’ development or launch of new products, identify customer needs and preferences on a timely basis, or successfully launch or ramp production of our new products, our business and operating results may be materially adversely affected. 11 Table of Contents Risks Related to Operating a Global Business Deterioration of global economic conditions, an economic recession, periods of inflation, or economic uncertainty in key end-user markets may adversely affect customer orders as well as demand for our products.
As a result, significant changes in commodity prices, particularly for various precious metals, could have a substantial adverse effect on our financial condition and results of operations. 15 Table of Contents In addition, we conduct a significant amount of business outside the United States and adverse movements in currency exchange rates, particularly the Malaysian ringgit, the Chinese renminbi (yuan), and the Philippine peso, in any period or periods, could have a material adverse effect on our business and our operating results due to a number of factors, including, among others: o our products are manufactured and sold outside the United States which increases our net exposure to changes in foreign exchange rates; o our products, which are typically sold in U.S. dollars, may become less price-competitive outside the United States as a result of unfavorable foreign exchange rates; o certain of our revenues that are derived from customer sales denominated in foreign currencies could decrease; o our foreign suppliers may raise their prices if they are impacted by currency fluctuations, resulting in higher than expected costs and lower margins; o the cost of materials, products, services, and other expenses outside the United States could be materially impacted by a weakening of the U.S. dollar; and o a sustained weakening of the U.S. dollar for an extended period could have a material adverse impact on our operating results and financial position.
As a result, significant changes in commodity prices, particularly for various precious metals, could have a substantial adverse effect on our financial condition and results of operations. 13 Table of Contents In addition, we conduct a significant amount of business outside the United States and adverse movements in currency exchange rates, particularly the Malaysian ringgit, the Chinese renminbi (yuan), the Philippine peso, and the Mexican peso in any period or periods, could have a material adverse effect on our business and our operating results due to a number of factors, including, among others: o our products are manufactured and sold outside the United States, which increases our net exposure to changes in foreign exchange rates; o our products, which are typically sold in U.S. dollars, may become less price-competitive outside the United States as a result of unfavorable foreign exchange rates; o certain of our revenues that are derived from customer sales denominated in foreign currencies could decrease; o our foreign suppliers may raise their prices if they are impacted by currency fluctuations, resulting in higher than expected costs and lower margins; o the cost of materials, products, services, and other expenses outside the United States could be materially impacted by a weakening of the U.S. dollar; and o a sustained weakening of the U.S. dollar for an extended period could have a material adverse impact on our operating results and financial position.
The U.S. government has made statements and taken certain actions that have led to, and may lead to further, changes to U.S. and international export and import controls or trade policies, including tariffs affecting certain products exported by a number of U.S. trading partners, including China.
The U.S. government has made statements and taken certain actions that have led to, and may lead to further, changes to U.S. and international export and import controls or trade policies, including tariffs affecting certain products exported by a number of U.S. trading partners, including China and Mexico.
Our future success depends largely on the continued service and efforts of our executive officers and other key management and technical personnel and on our ability to continue to identify, attract, retain, and motivate them, particularly in an environment of cost reductions and a general move toward more performance-based compensation for executives and key management. 11 Table of Contents Implementing our business strategy also requires specialized engineering and other talent, as our revenues are highly dependent on technological and product innovations.
Our future success depends largely on the continued service and efforts of our executive officers and other key management and technical personnel and on our ability to continue to identify, attract, retain, and motivate them, particularly in an environment of cost reductions and a general move toward more performance-based compensation for executives and key management. 9 Table of Contents Implementing our business strategy also requires specialized engineering and other talent, as our revenues are highly dependent on technological and product innovations.
We have had and may in the future have difficulty in certain circumstances in protecting or enforcing our intellectual property rights, including collecting royalties for use of certain patents included in our patent portfolio in certain foreign jurisdictions due to, among other things: policies of foreign governments; challenges to our licensing practices under such jurisdictions’ competition laws; failure of foreign courts to recognize and enforce judgments of contract breach and damages issued by courts in the United States; and/or challenges pending before foreign patent authorities as to the validity of our patents and those owned by competitors and other parties.
We have had and may in the future have difficulty in certain circumstances in protecting or enforcing our intellectual property rights, including collecting royalties for use of certain patents included in our patent portfolio in certain foreign jurisdictions due to, among other things: policies of foreign governments; challenges to our licensing practices under such jurisdictions’ competition laws; failure of foreign courts to recognize and enforce judgments of contract breach and damages issued by courts in the United States; and/or 14 Table of Contents challenges pending before foreign patent authorities as to the validity of our patents and those owned by competitors and other parties.
As a result of restrictive export laws, our customers may also develop their own solutions to replace our products or seek to obtain a greater supply of similar or substitute products from our competitors that are not subject to these restrictions, which could materially and adversely affect our business and results of operations.
In addition, as a result of restrictive export laws our customers may also develop their own solutions to replace our products or seek to obtain a greater supply of similar or substitute products from our competitors that are not subject to these restrictions, which could materially and adversely affect our business and results of operations.
We may not, for example, be able to retain key employees, customers, or suppliers of acquired companies, derive value from acquired technology or assets and we may experience delays in achieving cost synergies or higher than expected costs in implementing them.
We may not, for example, be able to retain key employees, customers, or suppliers of acquired companies, derive value from acquired technology or assets, and we may experience delays in achieving cost or revenue synergies or encounter higher than expected costs in implementing them.
As global economic conditions continue to be volatile or economic uncertainty remains, trends in end-user consumer spending also remain unpredictable. Many of our customers purchase our products, particularly in our CMM and MSA segments, based on end-user demand from consumers. As a result, unfavorable economic conditions may lead our customers to delay or reduce purchases of our products.
As global economic conditions continue to be volatile or economic uncertainty remains, trends in end-user consumer spending also remain unpredictable. Many of our customers purchase our products, particularly in our MSA segment, based on end-user demand from consumers. As a result, unfavorable economic conditions may lead our customers to delay or reduce purchases of our products.
In addition, the timing, volume, and mix of purchases by our significant customers may be impacted by the timing of such customers’ new or next generation product introductions, and the timing of such introductions may have a material adverse effect on our operating results.
Further, the timing, volume, and mix of purchases by our significant customers may be impacted by the timing of such customers’ new or next generation product introductions, and the timing of such introductions may have a material adverse effect on our operating results.
In the past, we have obtained amendments from the lenders under the credit agreement which have allowed us to comply with the financial covenants, but there can be no assurance that in the future the lenders will agree to such amendments, and our inability to comply with the covenants could result in an event of default which, if not cured or waived, could have a material adverse effect on our business, financial condition, and operating results. 17 Table of Contents There are risks associated with our indebtedness, which could have a material adverse effect on our financial condition.
In the past, we have obtained amendments from the lenders under the credit agreement which have allowed us to comply with the financial covenants, but there can be no assurance that in the future the lenders will agree to such amendments, and our inability to comply with the covenants could result in an event of default which, if not cured or waived, could have a material adverse effect on our business, financial condition, and operating results.
Accordingly, if current market and industry dynamics continue, revenues, particularly for our CMM segment, will continue to depend largely upon, and be impacted by the timing, volume, and mix of future purchases by a limited number of our OEM customers.
Accordingly, if current market and industry dynamics continue, revenues will continue to depend largely upon, and be impacted by the timing, volume, and mix of future purchases by a limited number of our OEM customers.
Risks Related to Operating a Global Business Our foreign operations and supply chain are each subject to various risks that could materially adversely impact our results of operations and financial condition.
Our foreign operations and supply chain are each subject to various risks that could materially adversely impact our results of operations and financial condition.
Tax regulations governing each region, changes to those regulations, differing statutory tax rates, changes in the valuation of deferred tax assets, tax law, or rate changes could adversely affect our effective tax rate, and ultimately actual taxes payable.
Tax regulations governing each region, changes to those regulations, differing statutory tax rates, changes in the valuation of deferred tax assets, tax law, or rate changes could adversely affect our effective tax rate, and ultimately actual taxes payable. The estimated effects of applicable tax laws have been incorporated into our financial results.
If revenues derived from these customers decrease or the timing of such revenues fluctuates, our operating results could be adversely affected. Our CMM and MSA segments rely on a limited number of customers for a significant portion of their sales. Our CMM segment accounted for 36% of our consolidated revenues for fiscal 2023.
We derive a significant portion of our revenues from a limited number of OEM customers. If revenues derived from these customers decrease or the timing of such revenues fluctuates, our operating results could be adversely affected. Our MSA segment relies on a limited number of customers for a significant portion of their sales.
The expense of protecting, defending, and enforcing our intellectual property, or defending claims that our products, technology, or manufacturing processes infringe the intellectual property rights of others, can vary significantly period to period and, in any given period, could have a material adverse effect on our operating results. 16 Table of Contents Our business and operations could suffer in the event of security breaches, cybersecurity incident, other unauthorized disclosures, or network disruptions.
The expense of protecting, defending, and enforcing our intellectual property, or defending claims that our products, technology, or manufacturing processes infringe the intellectual property rights of others, can vary significantly period to period and, in any given period, could have a material adverse effect on our operating results.
A warranty or product liability claim against us in excess of our available insurance coverage and established reserves, or a determination that we have liability or an obligation to cover the costs of a customer product recall, could have a material adverse effect on our business, results of operations, and financial condition.
A warranty or product liability claim against us in excess of our available insurance coverage and established reserves, or a determination that we have liability or an obligation to cover the costs of a customer product recall, could have a material adverse effect on our business, results of operations, and financial condition. 10 Table of Contents In addition, our products are typically sold to customers at prices that are significantly lower than the cost of the customer’s products in which they are incorporated.
During 2023, our closing stock price ranged from a high of $20.04 per share to a low of $12.98 per share.
During 2024, our closing stock price ranged from a high of $20.23 per share to a low of $15.09 per share.
Although these restrictions and laws have not significantly restricted our operations in the past, there is a risk that they could do so in the future.
Although these restrictions and laws have not significantly restricted our operations in the past, there is a risk that they could do so in the future. Obtaining export licenses can be difficult, time-consuming, and require interpretation of complex regulations.
Certain provisions in our certificate of incorporation, by-laws, and Delaware law may prevent or delay an acquisition of the Company, which could decrease the trading price of our common stock.
Further, the market price of our common stock could be subject to significant fluctuation or otherwise be adversely affected by stockholder activism. 16 Table of Contents Certain provisions in our certificate of incorporation, by-laws, and Delaware law may prevent or delay an acquisition of the Company, which could decrease the trading price of our common stock.
In particular, information included under the sections entitled “Business,” “Risk Factors,” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contain forward-looking statements. 8 Table of Contents Readers are cautioned that the matters discussed in these forward-looking statements are subject to risks, uncertainties, assumptions, and other factors that are difficult to predict and which could cause actual results to differ materially from those projected, anticipated, or implied in the forward-looking statements.
Readers are cautioned that the matters discussed in these forward-looking statements are subject to risks, uncertainties, assumptions, and other factors that are difficult to predict and which could cause actual results to differ materially from those projected, anticipated, or implied in the forward-looking statements.
In addition, current Delaware law includes provisions which limit the ability of persons that, without prior board approval, acquire more than 15% of the outstanding voting stock of a Delaware corporation from engaging in any business combination with that corporation, including by merger, consolidation, or purchases of additional shares, for a three-year period following the acquisition by such persons of more than 15% of the corporation’s outstanding voting stock. 18 Table of Contents In light of present circumstances, we believe these provisions taken as a whole protect our stockholders from coercive or otherwise unfair takeover tactics by requiring potential acquirers to negotiate with our Board of Directors and by providing our Board of Directors with more time to assess any acquisition proposal.
In addition, current Delaware law includes provisions which limit the ability of persons that, without prior board approval, acquire more than 15% of the outstanding voting stock of a Delaware corporation from engaging in any business combination with that corporation, including by merger, consolidation, or purchases of additional shares, for a three-year period following the acquisition by such persons of more than 15% of the corporation’s outstanding voting stock.
Competition for such experienced technical personnel in our industry and where we are located is intense, and we cannot assure that we can continue to recruit and retain such personnel.
Competition for such experienced technical personnel in our industry and where we are located is intense, and we cannot assure that we can continue to recruit and retain such personnel. For example, there is substantial competition for experienced engineers in Asia and technical personnel in the U.S., which may make it difficult for us to recruit and retain key employees.
For example, during fiscal 2022, our CMM segment experienced weak demand for our MEMS microphones product line due to weak global demand for consumer electronics, COVID-19 related shutdowns in China, excess inventory in the supply chain, and our shift away from commoditized products. 10 Table of Contents We rely on highly specialized suppliers for a variety of highly engineered or specialized components, and other inputs for which we may not be able to readily identify alternatives or substitutes in the event of a supply disruption or capacity constraint at or by any of these suppliers, which could have a material adverse impact on our results of operations.
We rely on highly specialized suppliers for a variety of highly engineered or specialized components, and other inputs for which we may not be able to readily identify alternatives or substitutes in the event of a supply disruption or capacity constraint at or by any of these suppliers, which could have a material adverse impact on our results of operations.
In addition, many countries have politically committed to proposed fundamental changes to the international corporate tax system, by the Organization for Economic Co-operation and Development's (the "OECD") Inclusive Framework on Base Erosion and Profit Shifting, including the potential implementation of a minimum tax on global income, amongst other proposals. 12 Table of Contents Our products are complex and could contain defects, which could result in material costs to us and harm our business, results of operations, and financial condition.
In addition, many countries have enacted fundamental changes to the international corporate tax system, by the Organization for Economic Co-operation and Development's (the "OECD") Inclusive Framework on Base Erosion and Profit Shifting, including the implementation of a minimum tax on global income now effective for some countries, amongst other proposals.
The increasing complexity of our products increases the risk that we or our customers or end users could discover latent defects or subtle faults after significant volumes of product have been shipped.
Product development in the markets we serve is becoming more focused on audio signal processing for improved audio performance and to enable intelligent and more sophisticated audio solutions. The increasing complexity of our products increases the risk that we or our customers or end users could discover latent defects or subtle faults after significant volumes of product have been shipped.
All forward-looking statements, expressed or implied, included in this Annual Report on Form 10-K are expressly qualified in their entirety by this cautionary statement. This cautionary statement should also be considered in connection with any subsequent written or oral forward-looking statements that we may make or persons acting on our behalf may issue.
All forward-looking statements, expressed or implied, included in this Annual Report on Form 10-K are expressly qualified in their entirety by this cautionary statement.
While we have taken measures to assess the requirements of, and to comply with data privacy legislation, there is the potential for fines and penalties, litigation, and reputational harm in the event of a data breach.
While we have taken measures to assess the requirements of, and to comply with data privacy legislation, there is the potential for fines and penalties, litigation, and reputational harm in the event of a data breach. 15 Table of Contents Risks Related to Our Indebtedness Our credit agreement requires us to comply with certain financial covenants and our failure to comply could have a material adverse effect on our business, financial condition, and results of operations.
If our effective tax rates were to increase or if our tax liabilities exceed our estimates and provisions for such taxes, our financial results could be adversely affected.
For additional detail regarding jurisdictions where we are currently under audit, see Note 12. Income Taxes to our consolidated Financial Statements under Item 8, "Financial Statements and Supplementary Data." If our effective tax rates were to increase or if our tax liabilities exceed our estimates and provisions for such taxes, our financial results could be adversely affected.
In particular, the sale of systems and components that are incorporated into smartphones for the global mobile phone industry involves a high degree of risk that such claims may be made. Due to the complex nature of our products, quality and reliability issues may be identified after significant volumes of a product have been shipped to a large customer.
Due to the complex nature of our products, quality and reliability issues may be identified after significant volumes of a product have been shipped to a large customer.
For the year ended December 31, 2023, WS Audiology A/S accounted for approximately 32% of MSA's revenues and 10% of consolidated company revenues.
Our MSA segment accounted for 46% of our consolidated revenues for fiscal 2024. For 2024, MSA's top five customers accounted for approximately 81% of its revenues. For the year ended December 31, 2024, WS Audiology A/S accounted for approximately 30% of MSA's revenues and 14% of the consolidated company revenues.
In addition, we have publicly announced certain corporate responsibility goals, which reflect our current plans and aspirations based on known conditions.
In addition, we have publicly announced certain corporate responsibility goals, which reflect our current plans and aspirations based on known conditions. Any failure to achieve such goals (or achieve the goals within the set timeframe) or the perception by stakeholders of such failure may result in reputational or financial harm.
In the past, the Company's business and operating results have been adversely affected by these global economic conditions and remain vulnerable to future adverse impacts. Any prolonged economic deceleration in China may have a material adverse effect on our sales to customers in China, our operating results, and our financial condition.
Global economic conditions and changes in U.S. and international trade policy could materially adversely impact our business, results of operations, and financial position. In the past, the Company's business and operating results have been adversely affected by these global economic conditions and remain vulnerable to future adverse impacts.
For example, in fiscal year 2023, excess industry inventory and an inability to shift product mix, resulted in a decrease in average selling prices of our products. If we are unsuccessful in implementing our investment and acquisition strategy, or integrating acquired companies, our business and financial results may be adversely effected.
If we are unsuccessful in implementing our investment and acquisition strategy, or integrating acquired companies, our business and financial results may be adversely effected.
You should consider each of the following factors as well as the other information in this Annual Report on Form 10-K, including our financial statements and the related notes, in evaluating our business and our prospects. The risks and uncertainties described below are not the only ones we face.
This cautionary statement should also be considered in connection with any subsequent written or oral forward-looking statements that we may make or persons acting on our behalf may issue. 7 Table of Contents You should consider each of the following factors as well as the other information in this Annual Report on Form 10-K, including our financial statements and the related notes, in evaluating our business and our prospects.
Any of these impacts could materially and adversely affect our business and operating results. Further, the market price of our common stock could be subject to significant fluctuation or otherwise be adversely affected by stockholder activism.
Any of these impacts could materially and adversely affect our business and operating results.
Risks Related to Our Indebtedness Our credit agreement requires us to comply with certain financial covenants and our failure to comply could have a material adverse effect on our business, financial condition, and results of operations.
There are risks associated with our indebtedness, which could have a material adverse effect on our financial condition.
For example, there is substantial competition for experienced engineers in China and technical personnel in the U.S. and India, which may make it difficult for us to recruit and retain key employees. If we are unable to attract and retain such qualified employees, our business and our ability to execute our business strategies may be materially impaired.
If we are unable to attract and retain such qualified employees, our business and our ability to execute our business strategies may be materially impaired. Our effective tax rate may fluctuate which will impact our future financial results.
In response, many of those trading partners, including China, have imposed or proposed new or higher tariffs on American products. In addition to tariffs, China has a stated policy of reducing its dependence on foreign manufacturers and technology companies.
In response, many of those trading partners, including China and Mexico, have imposed or proposed new or higher tariffs on American products. It is unknown whether and to what extent new tariffs (or other new laws or regulations) will be adopted, or the effect that any such actions would have on us or our industry and customers.
Removed
Future events or factors, such as the outcome of our strategic alternatives review of the CMM segment which could result in either a sale or a restructuring of our CMM segment, or if there are changes to underlying assumptions used to calculate fair value, could result in additional impairment charges and a significant charge to earnings.
Added
In particular, information included under the sections entitled “Business,” “Risk Factors,” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contain forward-looking statements.
Removed
We hold significant amounts of goodwill, other intangible assets, and long-lived assets, and the balances of these assets could increase in the future if we acquire other businesses. At December 31, 2023, the balance of our goodwill, other intangible assets, and long-lived assets was $918.6 million and the total market value of the Company’s outstanding shares was $1.6 billion.
Added
The risks and uncertainties described below are not the only ones we face.
Removed
Under generally accepted accounting principles in the United States ("U.S. GAAP"), we review our goodwill, other intangible assets, and long-lived assets for impairment when events or changes in circumstances indicate the carrying value of such goodwill, other intangible assets, or long-lived assets may not be recoverable. In addition, we test goodwill and other indefinite-lived intangible assets for impairment annually.
Added
Risks Related To Our Business The divestiture of our Consumer MEMS Microphones ("CMM") business may have material adverse effects on our financial condition, results of operations, or cash flows. On December 27, 2024 we consummated the sale of certain assets and liabilities of our CMM business to Syntiant Corp.
Removed
During the year ended December 31, 2022, we recorded impairment charges of $470.9 million, related to goodwill impairment charges for the CMM segment. For additional detail, see Note 4.
Added
While we believe the divestiture of our CMM business will place us in a better position to focus on higher value markets, we may not achieve some or all of the strategic and financial benefits that we expect to achieve, which could result in a material adverse effect to our financial condition, results of operations, or cash flows.
Removed
Impairment Charges to our Consolidated Financial Statements under Item 8, "Financial Statements and Supplementary Data." 9 Table of Contents Future events or factors considered a change in circumstances may occur which would adversely affect the fair value of the Company's assets and require impairment charges.
Added
We might experience greater dis-synergies than expected. For example, specialized suppliers may be unwilling or unable to fulfill post-divestiture reduced volumes that do not benefit from economies of scale. In addition, the impact of the divestiture on our revenue or profit might be larger than we expected.
Removed
Our pursuit of strategic alternatives for our CMM business may not result in the identification or consummation of any transaction or may result in the restructuring of the CMM business.
Added
Further, we might have financial exposure in the divested business, such as through our minority equity ownership in Syntiant, our provision of financing to Syntiant, and certain financial or performance guarantees, indemnities, or other obligations, such that conditions outside of our control might negate the expected benefits of the disposition.
Removed
Any potential transaction or a restructuring, and the related valuations, would be dependent upon a number of factors, some of which may be beyond our control, including, among others, market conditions, industry trends, the interest of third parties, and availability of financing to potential buyers on reasonable terms.
Added
The separation of certain shared services following the divestiture of our CMM business will continue to require the attention of our management and place demands on other internal resources. We cannot be certain that we will be successful in managing these or any other significant risks that we encounter as a result of divesting the CMM business.
Removed
Other factors that may be considered a change in circumstances, indicating that the carrying value of our goodwill, other intangible assets, or long-lived assets may not be recoverable, include, but are not limited to, a sustained decline in stock price and market capitalization, significant negative variances between actual and expected financial results, reduced future cash flow estimates, adverse changes in legal factors, failure to realize anticipated synergies from acquisitions, and slower growth rates in our industry.
Added
A significant portion of revenues for our Precision Devices segment depends on U.S. government contracts, which require us to comply with various procurement laws and regulations.
Removed
We may be required to record a significant charge to earnings in our financial statements during the period in which any impairment of our goodwill, other intangible assets, or long-lived assets is determined to exist, negatively impacting our results of operations.
Added
Failure to comply with these laws and regulations could result in an interruption or termination of our government contractor status, which could have a adverse impact on our results of operation. 8 Table of Contents We must comply with and are affected by U.S.
Removed
If our market capitalization was to fall below the book value of our total stockholders’ equity for a sustained period, we may conclude that the fair value of certain of our intangible or long-lived assets is materially impaired. In this case, we would be required under U.S.
Added
Federal, state, local, and foreign laws and regulations relating to the formation, administration, and performance of U.S. government contracts. These laws and regulations impose requirements that, while customary in U.S. government contracts, may impose additional costs on our business operations.
Removed
GAAP to record a non-cash charge to our earnings which could have a material adverse effect on our business, results of operations, and financial condition. We derive a significant portion of our revenues from a limited number of OEM customers.
Added
Failure to comply with applicable regulations and requirements could result in the imposition of civil and criminal penalties or sanctions, contract termination, forfeiture of profit, suspension of payment, or suspension or debarment from U.S. government contracting or subcontracting for a period of time.
Removed
For 2023, CMM's top five customers accounted for approximately 66% of its revenues. For the year ended December 31, 2023, Apple Inc. accounted for approximately 44% of CMM’s revenues and 16% of consolidated company revenues. For 2023, MSA's top five customers accounted for approximately 80% of its revenues.
Added
Among the causes for debarment are violations of various laws and regulations, including those related to procurement integrity, export control (including International Traffic in Arms Regulations ("ITAR"), employment practices, accuracy of records, proper recording of costs and foreign corruption.
Removed
Further, the smartphone industry is also subject to intense competition that could result in decreased demand and/or declining average selling prices for our products and those of our OEM customers.
Added
The termination of a U.S. government contract or relationship as a result of any of these acts could have an adverse impact on our operations and could have an adverse effect on our standing and eligibility for future U.S. government contracts.
Removed
We derive a substantial portion of our revenues from MEMS microphones and a significant reduction in our sales of MEMS microphones may significantly reduce our revenues and adversely impact our operating results. Sales of MEMS microphones by our CMM and MSA segments accounted for approximately 44% of our consolidated revenues for fiscal 2023.
Added
Further, the internal control environment of an acquired entity may not be consistent with our standards or with regulatory requirements, and may require significant time and resources to align or rectify.
Removed
We expect that a substantial portion of our revenues will continue to be attributable to sales of MEMS microphones and any weakening of demand, loss of market share, or other factors adversely affecting our levels and the timing of our sales of MEMS microphones, including our customers’ product release cycles, market acceptance, product competition, the performance and reliability of our MEMS microphones, and economic and market conditions could cause our revenues to substantially decline, which may have a material adverse effect on our operating results.
Added
Our products are complex and could contain defects, which could result in material costs to us and harm our business, results of operations, and financial condition. Our products are complex and could contain defects, which could result in material costs to us.
Removed
An inability to offset erosion of average selling prices in our CMM segment adversely affected our gross margins. Like most technology sectors, the smartphone industry has traditionally experienced an erosion of average selling prices due to a number of factors, including intense competition, component pricing trends, changes in demand mix, excess inventories, and rapid obsolescence resulting from technology advances.
Added
Global economic conditions can be uncertain and volatile.
Removed
Within our CMM segment, while average selling prices vary significantly on a product to product basis, our strategy has been to offset price erosion by shifting our product mix to new, higher end or higher performance microphones and gradually shifting customers from analog microphones to higher value digital microphones.
Added
Any unfavorable government policies on international trade, such as export and import controls, capital controls or tariffs, may affect the demand for our products and services, increase the cost of components, delay production, impact the competitive position of our products or prevent us from being able to sell products in certain countries.
Removed
To offset average selling price erosion, we must either be successful with these initiatives or increase our selling prices. If we are unable to offset average selling price erosion, the average selling prices of our products may decrease and our future operating results may be materially adversely affected.
Added
If any new export or import controls, tariffs, legislation or regulations are implemented or if existing trade agreements are renegotiated such changes could have an adverse effect on our business, financial condition and results of operations. 12 Table of Contents In addition to tariffs, China has a stated policy of reducing its dependence on foreign manufacturers and technology companies.
Removed
We depend on the smartphone market for a significant portion of our revenues, the downturn in this market has significantly reduced our revenues and adversely impacted our operating results. The smartphone market accounted for approximately 13% of our consolidated revenues for fiscal 2023.
Added
Also, ongoing export control reform may impose additional restrictions on our ability to ship products to certain countries or customers. Failure to comply with the various export control regulatory requirements could subject us to significant fines, suspension of export privileges, or disbarment.
Removed
While other markets such as mobile headsets, computing, wearables, and IoT are gaining in significance within our CMM segment, we expect that a substantial portion of CMM segment revenues will continue to be attributable to the smartphone market, which is cyclical and characterized by continuous and rapid technological change, product obsolescence, price erosion, evolving standards, short product life cycles, and significant fluctuations in product supply and demand.
Added
Failure to obtain and/or retain required export licenses could significantly reduce our revenue and materially adversely affect our business, financial condition, results of operations and relationships with customers.
Removed
The smartphone market has experienced and may continue to experience periodic downturns which may be characterized by diminished product demand, production overcapacity, high inventory levels, and accelerated erosion of average selling prices.
Added
Our business and operations could suffer in the event of security breaches, cybersecurity incident, other unauthorized disclosures, or network disruptions.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

9 edited+3 added−3 removed4 unchanged
Biggest changeThis does not imply compliance with specific technical standards, specifications or requirements of the NIST Cybersecurity Framework, but signifies its use as a guiding principle. Our commitment extends to various programs and processes to stay informed about and monitor the prevention, detection, mitigation and remediation of cybersecurity incidents.
Biggest changeWe designed and assess our cybersecurity risk management program based on the National Institute of Standards and Technology Cybersecurity Framework (the "NIST Cybersecurity 17 Table of Contents Framework"). This does not imply compliance with specific technical standards, specifications or requirements of the NIST Cybersecurity Framework, but signifies its use as a guiding principle.
In addition, the Audit Committee separately receives regular reports from our Vice President of Information Technology on, among other things, our cybersecurity risks and threats, the status of projects to strengthen our information security systems, and assessments of our security program.
In addition, the Audit Committee separately receives regular reports from our Chief Information Officer on, among other things, our cybersecurity risks and threats, the status of projects to strengthen our information security systems, and assessments of our security program.
The Chair of the Audit Committee regularly reports to the full Board regarding its activities, including those related to our cybersecurity risk management program. Our management team, led by our Vice President of Information Technology ("VP of IT"), has operational responsibility for our cybersecurity and information security framework and risk management.
The Chair of the Audit Committee regularly reports to the full Board regarding its activities, including those related to our cybersecurity risk management program. Our management team, led by our Vice President and Chief Information Officer ("CIO"), has operational responsibility for our cybersecurity and information security framework and risk management.
This training is reinforced by testing initiatives, including periodic phishing tests. We also assess the cybersecurity risks presented by third parties that could adversely impact our business in the event of a cybersecurity incident affecting those third-party systems.
This training is reinforced by testing initiatives, including periodic phishing tests. We also assess the cybersecurity risks presented by third parties that could adversely impact our business in the event of a cybersecurity incident affecting those third-party systems. In addition, we maintain business continuity and disaster recovery plans, as well as cybersecurity insurance.
ITEM 1C. CYBERSECURITY Risk Management and Strategy As part of our overall risk management program, we have implemented processes to assess, identify, and manage the material risks facing the Company, including from cybersecurity threats. We designed and assess our cybersecurity risk management program based on the National Institute of Standards and Technology Cybersecurity Framework (the "NIST Cybersecurity Framework").
ITEM 1C. CYBERSECURITY Risk Management and Strategy As part of our overall risk management program, we have implemented processes to assess, identify, and manage the material risks facing the Company, including from cybersecurity threats.
In addition, we maintain business continuity and disaster recovery plans, as well as cybersecurity insurance. 19 Table of Contents To date, we have not identified risks from cybersecurity threats, including as a result of any previous cybersecurity incidents, that have materially affected or are reasonably likely to materially affect our business strategy, results of operations, or financial condition.
To date, we have not identified risks from cybersecurity threats, including as a result of any previous cybersecurity incidents, that have materially affected or are reasonably likely to materially affect our business strategy, results of operations, or financial condition.
The incident response plan outlines roles and responsibilities, criteria for measuring the severity of a cybersecurity incident, and provides for Audit Committee and Board briefings as appropriate.
We have a well-defined cybersecurity incident response plan aimed at facilitating an effective response and handling of cybersecurity incidents. The incident response plan outlines roles and responsibilities, criteria for measuring the severity of a cybersecurity incident, and provides for Audit Committee and Board briefings as appropriate.
He, in turn, provides regular updates on these matters to our Chief Financial Officer and our Chief Administrative Officer and works closely with our Legal department to oversee compliance with legal, regulatory, and contractual security requirements. In addition, in conjunction with Internal Audit, our VP of IT supervises any retained external cybersecurity consultants.
The CIO receives regular updates on cybersecurity matters, results of mitigation efforts, and cybersecurity incident response and remediation. He, in turn, provides regular updates on these matters to our Chief Financial Officer and our Chief Transformation Officer and works closely with our Legal department to oversee compliance with legal, regulatory, and contractual security requirements.
This includes regular scans, penetration tests, and vulnerability assessments to identify any potential threats or vulnerabilities in our systems. We also conduct "tabletop" exercises to simulate cybersecurity incidents to enhance our readiness and resilience in the face of potential cybersecurity threats. These exercises are conducted at both the technical level and senior management level.
We also conduct "tabletop" exercises to simulate cybersecurity incidents to enhance our readiness and resilience in the face of potential cybersecurity threats. These exercises are conducted at both the technical level and senior management level. We have engaged external service providers, where appropriate, including leading cybersecurity firms, to assess, test or otherwise assist with aspects of our security processes.
Removed
We have engaged external service providers, where appropriate, including leading cybersecurity firms, to assess, test or otherwise assist with aspects of our security processes. We have a well-defined cybersecurity incident response plan aimed at facilitating an effective response and handling of cybersecurity incidents.
Added
Our commitment extends to various programs and processes to stay informed about and monitor the prevention, detection, mitigation and remediation of cybersecurity incidents. This includes regular scans, penetration tests, and vulnerability assessments to identify any potential threats or vulnerabilities in our systems.
Removed
Our VP of IT has extensive cybersecurity knowledge and skills gained from over 20 years of experience in leading and managing global IT operations and security teams. In addition, our VP of IT has a Master of Science degree in Management of Information Systems from Rensselaer Polytechnic Institute.
Added
Our CIO has extensive cybersecurity knowledge and skills gained from various roles in information technology and security for over 31 years, including serving as the Chief Information Officer at two large public companies. Our CIO is supported by a team of enterprise information system and security risk professionals.
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Our VP of IT is supported by a team of enterprise information system and security risk professionals. The VP of IT receives regular updates on cybersecurity matters, results of mitigation efforts, and cybersecurity incident response and remediation.
Added
In addition, in conjunction with Internal Audit, our CIO supervises any retained external cybersecurity consultants. 18 Table of Contents

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeOur material properties used in connection with manufacturing, sales, research and development, and corporate administrative operations, and the segments served at that facility, are as follows: Location Principal Function(s) Owned or Leased Segment Square Footage (in thousands) Suzhou, China Manufacturing and administrative Leased PD, MSA, CMM 495 Cebu, the Philippines Manufacturing and administrative Owned MSA 215 Penang, Malaysia Manufacturing and administrative Owned MSA, CMM 187 Liberty, South Carolina Manufacturing, sales, and administrative Owned PD 155 Cazenovia, New York Manufacturing, research and development, sales, and administrative Owned PD 133 Mexicali, Baja California, Mexico Manufacturing and administrative Leased PD 119 New Bedford, Massachusetts Distribution center Leased PD 110 Itasca, Illinois Corporate headquarters, research and development, sales, and administrative Owned PD, MSA, CMM 95 We believe that the owned and leased facilities we utilize are well-maintained and suitable for our operations. 20 Table of Contents
Biggest changeOur material properties used in connection with manufacturing, sales, research and development, and corporate administrative operations, and the segments served at that facility, are as follows: Location Principal Function(s) Owned or Leased Segment Square Footage (in thousands) Suzhou, China (1) Manufacturing and administrative Leased PD, MSA 284 Cebu, the Philippines Manufacturing and administrative Owned MSA 215 Mexicali, Baja California, Mexico Manufacturing and administrative Leased PD 165 Liberty, South Carolina Manufacturing, sales, and administrative Owned PD 155 Cazenovia, New York Manufacturing, research and development, sales, and administrative Owned PD 133 New Bedford, Massachusetts Distribution center Leased PD 110 Penang, Malaysia (1) Manufacturing and administrative Owned MSA 96 Itasca, Illinois (1) Corporate headquarters, research and development, sales, and administrative Owned PD, MSA 74 (1) Subsequent to the sale of the Consumer MEMS Microphones business to Syntiant Corp. on December 27, 2024, we lease space in these facilities to the buyer.
Added
The square footage above reflects the space in each facility that is occupied by Knowles. We believe that the owned and leased facilities we utilize are well-maintained and suitable for our operations.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeITEM 3. LEGAL PROCEEDINGS For a discussion of contingencies related to legal proceedings, see Note 15. Commitments and Contingent Liabilities to our Consolidated Financial Statements under Item 8, "Financial Statements and Supplementary Data." Except as otherwise noted above, there have been no material developments in legal proceedings.
Biggest changeITEM 3. LEGAL PROCEEDINGS For a discussion of contingencies related to legal proceedings, see Note 14. Commitments and Contingent Liabilities to our Consolidated Financial Statements under Item 8, "Financial Statements and Supplementary Data." Except as otherwise noted above, there have been no material developments in legal proceedings.

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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Biggest changeCabrera 57 Senior Vice President, Human Resources & Chief Administrative Officer Daniel J. Giesecke 56 Senior Vice President & Chief Operating Officer Robert J. Perna 60 Senior Vice President, General Counsel & Secretary Jeffrey S. Niew has served as President & Chief Executive Officer since September 2013 and as a member of our Board of Directors since February 2014.
Biggest change(since December 2024) John S. Anderson 61 Senior Vice President & Chief Financial Officer (since December 2013) Raymond D. Cabrera 58 Senior Vice President & Chief Human Resources Officer (since February 2014) Daniel J. Giesecke 57 Senior Vice President & Chief Operating Officer (since February 2014) Robert J.
ITEM 4. MINE SAFETY DISCLOSURES Not applicable. 21 Table of Contents INFORMATION ABOUT OUR EXECUTIVE OFFICERS The following sets forth information regarding our executive officers, as of February 21, 2024. Name Age Position Jeffrey S. Niew 57 President & Chief Executive Officer John S. Anderson 60 Senior Vice President & Chief Financial Officer Raymond D.
ITEM 4. MINE SAFETY DISCLOSURES Not applicable. INFORMATION ABOUT OUR EXECUTIVE OFFICERS The following sets forth information regarding our executive officers, as of February 13, 2025. Name Age Positions Held Jeffrey S. Niew 58 President & Chief Executive Officer (since September 2013), member of our Board of Directors (since February 2014), and Director of Syntiant Corp.
Perna has served as Senior Vice President, General Counsel & Secretary since May 2019. Prior to joining Knowles, Mr.
Perna 61 Senior Vice President, General Counsel & Secretary (since May 2019) 19 Table of Contents PART II
Removed
From November 2011 until we were spun-off from Dover Corporation in February 2014, Mr. Niew served as a Vice President of Dover Corporation and as President and Chief Executive Officer of Dover Communication Technologies. Mr.
Removed
Niew joined Knowles Electronics LLC (“Knowles Electronics”) in May 2000 and became Chief Operating Officer in January 2007, President in January 2008, and President and Chief Executive Officer in February 2010. Prior to joining Knowles Electronics, Mr.
Removed
Niew was employed by Littelfuse, Inc., from 1995 to 2000, where he held various positions in product management, sales, and engineering in the Electronic Products group and by Hewlett-Packard Company, from 1988 to 1994, where he served in various engineering and product management roles in the Optoelectronics Group in California. John S.
Removed
Anderson has served as Senior Vice President & Chief Financial Officer since December 2013. From January 2013 until we were spun-off from Dover Corporation in February 2014, Mr. Anderson served as Vice President and Chief Financial Officer of Dover Communication Technologies. Previously, Mr.
Removed
Anderson served as Vice President and Chief Financial Officer of Dover Energy (August 2010 to January 2013) and Vice President and Chief Financial Officer of Dover Fluid Management (October 2009 to August 2010). Previous experience includes the roles of Corporate Controller and Director Financial Planning & Analysis for Sauer-Danfoss Inc.
Removed
(October 2004 to October 2009) and Director of Finance and Controller for Borg Warner Turbo Systems GmbH (August 2002 to October 2004). Raymond D. Cabrera has served as Senior Vice President, Human Resources & Chief Administrative Officer since February 2014. From November 2011 until we were spun-off from Dover Corporation in February 2014, Mr.
Removed
Cabrera served as Vice President, Human Resources of Dover Communication Technologies. Previously, Mr. Cabrera served in the following capacities at Knowles: as Vice President, Human Resources and Chief Administrative Officer (January 2004 to November 2011), Vice President, Human Resources (March 2000 to January 2004), and Director, Human Resources (June 1997 to March 2000) of Knowles Electronics. Daniel J.
Removed
Giesecke has served as Senior Vice President & Chief Operating Officer since February 2014. From January 2012 until we were spun-off from Dover Corporation in February 2014, Mr. Giesecke served as Vice President, Global Operations of Dover Communication Technologies. Previously, Mr.
Removed
Giesecke served as Vice President, Advanced Manufacturing Engineering, Knowles Electronics (February 2009 to January 2012), Senior Director, Advanced Manufacturing Engineering, Knowles Electronics (January 2008 to February 2009), Director of Engineering Operations, Knowles Electronics (November 2003 to January 2008), and various operations, supply chain, and engineering positions since he joined Knowles Electronics in 1995. Robert J.
Removed
Perna served as Senior Vice President and Chief Legal Officer of The AZEK Company, a manufacturer of commercial and residential building products (November 2018 to April 2019) and as Senior Vice President, General Counsel and Secretary of Rockwell Collins, Inc., a leading producer of cabin interior, communications and aviation systems for the aerospace and defense industry (January 2014 to November 2018).
Removed
In addition, he served as Vice President, General Counsel and Secretary at A. M. Castle & Co., a specialty metals and plastics distributor and value-added processor (November 2008 to January 2014) and held various in-house legal positions at CNH Global, Navistar International and GE Capital Rail Services. 22 Table of Contents PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeBelow is a summary of share repurchases for the three months ended December 31, 2023: (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 November 2023 741,163 $ 15.96 741,163 $ 105.9 December 2023 480,280 $ 17.05 480,280 $ 97.7 Total Activity 1,221,443 $ 16.39 1,221,443 23 Table of Contents Performance Graph This performance graph does not constitute soliciting material, is not deemed filed with the SEC, and is not incorporated by reference in any of our filings under the Securities Act or the Exchange Act, whether made before or after the date of this Annual Report on Form 10-K and irrespective of any general incorporation language in any such filing, except to the extent we specifically incorporate this performance graph by reference therein.
Biggest changeBelow is a summary of share repurchases for the three months ended December 31, 2024: (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 October 2024 425,663 $ 17.62 425,663 $ 60.7 November 2024 536,827 $ 18.63 536,827 $ 50.7 December 2024 338,954 $ 19.80 338,954 $ 44.0 Total Activity 1,301,444 $ 18.60 1,301,444 On February 13, 2025, the Company announced that its Board of Directors had increased its share repurchase authorization by an additional $150 million in additional aggregate value. 20 Table of Contents Performance Graph This performance graph does not constitute soliciting material, is not deemed filed with the SEC, and is not incorporated by reference in any of our filings under the Securities Act or the Exchange Act, whether made before or after the date of this Annual Report on Form 10-K and irrespective of any general incorporation language in any such filing, except to the extent we specifically incorporate this performance graph by reference therein.
Data Source: NYSE *Total return assumes reinvestment of dividends. The graph assumes $100 invested on December 31, 2018 in Knowles Corporation common stock, the Dow Jones U.S. Electrical Components & Equipment Index, and the Russell 2000 index. ITEM 6. [RESERVED] 24 Table of Contents
Data Source: NYSE *Total return assumes reinvestment of dividends. The graph assumes $100 invested on December 31, 2019 in Knowles Corporation common stock, the Dow Jones U.S. Electrical Components & Equipment Index, and the Russell 2000 index. ITEM 6. [RESERVED] 21 Table of Contents
Our ability to pay dividends will depend on our ongoing ability to generate cash from operations and access to the capital markets. Holders The number of holders of record of our common stock as of February 16, 2024 was approximately 707. Recent Sales of Unregistered Securities None.
Our ability to pay dividends will depend on our ongoing ability to generate cash from operations and access to the capital markets. Holders The number of holders of record of our common stock as of February 11, 2025 was approximately 658. Recent Sales of Unregistered Securities None.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

110 edited+65 added−44 removed41 unchanged
Biggest changeAs described above, the decrease was primarily due to lower non-GAAP gross profit and higher non-GAAP operating expenses. 30 Table of Contents Reconciliation of GAAP Financial Measures to Non-GAAP Financial Measures (1) Years Ended December 31, (in millions, except per share amounts) 2023 2022 2021 Gross profit $ 283.4 $ 276.3 $ 359.5 Stock-based compensation expense 2.1 1.6 1.6 Restructuring charges (1.3) 32.2 — Production transfer costs (2) 0.4 — — Acquisition-related costs (3) 0.8 — 1.0 Non-GAAP gross profit $ 285.4 $ 310.1 $ 362.1 Earnings (loss) from continuing operations $ 72.4 $ (430.1) $ 150.2 Interest expense, net 5.4 3.9 14.2 (Benefit from) provision for income taxes (27.4) 11.9 (45.6) Earnings (loss) from continuing operations before interest and income taxes 50.4 (414.3) 118.8 Stock-based compensation expense 29.0 28.6 32.1 Intangibles amortization expense 13.5 12.2 15.9 Impairment charges — 470.9 4.0 Restructuring charges 2.2 41.8 0.5 Production transfer costs (2) 0.4 — — Acquisition-related costs (3) 9.4 — 1.5 Other (4) 0.9 3.2 1.5 Adjusted earnings from continuing operations before interest and income taxes $ 105.8 $ 142.4 $ 174.3 Interest expense, net $ 5.4 $ 3.9 $ 14.2 Interest expense, net non-GAAP reconciling adjustments (5) — — 6.6 Non-GAAP interest expense $ 5.4 $ 3.9 $ 7.6 (Benefit from) provision for income taxes $ (27.4) $ 11.9 $ (45.6) Income tax effects of non-GAAP reconciling adjustments (6) 6 45.6 7.3 65.4 Non-GAAP provision for income taxes $ 18.2 $ 19.2 $ 19.8 Earnings (loss) from continuing operations $ 72.4 $ (430.1) $ 150.2 Non-GAAP reconciling adjustments (7) 55.4 556.7 55.5 Interest expense, net non-GAAP reconciling adjustments (5) — — 6.6 Income tax effects of non-GAAP reconciling adjustments (6) 45.6 7.3 65.4 Non-GAAP net earnings $ 82.2 $ 119.3 $ 146.9 Diluted earnings (loss) per share from continuing operations $ 0.79 $ (4.69) $ 1.59 Earnings per share non-GAAP reconciling adjustment 0.09 5.95 (0.06) Non-GAAP diluted earnings per share $ 0.88 $ 1.26 $ 1.53 Diluted average shares outstanding 91.6 91.7 94.7 Non-GAAP adjustment (8) 2.3 2.9 1.1 Non-GAAP diluted average shares outstanding (8) 93.9 94.6 95.8 31 Table of Contents (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.
Biggest changeAs described above, the decrease was primarily due to lower non-GAAP gross profit, higher non-GAAP operating expenses, increased interest expense, and unfavorable foreign currency exchange rate impacts. 29 Table of Contents Reconciliation of GAAP Financial Measures to Non-GAAP Financial Measures (1) Years Ended December 31, (in millions, except per share amounts) 2024 2023 2022 Gross profit $ 234.8 $ 203.8 $ 227.0 Stock-based compensation expense 1.5 1.6 1.1 Restructuring charges 1.9 1.1 — Production transfer costs (2) 3.8 0.4 — Acquisition-related costs (3) 2.3 0.8 — Other (4) 1.1 — — Non-GAAP gross profit $ 245.4 $ 207.7 $ 228.1 Net earnings from continuing operations $ 23.4 $ 65.6 $ 66.4 Interest expense, net 16.3 5.4 3.5 Provision for (benefit from) income taxes 11.3 (28.3) 21.3 Earnings from continuing operations before interest and income taxes 51.0 42.7 91.2 Stock-based compensation expense 22.2 22.8 22.4 Intangibles amortization expense 17.0 7.5 5.8 Restructuring charges 3.4 3.3 0.6 Production transfer costs (2) 4.2 0.4 — Acquisition-related costs (3) 8.4 9.4 — Other (4) 1.7 2.1 3.4 Adjusted earnings from continuing operations before interest and income taxes $ 107.9 $ 88.2 $ 123.4 Provision for (benefit from) income taxes $ 11.3 $ (28.3) $ 21.3 Income tax effects of non-GAAP reconciling adjustments (5) (3.6) 46.6 (0.9) Non-GAAP provision for income taxes $ 7.7 $ 18.3 $ 20.4 Net earnings from continuing operations $ 23.4 $ 65.6 $ 66.4 Non-GAAP reconciling adjustments (6) 56.9 45.5 32.2 Income tax effects of non-GAAP reconciling adjustments (5) (3.6) 46.6 (0.9) Non-GAAP net earnings $ 83.9 $ 64.5 $ 99.5 Diluted earnings per share from continuing operations $ 0.26 $ 0.72 $ 0.72 Earnings per share non-GAAP reconciling adjustment (5)(6) 0.65 (0.03) 0.33 Non-GAAP diluted earnings per share $ 0.91 $ 0.69 $ 1.05 Diluted average shares outstanding 90.1 91.6 92.8 Non-GAAP adjustment (7) 2.4 2.3 1.8 Non-GAAP diluted average shares outstanding (7) 92.5 93.9 94.6 30 Table of Contents (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.
PD has sales, support, and engineering facilities in North America, Europe, and Asia, as well as manufacturing facilities in North America and Asia. • MSA Segment Our MSA segment designs and manufactures microphones and balanced armature speakers used in applications that serve the hearing health and premium audio markets.
PD has sales, support, and engineering facilities in North America, Europe, and Asia, as well as manufacturing facilities in North America and Asia. • MSA Segment Our MSA segment designs and manufactures balanced armature speakers and microphones used in applications that serve the hearing health and premium audio markets.
The gross profit margin decrease was primarily driven by lower factory capacity utilization, partially offset by product cost reductions and a decrease in precious metal costs. PD Adjusted EBIT was $40.5 million for the year ended December 31, 2023, compared with $67.9 million for the year ended December 31, 2022, a decrease of $27.4 million or 40.4%.
The gross profit margin decrease was primarily driven by lower factory capacity utilization, partially offset by product cost reductions and a decrease in precious metal costs. PD Adjusted EBIT was $40.5 million for the year ended December 31, 2023, compared with $67.9 million for the year ended December 31, 2022, a a decrease of $27.4 million or 40.4%.
Acquisitions to our Consolidated Financial Statements under Item 8, "Financial Statements and Supplementary Data." On September 25, 2023, the Company amended its Amended and Restated Credit Agreement (the "A&R Credit Agreement") to, among other things, (a) permit the Company in connection with the acquisition of Cornell Dubilier, 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 shall mature two years after the effective date of such Seller Note (the “Seller Note Maturity Date”), (b) extends 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, and (c) restricts, until the Seller Note Maturity Date, the amount of dispositions and investments from the Company and certain of its subsidiaries into Cornell Dubilier, LLC and the acquired subsidiaries that constitute Acquisition Assets from exceeding $80.0 million in the aggregate.
Acquisition to our Consolidated Financial Statements under Item 8, "Financial Statements and Supplementary Data." On September 25, 2023, the Company amended its Amended and Restated Credit Agreement (the "A&R Credit Agreement") to, among other things, (a) permit the Company in connection with the acquisition of Cornell Dubilier, 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 shall mature two years after the effective date of such Seller Note (the “Seller Note Maturity Date”), (b) extends 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, and (c) restricts, until the Seller Note Maturity Date, the amount of dispositions and investments from the Company and certain of its subsidiaries into Cornell Dubilier, LLC and the acquired subsidiaries that constitute Acquisition Assets from exceeding $80.0 million in the aggregate.
PD revenues decreased $21.5 million, primarily due to lower demand from the industrial, communication, distribution, medtech, and defense markets as a result of continued demand weakness associated with excess customer and channel inventory and timing of shipments into the defense market, partially offset by our acquisition of CD.
PD revenues decreased $21.5 million, primarily due to lower demand from the industrial, medtech, and defense markets as a result of continued demand weakness associated with excess customer and channel inventory and timing of shipments into the defense market, partially offset by our acquisition of CD.
At any time during the term of the Credit Facility, we will be permitted to increase the commitments under the Credit Facility or to establish one or more incremental term loan facilities under the New Credit Facility in an aggregate principal amount not to exceed $200.0 million for all such incremental facilities.
At any time during the term of the Credit Facility, we will be permitted to increase the commitments under the Credit Facility or to establish one or more incremental term loan facilities under the Revolving Credit Facility in an aggregate principal amount not to exceed $200.0 million for all such incremental facilities.
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 costs incurred to migrate manufacturing to facilities primarily within the United States.
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 consolidate or migrate manufacturing to facilities primarily within the United States.
Adjusted EBIT margin for the year ended December 31, 2023 was 38.6%, compared with 38.1% for the year ended December 31, 2022. The increases were primarily due to higher non-GAAP gross profit margin, partially offset by higher non-GAAP operating expenses.
Adjusted EBIT margin for the year ended December 31, 2023 was 38.2%, compared with 37.6% for the year ended December 31, 2022. The increases were primarily due to higher non-GAAP gross profit margin, partially offset by higher non-GAAP operating expenses.
The segments are aligned around similar product applications serving our key end markets to enhance focus on end market growth strategies. • PD Segment Our PD segment specializes in the design and delivery of high performance capacitor products and RF solutions primarily serving the defense, medtech, electric vehicle, and industrial markets.
The remaining segments are aligned around similar product applications serving our key end markets to enhance focus on end market growth strategies. • PD Segment Our PD segment specializes in the design and delivery of high performance capacitor products and RF solutions primarily serving the defense, medtech, electrification, and industrial markets.
Of these amounts, cash held by our non-U.S. operations totaled $71.8 million and $40.0 million as of December 31, 2023 and 2022, respectively. To the extent we repatriate these funds to the U.S., we may be required to pay U.S. state income taxes and applicable foreign withholding taxes on those amounts during the period when such repatriation occurs.
Of these amounts, cash held by our non-U.S. operations totaled $92.4 million and $71.8 million as of December 31, 2024 and 2023, respectively. To the extent we repatriate these funds to the U.S., we may be required to pay U.S. state income taxes and applicable foreign withholding taxes on those amounts during the period when such repatriation occurs.
Based on our current sales and manufacturing activity, a sustained 10% weakening of the U.S. dollar for a period of one year would reduce our pre-tax earnings by approximately $17.2 million, excluding the impact of our hedging program. See Note 11.
Based on our current sales and manufacturing activity, a sustained 10% weakening of the U.S. dollar for a period of one year would reduce our pre-tax earnings by approximately $19.4 million, excluding the impact of our hedging program. See Note 10.
Financing Activities Cash provided by financing activities during 2023 is primarily related to the $115.0 million net borrowing of revolving credit facility, $47.5 million of repurchases of common stock, and the $6.2 million payment of taxes related to net share settlement of equity awards.
Cash provided by financing activities during 2023 is primarily related to $115.0 million net borrowings of revolving credit facility, partially offset by $47.5 million of repurchases of common stock and $6.2 million payment of taxes related to net share settlement of equity awards.
Free cash flow and free cash flow as a percentage of revenues are not GAAP measures and may not be comparable to similarly titled measures used by other companies in our industry.
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.
In 2023 the change in the ETR was primarily due to the impact of intangible property transfers and the release of a portion of the valuation allowance in the U.S., compared to the nondeductible goodwill impairment recorded during 2022. The change in ETR was also impacted by the mix of earnings and losses by taxing jurisdictions.
The change in the ETR was primarily due to the release of a portion of the valuation allowance in the U.S. and the impact of intangible property transfers recorded during 2023. The change in ETR was also impacted by the mix of earnings and losses by taxing jurisdictions.
On April 28, 2022, we announced that our Board of Directors had increased the authorization by up to $150 million in additional aggregate value. At December 31, 2023, we have $97.7 million remaining that may yet be purchased under our share repurchase program.
On April 28, 2022, we announced that our Board of Directors had increased the authorization by up to $150 million in additional aggregate value. At December 31, 2024, we have $44.0 million remaining that may yet be purchased under our share repurchase program.
The higher gross profit margin was driven by product cost reductions and favorable foreign currency exchange rates, partially offset by lower factory capacity utilization. MSA Adjusted EBIT was $88.7 million for the year ended December 31, 2023, compared with $87.5 million for the year ended December 31, 2022, an increase of $1.2 million or 1.4%.
The higher gross profit margin was driven by product cost reductions and favorable foreign currency exchange rates, partially offset by lower factory capacity utilization. MSA Adjusted EBIT was $90.0 million for the year ended December 31, 2023, compared with $88.6 million for the year ended December 31, 2022, an increase of $1.4 million or 1.6%.
Selling and administrative expenses as a percentage of revenues for the year ended December 31, 2023 and 2022 were 21.2% and 16.9%, respectively. The increase in expenses was primarily driven by higher professional service fees and our acquisition of CD. The increase in expenses as a percentage of revenues was driven by an increase in expenses and our lower revenues.
Selling and administrative expenses as a percentage of revenues for the year ended December 31, 2023 and 2022 were 27.5% and 22.2%, respectively. The increase in expenses was primarily driven by higher professional service fees and our acquisition of CD. The increase in expenses as a percentage of revenues was driven by an increase in expenses and our lower revenues.
Impairment Charges to our Consolidated Financial Statements under Item 8, "Financial Statements and Supplementary Data." Interest Expense, net Interest expense, net for the year ended December 31, 2023 was $5.4 million, compared with $3.9 million for the year ended December 31, 2022, an increase of $1.5 million or 38.5%.
Borrowings to our Consolidated Financial Statements under Item 8, "Financial Statements and Supplementary Data." 2023 Versus 2022 Interest expense, net for the year ended December 31, 2023 was $5.4 million, compared with $3.5 million for the year ended December 31, 2022, an increase of $1.9 million or 54.3%.
At December 31, 2023, consistent with the above process, we evaluated the need for a valuation allowance against our deferred tax assets for U.S. foreign tax credits and certain of our U.S. state tax attributes and determined that it was more likely than not that the deferred tax assets for these attributes would be realized.
In 2023, consistent with the above process, we evaluated the need for a valuation allowance against our deferred tax assets for 41 Table of Contents U.S. foreign tax credits and certain of our U.S. state tax attributes and determined that it was more likely than not that the deferred tax assets for these attributes would be realized.
EBIT margin for the year ended December 31, 2023 was 37.0%, compared with 36.8% for the year ended December 31, 2022. The increases were primarily due to higher gross profit margin, partially offset by higher operating expenses.
EBIT margin for the year ended December 31, 2023 was 36.7%, compared with 36.3% for the year ended December 31, 2022. The increases were primarily due to higher gross profit margin, partially offset by higher operating expenses.
Cash flows are summarized in the following table: Years Ended December 31, (in millions) 2023 2022 2021 Net cash flows provided by (used in): Operating activities $ 122.7 $ 86.3 $ 182.1 Investing activities (141.6) (32.7) (129.6) Financing activities 58.2 (73.2) (131.4) Effect of exchange rate changes on cash and cash equivalents (0.2) (1.1) — Net increase (decrease) in cash and cash equivalents $ 39.1 $ (20.7) $ (78.9) Operating Activities Cash provided by operating activities adjusts net earnings for certain non-cash items, including impairment charges, depreciation expense, amortization of intangible assets, stock-based compensation, changes in deferred income taxes, and the effects of changes in operating assets and liabilities.
Cash flows are summarized in the following table: Years Ended December 31, (in millions) 2024 2023 2022 Net cash flows provided by (used in): Operating activities $ 130.1 $ 122.7 $ 86.3 Investing activities 45.2 (141.6) (32.7) Financing activities (132.0) 58.2 (73.2) Effect of exchange rate changes on cash and cash equivalents (0.5) (0.2) (1.1) Net increase (decrease) in cash and cash equivalents $ 42.8 $ 39.1 $ (20.7) Operating Activities Cash provided by operating activities adjusts net earnings for certain non-cash items, including impairment charges, depreciation expense, amortization of intangible assets, stock-based compensation, changes in deferred income taxes, and the effects of changes in operating assets and liabilities.
The cash used in investing activities during 2023 was primarily driven by the acquisition of CD, partially offset by proceeds from the sale of certain machinery and equipment. The 2023 and 2022 capital expenditures supported product innovation and cost savings. Capital expenditures were lower in 2023 as compared to 2022.
The cash used in investing activities during 2023 was primarily driven by the acquisition of CD and capital expenditures, partially offset by proceeds from the sale of certain machinery and equipment. The 2024 and 2023 capital expenditures supported product innovation and cost savings.
Any shares repurchased will be held as treasury stock. During the years ended December 31, 2023, 2022, and 2021 we repurchased 2,851,604, 2,339,045, and 2,139,413 shares of common stock, respectively, for a total of $47.5 million, $44.0 million, and $44.5 million, respectively.
Any shares repurchased will be held as treasury stock. During the years ended December 31, 2024, 2023, and 2022 we repurchased 2,987,697, 2,851,604, and 2,339,045 shares of common stock, respectively, for a total of $53.7 million, $47.5 million, and $44.0 million, respectively.
Due to the global nature of our operations, a significant portion of our cash is generated and typically held outside the United States. Our cash and cash equivalents totaled $87.3 million and $48.2 million at December 31, 2023 and 2022, respectively.
Due to the global nature of our operations, a significant portion of our cash is typically held outside the United States. Our cash and cash equivalents totaled $130.1 million and $87.3 million at December 31, 2024 and 2023, respectively.
A hypothetical 100 basis point increase in interest rates affecting our external variable rate borrowings as of December 31, 2023 would increase our annual interest expense by approximately $2.7 million. 39 Table of Contents Critical Accounting Estimates Our Consolidated Financial Statements are based on the application of GAAP.
A hypothetical 100 basis point increase in interest rates affecting our external variable rate borrowings as of December 31, 2024 would increase our annual interest expense by approximately $1.3 million. Critical Accounting Estimates Our Consolidated Financial Statements are based on the application of GAAP.
This decrease was primarily due to product cost reductions, lower shipping volumes, benefits of prior year restructuring actions, and favorable foreign currency exchange rate changes, partially offset by our acquisition of CD and lower factory capacity utilization.
This increase was primarily due to lower factory capacity utilization and our acquisition of CD, partially offset by product cost reductions, lower shipping volumes, and favorable foreign currency exchange rate changes.
Commitments and Contingent Liabilities to our Consolidated Financial Statements under Item 8, "Financial Statements and Supplementary Data." Contractual Obligations and Off-Balance Sheet Arrangements A summary of our significant contractual obligations and commitments as of December 31, 2023 and the years when these obligations are expected to be due is as follows: Payments Due by Period (in millions) Total Less than 1 Year 1-3 Years 3-5 Years More than 5 Years Debt (1) $ 282.9 $ 50.0 $ 72.9 $ 160.0 $ — Operating leases (2) 14.5 5.5 5.7 3.1 0.2 Purchase obligations (3) 67.8 67.8 — — — Finance leases (2) 2.3 1.6 0.6 0.1 — Total obligations $ 367.5 $ 124.9 $ 79.2 $ 163.2 $ 0.2 (1) Relates to the maturity of indebtedness under our New Credit Facility and the Seller Note; does not give effect to any early repayment of or future amounts which may be drawn under the New Credit Facility.
Commitments and Contingent Liabilities to our Consolidated Financial Statements under Item 8, "Financial Statements and Supplementary Data." Contractual Obligations and Off-Balance Sheet Arrangements A summary of our significant contractual obligations and commitments as of December 31, 2024 and the years when these obligations are expected to be due is as follows: Payments Due by Period (in millions) Total Less than 1 Year 1-3 Years 3-5 Years More than 5 Years Debt (1) $ 206.7 $ 72.7 $ 134.0 $ — $ — Operating leases (2) 10.6 4.3 5.0 1.2 0.1 Purchase obligations (3) 61.5 61.5 — — — Finance leases (2) 0.9 0.4 0.5 — — Total obligations $ 279.7 $ 138.9 $ 139.5 $ 1.2 $ 0.1 (1) Relates to the maturity of indebtedness under our Revolving Credit Facility and the Seller Note; does not give effect to any early repayment of or future amounts which may be drawn under the Revolving Credit Facility.
Fair value was estimated using a discounted cash flow model that included market participant assumptions, forecasted future cash flows based on historical performance and future estimated results, determination of appropriate discount rates, and other assumptions which were considered reasonable in the discounted cash flow analysis.
In the quantitative impairment assessment, fair value is estimated using a discounted cash flow model that includes market participant assumptions, forecasted future cash flows based on historical performance and future estimated results, determination of appropriate discount rates, and other assumptions which are considered reasonable in the discounted cash flow analysis.
These adjustments include the impact of one-time tax benefits. (7) The non-GAAP reconciling adjustments are those adjustments made to reconcile Earnings (loss) from continuing operations before interest and income taxes to Adjusted earnings from continuing operations before interest and income taxes .
In 2023, these adjustments include one-time tax benefits. (6) The non-GAAP reconciling adjustments are those adjustments made to reconcile Earnings from continuing operations before interest and income taxes to Adjusted earnings from continuing operations before interest and income taxes.
As such, free cash flow and 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. Our PD segment is not typically subject to seasonality.
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 non-GAAP gross profit margin decrease was primarily driven by lower factory capacity utilization, partially offset by product cost reductions and a decrease in precious metal costs. 33 Table of Contents MedTech & Specialty Audio Years Ended December 31, (in millions) 2023 Percent of Revenues 2022 Percent of Revenues 2021 Percent of Revenues Revenues $ 230.0 $ 229.9 $ 231.3 Earnings from continuing operations before interest and income taxes $ 85.2 37.0% $ 84.6 36.8% $ 77.0 33.3% Stock-based compensation expense 3.5 2.9 2.4 Restructuring charges — — 0.1 Adjusted earnings from continuing operations before interest and income taxes $ 88.7 38.6% $ 87.5 38.1% $ 79.5 34.4% Revenues MSA revenues were $230.0 million for the year ended December 31, 2023, compared with $229.9 million for the year ended December 31, 2022, an increase of $0.1 million.
The non-GAAP gross profit margin decrease was primarily driven by lower factory capacity utilization, partially offset by product cost reductions and a decrease in precious metal costs. 33 Table of Contents MedTech & Specialty Audio Years Ended December 31, (in millions) 2024 Percent of Revenues 2023 Percent of Revenues 2022 Percent of Revenues Revenues $ 253.5 $ 235.4 $ 235.9 Earnings from continuing operations before interest and income taxes $ 97.5 38.5% $ 86.5 36.7% $ 85.7 36.3% Stock-based compensation expense 4.8 3.5 2.9 Adjusted earnings from continuing operations before interest and income taxes $ 102.3 40.4% $ 90.0 38.2% $ 88.6 37.6% Revenues 2024 Versus 2023 MSA revenues were $253.5 million for the year ended December 31, 2024, compared with $235.4 million for the year ended December 31, 2023, an increase of $18.1 million or 7.7%.
The non-GAAP ETR for the year ended December 31, 2023 was 18.1% or a $18.2 million tax provision, compared with 13.9% or a $19.2 million tax provision for the year ended December 31, 2022. The increase in the non-GAAP ETR was primarily due to lower pre-tax earnings and the loss of our Malaysian tax holiday.
The non-GAAP ETR for the year ended December 31, 2023 was 22.1% or a $18.3 million tax provision, compared with 17.0% or a $20.4 million tax provision for the year ended December 31, 2022. The increase in the non-GAAP ETR was primarily due to lower pre-tax earnings and the loss of our Malaysian tax holiday.
As of December 31, 2023, outstanding borrowings under the Credit Facility were $160.0 million.
As of December 31, 2024, outstanding borrowings under the Credit Facility were $134.0 million.
We recognize reserves against the carrying value of such at-risk inventory items after considering the nature of the risk and any mitigating factors. These estimates require judgment with respect to forecasted future demand and market conditions. Additional reserves could be required if actual demand and market conditions differ from our estimates.
We recognize reserves against the carrying value of such at-risk inventory items after considering the nature of the risk and any mitigating factors. These estimates require judgment with respect to future demand and market conditions.
Non-GAAP gross profit margin (non-GAAP gross profit as a percentage of revenues) for the year ended December 31, 2023 was 40.3%, compared with 40.6% for the year ended December 31, 2022.
Non-GAAP gross profit margin (non-GAAP gross profit as a percentage of revenues) for the year ended December 31, 2024 was 44.3%, compared with 45.5% for the year ended December 31, 2023.
As a result, we recognized an income tax benefit of $15.1 million related to the reversal of our deferred tax asset valuation allowance during the fourth quarter of 2023.
As a result, we recognized an income tax benefit of $15.1 million related to the reversal of our deferred tax asset valuation allowance during the fourth quarter of 2023. We did not have significant valuation allowance movement against our deferred tax assets in 2022.
Gross profit margin (gross profit as a percentage of revenues) for the year ended December 31, 2023 was 40.1%, compared with 36.1% for the year ended December 31, 2022.
Gross profit margin (gross profit as a percentage of revenues) for the year ended December 31, 2023 was 44.6%, compared with 47.4% for the year ended December 31, 2022.
Earnings and Adjusted Earnings from Continuing Operations Before Interest and Income Taxes MSA EBIT from continuing operations was $85.2 million for the year ended December 31, 2023, compared with $84.6 million for the year ended December 31, 2022, an increase of $0.6 million or 0.7%.
Earnings and Adjusted Earnings from Continuing Operations Before Interest and Income Taxes 2024 Versus 2023 MSA EBIT from continuing operations was $97.5 million for the year ended December 31, 2024, compared with $86.5 million for the year ended December 31, 2023, an increase of $11.0 million or 12.7%.
Borrowings to our Consolidated Financial Statements under Item 8, "Financial Statements and Supplementary Data." Other Expense (Income), net Other expense for the year ended December 31, 2023 was $0.7 million, compared with income of $0.5 million for the year ended December 31, 2022, a change of $1.2 million. Expense in 2023 primarily represents unfavorable foreign currency exchange rate impacts.
Borrowings to our Consolidated Financial Statements under Item 8, "Financial Statements and Supplementary Data." Other Expense (Income), net 2024 Versus 2023 Other expense for the year ended December 31, 2024 was $0.8 million, compared with $0.7 million for the year ended December 31, 2023, a change of $0.1 million.
As a result, our operating results are exposed to such fluctuations. Although some cost increases may be recovered through increased prices to customers if commodity prices trend upward, we also attempt to control such costs through fixed-price contracts with suppliers and various other programs through our global supply chain activities.
Although some cost increases may be recovered through increased prices to customers if commodity prices trend upward, we also attempt to control such costs through fixed-price contracts with suppliers and various other programs through our global supply chain activities. Interest Rates Borrowings under our Revolving Credit Facility are at variable interest rates.
The higher non-GAAP gross profit margin was driven by benefits of prior year restructuring actions, the gain on sale of fixed assets, product cost reductions, and favorable foreign currency exchange rates, partially offset by lower average pricing on mature products shipped into the mobile market, decreased factory capacity utilization, and unfavorable product mix. 35 Table of Contents Liquidity and Capital Resources Historically, we have generated and expect to continue to generate positive cash flow from operations.
The higher non-GAAP gross profit margin was driven by product cost reductions and favorable foreign currency exchange rates, partially offset by lower factory capacity utilization. 35 Table of Contents Liquidity and Capital Resources Historically, we have generated and expect to continue to generate positive cash flow from operations.
(Benefit from) Provision for Income Taxes and Non-GAAP Provision for Income Taxes The effective tax rate ("ETR") for the year ended December 31, 2023 was (60.9)% or a $27.4 million tax benefit, compared with (2.8)% or a $11.9 million tax provision for the year ended December 31, 2022.
Provision for (Benefit from) Income Taxes and Non-GAAP Provision for Income Taxes 2024 Versus 2023 The effective tax rate ("ETR") for the year ended December 31, 2024 was 32.6% or a $11.3 million tax provision, compared with (75.9)% or a $28.3 million tax benefit for the year ended December 31, 2023.
These amounts are included in the corresponding Gross profit and Earnings (loss) before interest and income taxes for each period presented. (3) In 2023, these expenses are related to the acquisition of CD by the PD segment. In 2021, these expenses are related to the acquisition of IMC by the PD segment.
These amounts are included in the corresponding Gross profit and Earnings from continuing operations before interest and income taxes for each period presented. (3) These expenses are related to the acquisition of Cornell Dubilier by the Precision Devices segment.
Earnings (Loss) and Adjusted Earnings from Continuing Operations Before Interest and Income Taxes Earnings before interest and income taxes from continuing operations ("EBIT") for the year ended December 31, 2023 was $50.4 million, compared with a loss of $414.3 million for the year ended December 31, 2022, an increase of $464.7 million or 112.2%.
Adjusted earnings before interest and income taxes ("Adjusted EBIT") from continuing operations for the year ended December 31, 2024 was $107.9 million, compared with $88.2 million for the year ended December 31, 2023, an increase of $19.7 million or 22.3%.
No impairment of other intangible or long-lived assets was recorded for the years ended December 31, 2023 and 2022. 41 Table of Contents Income Taxes: We use judgment in determining our provision for income taxes, including our assessment of the need for a valuation allowance against our deferred tax assets and our determination of whether tax positions will be sustained on examination by taxing authorities based on the technical merits of the positions.
Income Taxes: We use judgment in determining our provision for income taxes, including our assessment of the need for a valuation allowance against our deferred tax assets and our determination of whether tax positions will be sustained on examination by taxing authorities based on the technical merits of the positions.
EBIT margin (EBIT from continuing operations as a percentage of revenues) for the year ended December 31, 2023 was 7.1%, compared with (54.2)% for the year ended December 31, 2022.
Adjusted EBIT margin (adjusted EBIT from continuing operations as a percentage of revenues) for the year ended December 31, 2024 was 19.5%, compared with 19.3% for the year ended December 31, 2023.
We also recorded restructuring charges of $2.5 million for severance pay and benefits related to headcount reductions and for costs associated with transferring certain capacitors manufacturing to existing facilities to further optimize operations within the PD segment.
Restructuring Charges 2024 During the year ended December 31, 2024, we recorded restructuring charges of $2.0 million related to headcount reductions and $1.4 million for costs associated with transferring certain capacitors manufacturing to existing facilities to further optimize operations within our PD segment.
A weakening of foreign currencies relative to the U.S. dollar would adversely affect the U.S. dollar value of the Company’s foreign currency-denominated sales, but would be beneficial to the cost of materials, products, and services purchased overseas.
Cross-border transactions, both with external parties and intercompany relationships, could result in increased foreign exchange exposures. A weakening of foreign currencies relative to the U.S. dollar would adversely affect the U.S. dollar value of the Company’s foreign currency-denominated sales, but would be beneficial to the cost of materials, products, and services purchased overseas.
Significant assumptions used in the model included forecasted revenue and terminal growth rates, profit margins, income tax rates, capital expenditures, working capital requirements, and the Company's weighted average cost of capital.
Significant assumptions used in the model include forecasted revenue and terminal growth rates, profit margins, income tax rates, capital expenditures, working capital requirements, and the Company's weighted average cost of capital. The fair value measurements for reporting units are based on significant unobservable inputs.
Non-GAAP gross profit for the year ended December 31, 2023 was $285.4 million, compared with $310.1 million for the year ended December 31, 2022, a decrease of $24.7 million or 8.0%.
Non-GAAP gross profit for the year ended December 31, 2023 was $207.7 million, compared with $228.1 million for the year ended December 31, 2022, a decrease of $20.4 million or 8.9%. Non-GAAP gross profit margin for the year ended December 31, 2023 was 45.5%, compared with 47.6% for the year ended December 31, 2022.
CMM Adjusted EBIT was $23.5 million for the year ended December 31, 2023, compared with $20.0 million for the year ended December 31, 2022, an increase of $3.5 million or 17.5%. Adjusted EBIT margin for the year ended December 31, 2023 was 9.2%, compared with 6.9% for the year ended December 31, 2022.
PD Adjusted EBIT was $50.0 million for the year ended December 31, 2024, compared with $40.5 million for the year ended December 31, 2023, an increase of $9.5 million or 23.5%. Adjusted EBIT margin for the year ended December 31, 2024 was 16.7%, compared with 18.3% for the year ended December 31, 2023.
Non-GAAP diluted earnings per share for the year ended December 31, 2023 was $0.88, compared with $1.26 for the year ended December 31, 2022, a decrease of $0.38.
Diluted Earnings per Share from Continuing Operations and Non-GAAP Diluted Earnings per Share 2024 Versus 2023 Diluted earnings per share from continuing operations was $0.26 for the year ended December 31, 2024, compared with $0.72 for the year ended December 31, 2023, a decrease of $0.46.
The increase was primarily due to imputed interest expense on our Seller Note in 2023, a higher outstanding revolving credit facility balance, and higher interest rates during the year ended December 31, 2023. For additional information on borrowings and interest expense, refer to Note 12.
The increase was primarily due to imputed interest expense on our Seller Note and a higher outstanding revolving credit facility balance as a result of the acquisition of CD. For additional information on borrowings and interest expense, refer to Note 11.
Revenues decreased primarily due to lower demand from the industrial, communication, distribution, medtech, and defense markets, as a result of continued demand weakness associated with excess customer and channel inventory and timing of shipments into the defense market, partially offset by our acquisition of CD.
PD revenues increased $78.6 million, primarily due to our acquisition of the CD business, partially offset by lower demand from the industrial market in our legacy PD business as a result of continued demand weakness associated with excess customer and channel inventory.
The decrease in non-GAAP gross profit was primarily due to lower factory capacity utilization, lower average pricing on mature products shipped into the mobile market, lower shipping volumes, and unfavorable product mix, partially offset by product cost reductions, benefits of prior year restructuring actions, the gain on sale of fixed assets, and favorable foreign currency exchange rate changes.
The decrease in non-GAAP gross profit was primarily due to lower factory capacity utilization, lower shipping volumes, and unfavorable product mix, partially offset by product cost reductions and favorable foreign currency exchange rate changes.
Changes in interest and income tax rates could impact the weighted average cost of capital used in our estimates of fair value for our reporting units.
The Company cannot predict the occurrence of certain events or changes in circumstances that might adversely affect the carrying value of goodwill. Changes in interest and income tax rates could impact the weighted average cost of capital used in our estimates of fair value for our reporting units.
The decrease in non-GAAP gross profit margin was primarily due to lower factory capacity utilization, lower average pricing on mature products shipped into the mobile market, and unfavorable product mix, partially offset by product cost reductions, benefits of prior year restructuring actions, the gain on sale of fixed assets, and favorable foreign currency exchange rate changes.
The decrease in non-GAAP gross profit margin was primarily due to lower factory capacity utilization and unfavorable product mix, partially offset by product cost reductions and favorable foreign currency exchange rate changes.
Although the anti-dilutive impact of the convertible note hedges is not reflected under GAAP, the Company includes the anti-dilutive impact of the convertible note hedges in non-GAAP diluted average shares outstanding, if applicable. 32 Table of Contents Segment Results of Operations for the Year Ended December 31, 2023 Compared with the Year Ended December 31, 2022 Precision Devices Years Ended December 31, (in millions) 2023 Percent of Revenues 2022 Percent of Revenues 2021 Percent of Revenues Revenues $ 221.4 $ 242.9 $ 201.1 Earnings from continuing operations before interest and income taxes $ 25.0 11.3% $ 56.1 23.1% $ 43.7 21.7% Stock-based compensation expense 3.5 2.6 2.7 Intangibles amortization expense 7.5 5.8 5.0 Restructuring charges 2.5 — 0.1 Production transfer costs (1) 0.4 — — Acquisition-related costs (2) 1.6 — 1.0 Other (3) — 3.4 — Adjusted earnings from continuing operations before interest and income taxes $ 40.5 18.3% $ 67.9 28.0% $ 52.5 26.1% (1) Production transfer costs represent costs incurred to migrate manufacturing to existing facilities.
(7) The number of shares used in the diluted per share 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. 31 Table of Contents Segment Results of Operations for the Year Ended December 31, 2024 Compared with the Year Ended December 31, 2023 Precision Devices Years Ended December 31, (in millions) 2024 Percent of Revenues 2023 Percent of Revenues 2022 Percent of Revenues Revenues $ 300.0 $ 221.4 $ 242.9 Earnings from continuing operations before interest and income taxes $ 14.8 4.9% $ 25.0 11.3% $ 56.1 23.1% Stock-based compensation expense 2.7 3.5 2.6 Intangibles amortization expense 17.0 7.5 5.8 Restructuring charges 3.4 2.5 — Production transfer costs (1) 4.2 0.4 — Acquisition-related costs (2) 7.4 1.6 — Other (3) 0.5 — 3.4 Adjusted earnings from continuing operations before interest and income taxes $ 50.0 16.7% $ 40.5 18.3% $ 67.9 28.0% (1) Production transfer costs represent costs incurred to migrate manufacturing to existing facilities.
Adjusted EBIT margin (adjusted EBIT from continuing operations as a percentage of revenues) for the year ended December 31, 2023 was 15.0%, compared with 18.6% for the year ended December 31, 2022. The decreases were primarily due to lower non-GAAP gross profit, partially offset by higher non-GAAP operating expenses.
EBIT margin (EBIT from continuing operations as a percentage of revenues) for the year ended December 31, 2024 was 9.2%, compared with 9.3% for the year ended December 31, 2023. The increase in EBIT is primarily due to higher gross profit from the acquisition of CD, partially offset by higher operating expenses from the acquisition of CD.
In 2022, Other expenses represent an adjustment to pre-spin-off pension obligations of $3.4 million, which was recorded during the second quarter of 2022 in the Other (income) expense, net line on the Consolidated Statements of Earnings, and the ongoing net lease cost related to facilities not used in operations.
In 2022, Other expenses represent an adjustment to pre-spin-off pension obligations of $3.4 million, which was recorded in Other (income) expense, net, and the ongoing net lease cost related to facilities not used in operations. (5) Income tax effects of non-GAAP reconciling adjustments are calculated using the applicable tax rates in the jurisdictions of the underlying adjustments.
We do not engage in speculative or leveraged transactions and do not hold or issue financial instruments for trading purposes. Foreign Currency Exposure We conduct business through our subsidiaries in many different countries and fluctuations in currency exchange rates could have a significant impact on the reported results of operations, which are presented in U.S. dollars.
Foreign Currency Exposure We conduct business through our subsidiaries in many different countries and fluctuations in currency exchange rates could have a significant impact on the reported results of operations, which are presented in U.S. dollars. A significant and growing portion of our products are manufactured in lower-cost locations and sold in various countries.
The increase in gross profit was primarily due to lower restructuring charges, product cost reductions, benefits of prior year restructuring actions, the gain on sale of fixed assets, and favorable foreign currency exchange rate changes, partially offset by lower factory capacity utilization, lower average pricing on mature products shipped into the mobile market, lower shipping volumes, and unfavorable product mix.
The decrease in gross profit was primarily due to lower factory capacity utilization, lower shipping volumes, unfavorable product mix, and higher restructuring charges, partially offset by product cost reductions and favorable foreign currency exchange rate changes.
Acquisitions to our Consolidated Financial Statements under Item 8, "Financial Statements and Supplementary Data." 36 Table of Contents On February 24, 2020, we announced that our Board of Directors had authorized a share repurchase program of up to $100 million of our common stock.
Commitments under the Credit Facility will terminate, and loans outstanding thereunder will mature, on February 8, 2028. For additional information, refer to Note 11. Borrowings to our Consolidated Financial Statements. 36 Table of Contents On February 24, 2020, we announced that our Board of Directors had authorized a share repurchase program of up to $100 million of our common stock.
(2) In 2023, these expenses are related to the acquisition of CD. In 2021, these expenses are related to the acquisition of IMC. These expenses principally include costs incurred by the Company to carry out these transactions as well as ongoing costs to facilitate integration. (3) 2022 expenses represent an adjustment to pre-spin-off pension obligations.
(2) These expenses are related to the acquisition of CD. These expenses include ongoing costs to facilitate integration and the amortization of fair value adjustments to inventory. (3) Expenses in 2022 represent an adjustment to pre-spin-off pension obligations.
Earnings and Adjusted Earnings from Continuing Operations Before Interest and Income Taxes PD EBIT from continuing operations was $25.0 million for the year ended December 31, 2023, compared with $56.1 million for the year ended December 31, 2022, a decrease of $31.1 million or 55.4%.
Earnings and Adjusted Earnings from Continuing Operations Before Interest and Income Taxes 2024 Versus 2023 Earnings before interest and income taxes from continuing operations ("EBIT") for the year ended December 31, 2024 was $51.0 million, compared with $42.7 million for the year ended December 31, 2023, an increase of $8.3 million or 19.4%.
Goodwill: The Company tests goodwill for impairment annually as of October 1, or more frequently if there are events or circumstances indicating it is more likely than not that the carrying value of individual reporting units may exceed their respective fair values. Recoverability of goodwill is measured at the reporting unit level.
Additional reserves could be required if actual demand and market conditions differ from our estimates. 40 Table of Contents Goodwill: The Company tests goodwill for impairment annually as of October 1, or more frequently if there are events or circumstances indicating it is more likely than not (that is, a likelihood of more than 50 percent) that the carrying value of individual reporting units may exceed their respective fair values.
Research and Development Expenses Research and development expenses for the years ended December 31, 2023 and 2022 were $78.5 million and $81.7 million, respectively, a decrease of $3.2 million or 3.9%. Research and development expenses as a percentage of revenues for the years ended December 31, 2023 and 2022 were 11.1% and 10.7%, respectively.
Research and Development Expenses 2024 Versus 2023 Research and development expenses for the years ended December 31, 2024 and 2023 were $39.5 million and $32.4 million, respectively, an increase of $7.1 million or 21.9%. Research and development expenses as a percentage of revenues for the years ended December 31, 2024 and 2023 was 7.1%.
Gross Profit and Non-GAAP Gross Profit Gross profit for the year ended December 31, 2023 was $283.4 million, compared with $276.3 million for the year ended December 31, 2022, an increase of $7.1 million or 2.6%.
Gross Profit and Non-GAAP Gross Profit 2024 Versus 2023 Gross profit for the year ended December 31, 2024 was $234.8 million, compared with $203.8 million for the year ended December 31, 2023, an increase of $31.0 million or 15.2%.
The following table reconciles our free cash flow to cash flow provided by operating activities: (in millions) Years Ended December 31, Free Cash Flow 2023 2022 2021 Cash flow provided by operating activities $ 122.7 $ 86.3 $ 182.1 Less: Capital expenditures (16.9) (32.1) (48.6) Free cash flow $ 105.8 $ 54.2 $ 133.5 Free cash flow as a percentage of revenues 15.0 % 7.1 % 15.4 % In 2023, we generated free cash flow of $105.8 million, representing 15.0% of revenues, compared to free cash flow in 2022 of $54.2 million, representing 7.1% of revenues.
The following table reconciles our adjusted free cash flow to cash flow provided by operating activities: Years Ended December 31, 2024 2023 2022 Net cash provided by operating activities $ 130.1 $ 122.7 $ 86.3 Less: amounts attributable to discontinued operations (24.4) (43.6) 9.8 Non-GAAP net cash attributable to continuing operations 105.7 79.1 96.1 Capital expenditures (13.6) (16.9) (32.1) Less: amounts attributable to discontinued operations 1.7 4.7 17.2 Non-GAAP capital expenditures attributable to continuing operations (11.9) (12.2) (14.9) Non-GAAP net cash attributable to continuing operations 105.7 79.1 96.1 Non-GAAP capital expenditures attributable to continuing operations (11.9) (12.2) (14.9) Adjusted free cash flow $ 93.8 $ 66.9 $ 81.2 Adjusted free cash flow as a % of revenues 16.9 % 14.6 % 17.0 % In 2024, we generated adjusted free cash flow of $93.8 million compared to adjusted free cash flow in 2023 of $66.9 million.
On November 1, 2023, we acquired (i) all the issued and outstanding shares of Kaplan Electronics, Inc. and (ii) certain assets of Cornell Dubilier Electronics, Inc. and CD Aero, LLC (collectively, "Cornell Dubilier" or "CD") for aggregate consideration of $259.8 million, which equated to a total fair value of consideration transferred of $246.8 million.
We may incur some amount of dis-synergies following the sale of the CMM business due to the reduced size of our company and, as a result, we may undertake actions to help ensure that our cost structure is appropriate to support our remaining businesses. 22 Table of Contents On November 1, 2023, we acquired (i) all the issued and outstanding shares of Kaplan Electronics, Inc. and (ii) certain assets of Cornell Dubilier Electronics, Inc. and CD Aero, LLC (collectively, "Cornell Dubilier" or "CD") for aggregate consideration of $259.8 million, which equated to a total fair value of consideration transferred of $246.8 million.
The increases were primarily due to higher non-GAAP gross profit margins and lower non-GAAP operating expenses, partially offset by lower revenues.
The increase in Adjusted EBIT was primarily due to higher non-GAAP gross profit driven by the acquisition of CD, partially offset by higher non-GAAP operating expenses and lower non-GAAP gross profit margins from the acquisition of CD.
The increase in gross profit margin was primarily due to lower restructuring charges, product cost reductions, benefits of prior year restructuring actions, the gain on sale of fixed assets, and favorable foreign currency exchange rate changes, partially offset by lower factory capacity utilization, lower average pricing on mature products shipped into the mobile market, and unfavorable product mix.
The decrease in gross profit margin was primarily due to lower factory capacity utilization and unfavorable product mix product, partially offset by product cost reductions and favorable foreign currency exchange rate changes.
As a result, we recorded total restructuring charges of $32.2 million within Gross profit and $9.6 million within Operating expenses. For additional information, refer to Note 10. Restructuring and Related Activities to our Consolidated Financial Statements.
Restructuring and Related Activities to our Consolidated Financial Statements. 2022 During the year ended December 31, 2022, we recorded restructuring charges of $0.6 million for other costs within Operating expenses. For additional information, refer to Note 9. Restructuring and Related Activities to our Consolidated Financial Statements.
Free cash flow is calculated as cash flow provided by operating activities less capital expenditures. Our management believes these measures are useful in measuring our cash generated from operations that is available to repay debt, fund acquisitions, and repurchase Knowles’ common stock.
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.
The fair value measurements for reporting units are based on significant unobservable inputs. 40 Table of Contents Fair value measurements require considerable judgment and are sensitive to changes in underlying assumptions. As a result, there can be no assurance that estimates and assumptions made for purposes of the impairment assessment will prove to be an accurate prediction of the future.
As a result, there can be no assurance that estimates and assumptions made for purposes of the impairment assessment will prove to be an accurate prediction of the future.
For a reconciliation of these non-GAAP financial measures to the most directly comparable GAAP financial measures, see the reconciliation included herein. 26 Table of Contents Results of Operations for the Year Ended December 31, 2023 compared with the Year Ended December 31, 2022 Years Ended December 31, (in millions, except per share amounts) 2023 2022 2021 Revenues $ 707.6 $ 764.7 $ 868.1 Gross profit $ 283.4 $ 276.3 $ 359.5 Non-GAAP gross profit $ 285.4 $ 310.1 $ 362.1 Earnings (loss) from continuing operations before interest and income taxes $ 50.4 $ (414.3) $ 118.8 Adjusted earnings from continuing operations before interest and income taxes $ 105.8 $ 142.4 $ 174.3 (Benefit from) provision for income taxes $ (27.4) $ 11.9 $ (45.6) Non-GAAP provision for income taxes $ 18.2 $ 19.2 $ 19.8 Earnings (loss) from continuing operations $ 72.4 $ (430.1) $ 150.2 Non-GAAP net earnings $ 82.2 $ 119.3 $ 146.9 Diluted earnings (loss) per share from continuing operations $ 0.79 $ (4.69) $ 1.59 Non-GAAP diluted earnings per share $ 0.88 $ 1.26 $ 1.53 Revenues Revenues for the year ended December 31, 2023 were $707.6 million, compared with $764.7 million for the year ended December 31, 2022, a decrease of $57.1 million or 7.5%.
For a reconciliation of these non-GAAP financial measures to the most directly comparable GAAP financial measures, see the reconciliation included herein. 23 Table of Contents Results of Operations for the Year Ended December 31, 2024 compared with the Year Ended December 31, 2023 Years Ended December 31, (in millions, except per share amounts) 2024 2023 2022 Revenues $ 553.5 $ 456.8 $ 478.8 Gross profit $ 234.8 $ 203.8 $ 227.0 Non-GAAP gross profit $ 245.4 $ 207.7 $ 228.1 Earnings from continuing operations before interest and income taxes $ 51.0 $ 42.7 $ 91.2 Adjusted earnings from continuing operations before interest and income taxes $ 107.9 $ 88.2 $ 123.4 Provision for (benefit from) income taxes $ 11.3 $ (28.3) $ 21.3 Non-GAAP provision for income taxes $ 7.7 $ 18.3 $ 20.4 Earnings from continuing operations $ 23.4 $ 65.6 $ 66.4 Non-GAAP net earnings $ 83.9 $ 64.5 $ 99.5 Diluted earnings per share from continuing operations $ 0.26 $ 0.72 $ 0.72 Non-GAAP diluted earnings per share $ 0.91 $ 0.69 $ 1.05 Revenues 2024 Versus 2023 Revenues for the year ended December 31, 2024 were $553.5 million, compared with $456.8 million for the year ended December 31, 2023, an increase of $96.7 million or 21.2%.
Contingent Obligations From time to time, we are involved in various legal proceedings and claims arising in the ordinary course of its business. Legal contingencies are discussed in Note 15.
In addition, adjusted free cash flow was lower due to higher 2023 cash payments for income taxes and interest. 38 Table of Contents Contingent Obligations From time to time, we are involved in various legal proceedings and claims arising in the ordinary course of its business. Legal contingencies are discussed in Note 14.
Our 2023 and 2022 capital expenditures as a percentage of revenues were 2.4% and 4.2%, respectively. In 2024, we expect capital expenditures to be in the range of 3.0% to 4.0% of revenues. We expect to fund these capital expenditures through our existing cash balances and cash flows from operating activities.
Our 2024, 2023, and 2022 capital expenditures attributable to continuing operations as a percentage of revenues (see Adjusted free cash flows below) were 2.1%, 2.7%, and 3.1%, respectively. In 2025, we expect capital expenditures to be in the range of 3% to 5% of revenues.
The increase in expenses as a percentage of revenues was driven by our lower revenues. 28 Table of Contents Selling and Administrative Expenses Selling and administrative expenses for the year ended December 31, 2023 were $150.3 million, compared with $128.9 million for the year ended December 31, 2022, an increase of $21.4 million or 16.6%.
The decrease in expenses as a percentage of revenues was driven by higher revenues, lower professional fees, and the benefits of PD restructuring actions taken in the prior year. 26 Table of Contents 2023 Versus 2022 Selling and administrative expenses for the year ended December 31, 2023 were $125.8 million, compared with $106.3 million for the year ended December 31, 2022, an increase of $19.5 million or 18.3%.
MSA revenues increased $0.1 million, primarily due to higher shipping volumes into the premium audio market, partially offset by lower shipping volumes into the hearing health market as customers reduced their inventory levels. In addition, shipping volumes were unfavorably impacted earlier this year by financial incentives offered to customers resulting in higher shipping volumes in the fourth quarter of 2022.
MSA revenues decreased $0.5 million primarily due to lower shipping volumes into the specialty audio market as customers reduced their inventory levels, partially offset by higher shipping volumes into the hearing health market.

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