Knowles Targets 30% Margins as Specialty Components Drive Growth

Knowles has reshaped its portfolio around specialty electronic components for medical technology, defense and industrial markets, Chief Executive Officer Jeff Niew said during an investor presentation. The company has divested lower-margin, more commoditized operations and is emphasizing customized products, margin expansion and cash generation. Niew said Knowles generated just under $600 million in 2025 revenue and employs about 5,000 people globally. The company operates through two segments: Precision Devices, which supplies RF filters and several capacitor technologies to MedTech, defense and industrial customers; and MedTech & Specialty Audio, which sells miniature microphones and speakers into the hearing-health market.

Knowles sold its Consumer MEMS Microphone business approximately three years ago, according to Niew. That business supplied consumer-electronics customers including smartphone and earbud manufacturers, but carried lower gross margins and was more commoditized, he said. The company also divested its Vectron commodity oscillator operation. Between 2017 and 2023, Knowles divested roughly $400 million in revenue from low-margin, slower-growth businesses, Niew said. He added that management does not currently expect to sell additional businesses. Niew said Knowles’ remaining portfolio is built around technologies that are customized for individual customer applications rather than catalog products. The company works with customers including Abbott, Medtronic, Raytheon and L3, he said, and its relationships with many customers span decades. “We do not participate in the commodity portion” of the capacitor market, Niew said. He said Knowles combines specialized technology, close customer engagement and internally designed manufacturing processes intended to support high-mix production at scale.

Through the 2017-to-2025 period, the remaining businesses delivered an 8% revenue compound annual growth rate and 11% EBITDA growth rate, including acquisitions, Niew said. Organic revenue growth during that period was approximately 4% to 5%, with acquisitions accounting for the remainder. Management’s longer-term framework calls for 8% to 10% revenue growth including acquisitions and 10% to 14% EBITDA growth. Niew said recent organic growth has exceeded 10%, while EBITDA growth has also been ahead of the company’s target range. For the current year, Precision Devices is expected to grow more than 15%, compared with Knowles’ long-term 6% to 8% growth objective for the segment, Niew said. The hearing-health business is expected to remain within its 2% to 4% historical growth range. He said the hearing-health operation generates gross margins above 50% and EBITDA margins above 40%. Niew said Knowles could produce EBITDA growth near 20% this year based on the company’s previously provided earnings information. He said EBITDA margins could be about 24% for the full year and exit the year above 25%, with management seeing a path to 30% EBITDA margins over the next 36 months. Most future gross-margin expansion is expected to come from Precision Devices, particularly the Cornell Dubilier capacitor business, he said. Knowles acquired Cornell Dubilier for $263 million. Its gross margin was about 27% when acquired and has risen to the mid-30% range, according to Niew. Management sees a long-term opportunity to raise that margin toward the 45% to 50% range through product development, pricing, manufacturing absorption and operational improvements.

Knowles has historically spent about 3% of revenue on capital expenditures, Niew said, though spending could approach 5% this year as the company expands capacity to meet demand. The ...