Knowles KN Form 10-Q filing Q2 FY2026

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements

See accompanying Notes to Consolidated Financial Statements

See accompanying Notes to Consolidated Financial Statements

See accompanying Notes to Consolidated Financial Statements

See accompanying Notes to Consolidated Financial Statements

See accompanying Notes to Consolidated Financial Statements

See accompanying Notes to Consolidated Financial Statements

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

1. Basis of Presentation

Background - Knowles Corporation (NYSE:KN) is a leading manufacturer of specialty electronic components. The Company designs parts that perform unique and critical functions for innovative technologies. Through extreme reliability, custom engineering, and scalable manufacturing, the Company enables businesses to succeed in the most demanding applications across medtech, defense, industrial, and electrification markets. Knowles high performance capacitors, radio frequency ("RF") filters, advanced medtech microphones, and balanced armature speakers enhance the performance of customer products. The Company's focus on the customer, combined with unique technology, proprietary manufacturing techniques, and global operational expertise, enable the Company to deliver innovative solutions across multiple applications. References to "Knowles," "the Company," "we," "our," and "us" refer to Knowles Corporation and its consolidated subsidiaries.

Financial Statement Presentation - The accompanying unaudited interim Consolidated Financial Statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC") for quarterly reports on Form 10-Q and do not include all of the information and note disclosures required by U.S. generally accepted accounting principles (“GAAP” or “U.S. GAAP”) for complete financial statements. These unaudited interim Consolidated Financial Statements should therefore be read in conjunction with the Consolidated Financial Statements and Notes thereto for the year ended December 31, 2025 included in the Company’s Annual Report on Form 10-K.

The accompanying unaudited interim Consolidated Financial Statements have been prepared in accordance with U.S. GAAP, which requires management to make estimates and assumptions that affect amounts reported in the Consolidated Financial Statements and accompanying disclosures. Although these estimates are based on management’s best knowledge of current events and actions that the Company may undertake in the future, actual results may differ from those estimates. Management uses historical experience and all available information to make these estimates. The unaudited interim Consolidated Financial Statements reflect all adjustments of a normal, recurring nature that are, in the opinion of management, necessary for a fair statement of results for these interim periods.

On December 27, 2024, the Company completed the sale of the Consumer MEMS Microphones ("CMM") business to Syntiant Corp. ("Syntiant"). See Note 3. Discontinued Operations for additional information related to this transaction. The results of operations for CMM, including the impacts of the sale, have been classified as discontinued operations for all periods presented.

Transactions with Syntiant - As partial consideration for the sale of CMM on December 27, 2024, the Company received Series D-2 preferred stock of Syntiant. See Note 3. Discontinued Operations for additional information related to this transaction. The Company accounts for this investment using the cost method, measured at its historical cost, which was the fair value of the consideration received from Syntiant for the sale of CMM, plus any non-cash dividend earned. The balance of this investment was $83.4 million as of both June 30, 2026 and December 31, 2025, and is classified as “Investment in affiliate” on the Consolidated Balance Sheet.

In connection with the sale of CMM, the Company provided financing of $6.4 million to Syntiant, which was utilized to fund Syntiant's requirement to have $40.0 million of cash on its balance sheet at closing. This note is junior to Syntiant's debt financing and matures on March 28, 2029. This note bore interest at the prime rate until June 28, 2025, at which time the interest rate increased to 13.0%. The interest rate on this note was reduced to 8.0% effective May 11, 2026 in connection with an amendment executed at the time. The balance of this note was $5.9 million as of both June 30, 2026 and December 31, 2025 and is classified within "Other assets and deferred charges" on the Consolidated Balance Sheet.

The Company shares in certain separation costs with Syntiant related to the sale of CMM pursuant to a credit for up to $13.5 million. Under the terms of the separation cost credit, the Company is required to reimburse Syntiant 100% for the first $7.0 million of separation costs incurred and 50% for those costs in excess of $7.0 million, up to the maximum established separation cost credit of $13.5 million. The balance of the separation credit was $3.1 million and $4.8 million at June 30, 2026 and December 31, 2025, respectively and is classified within "Other accrued expenses" on the Consolidated Balance Sheet. The separation credit as of June 30, 2026 of $3.1 million was paid to Syntiant in July 2026.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

The Company leases portions of its facilities to Syntiant, for which lease payments of $0.3 million and $1.9 million were applied to the separation credit for the six months ended June 30, 2026 and 2025, respectively. The Company also subleases portions of its manufacturing facilities to Syntiant at cost. The portion of operating lease right-of-use assets subleased by Syntiant totaled approximately $5.2 million as of both June 30, 2026 and December 31, 2025, respectively.

The Company recognized revenue for transactions with Syntiant totaling $4.4 million and $4.0 million during the three months ended June 30, 2026 and 2025, respectively, and $7.1 million and $8.3 million during the six months ended June 30, 2026 and 2025, respectively. These revenues are reflected in the results of the MedTech & Specialty Audio segment. Receivables, net include $2.5 million and $4.2 million due from Syntiant at June 30, 2026 and December 31, 2025, respectively.

During the second quarter of 2025, the Company engaged with Syntiant to sell certain machinery and equipment associated with the MedTech & Specialty Audio segment for a nominal selling price. The Company recorded an impairment charge of $3.6 million for the three and six months ended June 30, 2025 to write down the carrying value of these assets to fair value based on the selling price.

Share Repurchase Program - On February 24, 2020, the Company announced that its Board of Directors had authorized a share repurchase program of up to $100.0 million of the Company's common stock. On April 28, 2022, the Company announced that its Board of Directors had increased the authorization by up to $150.0 million in additional aggregate value. On February 13, 2025, the Company announced another authorization increase of up to $150.0 million in additional aggregate value, for a total of $400.0 million of aggregate value. The timing and amount of any shares repurchased will be determined by the Company based on its evaluation of market conditions and other factors, and will be made in accordance with applicable securities laws in either the open market or in privately negotiated transactions. The Company is not obligated to purchase any shares under the program, and the program may be suspended or discontinued at any time. Any shares repurchased will be held as treasury stock.

During the six months ended June 30, 2026 and 2025, the Company repurchased 692,369 and 2,182,462 shares of common stock for a total of $22.5 million and $35.0 million, respectively. At June 30, 2026, the Company had $106.5 million remaining that may yet be repurchased under the share repurchase program.

Non-cash Operating Activities - Operating lease liabilities arising from obtaining right-of-use assets for the six months ended June 30, 2026 and 2025 were $1.2 million and $14.6 million, respectively.

Non-cash Investing Activities - Purchases of property, plant, and equipment included in accounts payable at June 30, 2026 and 2025 were $1.9 million and $1.3 million, respectively.

2. Recent Accounting Standards

In November 2024, the Financial Accounting Standards Board issued Accounting Standards Update ("ASU") 2024-03 to provide additional information about specific expense categories in the notes to the financial statements at interim and annual reporting periods. This guidance requires that a public business entity disclose amounts of purchases of inventory, employee compensation, depreciation, and intangible asset amortization included in each relevant expense caption presented on the face of the income statement and a qualitative description of the amounts remaining in relevant expense captions that are not separately disaggregated quantitatively. This standard also requires an entity disclose the total amount of selling expenses and, in annual reporting periods, an entity's definition of selling expenses. In accordance with the requirements of the standard, the Company intends to adopt ASU 2024-03 for its annual reporting for the year ended December 31, 2027 and for its interim reporting for the three months ended March 31, 2028. This standard may be applied either prospectively to the financial statements issued for reporting periods after the effective date or retrospectively to any or all prior periods presented in the financial statements. The Company expects that the adoption of ASU 2024-03 will expand its disclosures, but does not expect it to have a material impact on its financial position, results of operations, or cash flows.

3. Discontinued Operations

On December 27, 2024, the Company completed the sale of CMM to Syntiant. The total consideration for this transaction was approximately $140.8 million, consisting of $63.6 million in cash ($58.0 million net of cash sold), and Syntiant Series D-2 preferred stock with a fair value of $77.2 million. The Company shares in certain separation costs pursuant to a credit for up to $13.5 million, which the buyer applied to specified separation costs post-closing. The Company recorded a gain on sale of $0.8 million for the three and six months ended June 30, 2026 and a loss on sale of $1.6 million for the six months ended June 30,

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

2025 related to working capital adjustments and costs associated with this transaction. The purchase price for this transaction has now been finalized.

During the six months ended June 30, 2026, the Company recorded net expense of $1.4 million to update its estimates regarding certain tax liabilities related to CMM's historical operations.

The disposition of CMM meets the criteria described in ASC 205-20, Presentation of Financial Statements – Discontinued Operations. In accordance with this guidance, the Company has classified the results of operations of CMM, including the impacts of the sale, as discontinued operations for all periods presented as this disposal represents a strategic shift that has a major effect on the Company’s results of operations.

Results of the Company’s discontinued operations were as follows:

There was no depreciation, amortization of intangible assets, or capital expenditures related to discontinued operations during the three and six months ended June 30, 2026 or 2025.

4. Inventories

The following table details the major components of inventories:

5. Property, Plant, and Equipment, net

The following table details the major components of property, plant, and equipment, net:

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Depreciation expense totaled $5.7 million and $5.0 million for the three months ended June 30, 2026 and 2025, respectively. For the six months ended June 30, 2026 and 2025 depreciation expense totaled $10.9 million and $10.0 million, respectively.

During the three and six months ended June 30, 2025, the Company recorded an impairment charge of $3.6 million to write down the carrying value of certain machinery and equipment to its expected selling price. See also "Transactions with Syntiant" in Note 1. Basis of Presentation.

6. Goodwill and Other Intangible Assets

The changes in the carrying value of goodwill by reportable segment for the six months ended June 30, 2026 are as follows:

Other Intangible Assets

The gross carrying value and accumulated amortization for each major class of intangible assets are as follows:

Amortization expense totaled $4.0 million and $4.1 million for the three months ended June 30, 2026 and 2025, respectively. For the six months ended June 30, 2026 and 2025 amortization expense totaled $8.0 million and $8.1 million, respectively.

Amortization expense for the next five years, based on current definite-lived intangible balances, is estimated to be as follows:

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

7. Other Accrued Expenses and Other Liabilities

The following table details the major components of other accrued expenses:

The following table details the major components of other liabilities:

(1) The Company did not recognize any material revenue during the six months ended June 30, 2026 that was included in deferred revenue at December 31, 2025; the remaining underlying performance obligations are expected to be fulfilled by Q1 2028.

(2) In connection with the sale of CMM on December 27, 2024, the Company shares in certain separation costs with the buyer pursuant to a credit of up to $13.5 million that the buyer may apply to specified separation costs post-closing. See Note 1. Basis of Presentation. The remaining separation credit of $3.1 million was paid to Syntiant in July 2026.

8. Restructuring and Related Activities

Restructuring and related activities are designed to better align the Company's operations with current market conditions through targeted facility consolidations, headcount reductions, and other measures to further optimize operations.

The Company recorded restructuring charges of $0.2 million and $0.4 million during the three and six months ended June 30, 2026, respectively, primarily related to headcount reductions within the Precision Devices segment. The Company recorded charges of $0.1 million and $0.2 million within Gross profit for the three and six months ended June 30, 2026, respectively, and $0.1 million and $0.2 million within Operating expenses for the three and six months ended June 30, 2026, respectively.

The Company recorded restructuring charges of $2.9 million during the six months ended June 30, 2025, related to headcount reductions across the Company to rightsize operating expenses subsequent to the sale of the CMM business. The Company recorded charges of $0.5 million within Gross profit and $2.4 million within Operating expenses for six months ended June 30, 2025.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

The following table details restructuring charges incurred by reportable segment for the periods presented:

The following table details the Company’s severance and other restructuring accrual activity:

All severance and restructuring accruals are reflected within "Other accrued expenses" on the Consolidated Balance Sheet at both June 30, 2026 and December 31, 2025.

9. Borrowings

Borrowings consist of the following:

(1) There are no required principal payments due until maturity in February 2028.

Total debt principal payments over the next five years are as follows:

Revolving Credit Facility

On February 8, 2023, the Company entered into an Amended and Restated Credit Agreement (the "A&R Credit Agreement") that amends and restates the prior Credit Agreement, dated September 4, 2020, and provides for a senior secured revolving credit facility with borrowings in an aggregate principal amount at any time outstanding not to exceed $400.0 million (the "Credit Facility"). The A&R Credit Agreement, among other things, extends the maturity date of the Credit Facility from January 2, 2024 to February 8, 2028, replaces the London Inter-Bank Offered Rate (“LIBOR”) with the Term Secured Overnight Financing Rate (“Term SOFR”) as a reference rate available for borrowings, amends the minimum Interest Coverage Ratio, and amends certain other financial covenants with which the Company must comply, as described below.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

On September 25, 2023, the Company amended its A&R Credit Agreement to, among other things, (a) permit the Company in connection with the acquisition of Cornell Dubilier ("CD"), 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 matured two years after the effective date of such Seller Note (the “Seller Note Maturity Date”) and (b) extend 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. All other terms remain the same as the A&R Credit Agreement dated February 8, 2023.

Up to $100.0 million of the Credit Facility will be available in Euro, Pounds Sterling, and other currencies requested by the Company and up to $50.0 million of the Credit Facility will be made available in the form of letters of credit. Undrawn amounts under the Credit Facility accrue a commitment fee at a per annum rate of 0.225% to 0.350%, based on a leverage ratio grid.

At any time during the term of the Credit Facility, the Company may request to increase the commitments under the Credit Facility or to establish one or more incremental term loan facilities under the Credit Facility in an aggregate principal amount not to exceed the sum of $200.0 million, plus additional amounts, so long as the senior secured leverage ratio does not exceed 2.00 to 1.00.

The A&R Credit Agreement includes requirements, to be tested quarterly, that the Company maintains (i) a minimum ratio of Consolidated EBITDA to consolidated cash interest expense of 3.00 to 1.00, (the "Interest Coverage Ratio"), (ii) a ratio of total indebtedness, minus netted cash in an aggregate amount not to exceed $50.0 million, to Consolidated EBITDA of 3.75 to 1.00 (the "Total Net Leverage Ratio"), and (iii) a maximum ratio of senior net secured indebtedness to Consolidated EBITDA of 3.25 to 1.00 (the "Senior Secured Net Leverage Ratio"). For these ratios, Consolidated EBITDA and consolidated interest expense are calculated using the most recent four consecutive fiscal quarters in a manner defined in the A&R Credit Agreement. At June 30, 2026, the Company was in compliance with these covenants and it expects to remain in compliance with all of its debt covenants over the next twelve months.

The interest rates under the A&R Credit Facility will be, at the Borrowers' option (1) (A) in the case of borrowings denominated in U.S. dollars Term SOFR, (B) in the case of borrowings denominated in Sterling, Daily Simple Sonia, or (C) for borrowings denominated in Euro, EURIBOR, in each case, plus the rates per annum determined from time to time based on the total net leverage ratio of the Company as of the end of and for the most recent period of four fiscal quarters for which financial statements have been delivered (the "Applicable Margin"); or (2) in the case of borrowings denominated in U.S. dollars, alternate base rate ("ABR") (as defined in the A&R Credit Agreement) plus the Applicable Margin. The Applicable Margin for Term SOFR, Daily Simple Sonia, or EURIBOR could range from 1.50% to 2.50% while the Applicable Margin for ABR could range from 0.50% to 1.50%.

The weighted-average interest rate on the Company's borrowings under the Credit Facility was 5.35% and 6.18% for the six months ended June 30, 2026 and 2025, respectively. The weighted-average commitment fee on the revolving line of credit was 0.23% and 0.25% for the six months ended June 30, 2026 and 2025, respectively.

Seller Note

In connection with the acquisition of Cornell Dubilier on November 1, 2023, the Company obtained an interest-free Seller Note with aggregate principal payments of $122.9 million. The Company recorded the Seller Note on the acquisition date at its present value of $109.9 million by discounting the future principal payments using an imputed rate of interest of approximately 7.1% in accordance with accounting guidance in ASC 835, Interest. The Company has made a successful indemnity claim against the Seller Note of $0.2 million. The Company repaid $50.0 million of the Seller Note on November 1, 2024 and the remaining $72.7 million on October 31, 2025. The Company recognized imputed interest expense on the Seller Note of approximately $1.3 million and $2.5 million for the three and six months ended June 30, 2025, respectively.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

10. Other Comprehensive Earnings

The amounts recognized in other comprehensive earnings were as follows:

The following tables summarize the changes in balances of each component of accumulated other comprehensive earnings, net of tax during the six months ended June 30, 2026 and 2025:

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

The following tables summarize the amounts reclassified from accumulated other comprehensive loss to earnings:

11. Income Taxes

Income taxes for the interim periods presented have been included in the accompanying Consolidated Financial Statements on the basis of an estimated annual effective tax rate ("ETR"). The determination of the consolidated provision for income taxes requires management to make certain judgments and estimates. Changes in the estimated level of annual pre-tax earnings or loss, tax laws, and changes resulting from tax audits can affect the overall ETR, which impacts the level of income tax expense or benefit and net income or loss. Judgments and estimates related to the Company’s projections and assumptions are inherently uncertain and therefore, actual results could differ materially from projections.

The Company's ETR from continuing operations for the three and six months ended June 30, 2026 was 18.6% (inclusive of discrete items totaling $0.9 million of tax benefit) and 11.6% (inclusive of discrete items totaling $4.7 million of tax benefit), respectively. The discrete items impacting the tax benefit for the three and six months ended June 30, 2026 were primarily attributable to stock-based compensation. Absent the discrete items, the ETR from continuing operations for the three and six months ended June 30, 2026 was 22.6% and 25.6%, respectively. The Company's ETR from continuing operations for the three and six months ended June 30, 2025 was 31.0% (inclusive of discrete items totaling $0.1 million of tax expense) and 38.8% (inclusive of discrete items totaling $0.3 million of tax benefit), respectively. The discrete items impacting the tax provision for the three and six months ended June 30, 2025 were primarily attributable to stock-based compensation. Absent the discrete items, the ETR from continuing operations for the three and six months ended June 30, 2025 was 30.1% and 41.3%, respectively.

The Company accrues taxes in various countries where it generates income and applies a valuation allowance in other jurisdictions, which resulted in the provision for the six months ended June 30, 2026 and 2025, respectively.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

12. Equity Incentive Program

The following table summarizes the stock-based compensation expense recognized by the Company for the periods presented:

Stock Options

No stock options were granted during the six months ended June 30, 2026 and 2025.

The following table summarizes the Company's stock option activity for the six months ended June 30, 2026:

(1) The number of stock options exercised includes shares that the Company withheld on behalf of employees to satisfy the option exercise price (in the instances of net exercises) as well as statutory tax withholding requirements.

There was no unrecognized compensation expense related to stock options at June 30, 2026.

Restricted Stock Units

The following table summarizes the Company's restricted stock unit ("RSU") activity for the six months ended June 30, 2026:

(1) The number of RSUs vested includes shares that the Company withheld on behalf of employees to satisfy statutory tax withholding requirements.

At June 30, 2026, the Company had $24.1 million of unrecognized compensation expense related to its RSUs that it expects to recognize over a weighted-average period of 1.7 years.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Performance Share Units

Awards with market conditions

The Company grants performance share units (“PSUs”) to senior management for which the number of PSUs that may be earned and vest is based on total shareholder return (“TSR”) relative to the component companies of the Russell 2000 Index over a three-year performance period. These awards will cliff vest three years following the grant date. PSUs will be settled in shares of the Company's common stock. Depending on the Company's overall performance relative to the applicable measures, the size of the PSU awards are subject to adjustment, up or down, resulting in awards at the end of the performance period that can range from 0% to 225% of target. The Company ratably recognizes the expense over the applicable service period for each PSU grant. During the six months ended June 30, 2026 and 2025, respectively, the Company granted 259,580 and 365,051 of PSUs with market conditions.

The fair value of PSUs with market conditions was determined by using a Monte Carlo simulation with the following assumptions:

Awards with performance conditions

The Company also grants PSUs to certain employees for which the number of PSUs that may be earned and vest is based on achievement of internal company targets. The fair value of each PSU with a performance condition is equal to the share price on the date of grant. The Company ratably recognizes the expense for these awards over the applicable service period and adjusts the expense for the expected achievement of performance conditions as necessary.

During the six months ended June 30, 2026, the Company granted 27,515 PSUs with performance conditions that had a grant date fair value of $0.7 million. During the six months ended June 30, 2025, the Company granted 89,967 of PSUs with performance conditions that had a grant date fair value of $1.7 million. The 2025 grant included a special PSU award for the Chief Executive Officer of 81,788 target PSUs with a grant date fair value of $1.5 million. This award is eligible to vest based on the achievement of a minimum non-GAAP diluted earnings per share amount and specified revenue goals over a potential five-year performance period. If the goals are not met during the initial three-year performance period, it may be extended an additional two years at a reduced payout level. Achievement of this award could range from 0% to 400% of the target number of PSUs.

The following table summarizes the Company's PSU activity for the six months ended June 30, 2026:

(1) The number of PSUs shown reflects 100% of the target award; actual payouts may differ based on performance.

(2) The number of PSUs vested includes shares that the Company withheld on behalf of employees to satisfy statutory tax withholding requirements.

At June 30, 2026, the Company had $14.5 million of unrecognized compensation expense related to PSUs that it expects to recognize over a weighted-average period of 1.7 years.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

13. Earnings per Share

Basic and diluted earnings per share were computed as follows:

(1) In accordance with ASC 260, Earnings Per Share, the control number for determining whether including potential common shares in the diluted EPS computation would be antidilutive is earnings from continuing operations.

The following table is a reconciliation of the share amounts used in computing earnings per share:

For the three and six months ended June 30, 2026, the weighted-average number of antidilutive potential common shares for stock-based awards excluded from the diluted earnings per share calculation above was 0.5 million and 0.4 million, respectively. For the three and six months ended June 30, 2025, the weighted-average number of antidilutive potential common shares for stock-based awards excluded from the diluted earnings per share calculation above was 1.8 million and 1.1 million, respectively.

14. Commitments and Contingent Liabilities

From time to time, the Company is involved in various legal proceedings and claims arising in the ordinary course of its business. The majority of these claims and proceedings relate to commercial, warranty, employment, and intellectual property matters. Although the ultimate outcome of any legal proceeding or claim cannot be predicted with certainty, based on present information, including management’s assessment of the merits of the particular claim, the Company believes that the disposition of these legal proceedings or claims, individually or in the aggregate, after taking into account recorded accruals and the availability and limits of insurance coverage, will not have a material adverse effect on its cash flow, results of operations, or financial condition.

The Company owns many patents and other intellectual property pertaining to its products, technology, and manufacturing processes. Some of the Company's patents have been and may continue to be infringed upon or challenged by others. In

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

appropriate cases, the Company has taken and will take steps to protect and defend its patents and other intellectual property, including through the use of legal proceedings in various jurisdictions around the world. Such steps have resulted in and may continue to result in retaliatory legal proceedings, including litigation or other legal proceedings in various jurisdictions and forums around the world alleging infringement by the Company of patents owned by others. The costs of investigations and legal proceedings relating to the enforcement and defense of the Company’s intellectual property may be substantial. Additionally, in multi-forum disputes, the Company may incur adverse judgments with regard to certain claims in certain jurisdictions and forums while still contesting other related claims against the same opposing party in other jurisdictions and forums.

Intellectual Property Infringement Claims

The Company may, on a limited basis, provide contractual indemnities for certain losses that arise out of claims that its products infringe on the intellectual property of others. It is not possible to determine the maximum potential amount under these indemnification agreements due to the unique facts and circumstances involved in each particular agreement. Historically, the Company has not made significant payments under such indemnity arrangements. The Company’s legal accruals associated with these indemnity arrangements were not significant at June 30, 2026 and December 31, 2025.

15. Segment Information

The Company's two reportable segments are Precision Devices and MedTech & Specialty Audio. Information regarding the Company’s reportable segments is as follows:

(1) Other segment items primarily include foreign currency exchange gains and losses and other non-operating income and expense.

(2) Other expenses include certain foreign currency exchange rate adjustments.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

(1) Other segment items primarily include foreign currency exchange gains and losses and other non-operating income and expense.

(1) Other segment items primarily include foreign currency exchange gains and losses and other non-operating income and expense.

(2) Other expenses include certain foreign currency exchange rate adjustments.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

(1) Other segment items primarily include foreign currency exchange gains and losses and other non-operating income and expense.

(2) Other expenses include foreign currency exchange rate impacts on restructuring balances.

Information regarding assets of the Company's reportable segments is as follows:

(1) Corporate assets at both June 30, 2026 and December 31, 2025 include $83.4 million of Syntiant preferred stock received in partial consideration for the sale of CMM on December 27, 2024 and a note receivable from Syntiant totaling $5.9 million. Corporate assets also include the portion of right-of-use operating lease assets subleased by Syntiant, which totaled approximately $5.2 million at both June 30, 2026 and December 31, 2025.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

The following table details revenues by geographic location. Revenues are attributed to regions based on the location of the Company's direct customer, which in some instances is an intermediary and not necessarily the end user. The Company's businesses are based primarily in North America, Asia, and Europe.

Receivables, net from contracts with customers were $100.7 million and $91.7 million as of June 30, 2026 and December 31, 2025, respectively. As of June 30, 2026 and December 31, 2025, our total remaining performance obligations were immaterial.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis should be read in conjunction with our Consolidated Financial Statements and related Notes included elsewhere in this Quarterly Report on Form 10-Q.

Overview

We are a leading manufacturer of specialty electronic components. We design parts that perform unique and critical functions for innovative technologies. Through extreme reliability, custom engineering, and scalable manufacturing, we enable businesses to succeed in the most demanding applications across medtech, defense, industrial, and electrification markets. Our high performance capacitors, radio frequency ("RF") filters, advanced medtech microphones, and balanced armature speakers enable and enhance the performance of technologies with the power to change, improve, and save lives. Our focus on the customer, combined with unique technology, proprietary manufacturing techniques, and global operational expertise, enables us to deliver customized solutions across multiple applications. References to "Knowles," the "Company," "we," "our," or "us" refer to Knowles Corporation and its consolidated subsidiaries, unless the context otherwise requires.

We sell our products directly to original equipment manufacturers ("OEMs") and to their contract manufacturers and suppliers and through distributors worldwide.

Recent Developments

The tariff environment remains highly dynamic. On February 20, 2026, a Supreme Court ruling invalidated certain tariffs previously imposed under the International Emergency Economic Powers Act ("IEEPA"). Knowles submitted refund requests and has, to date, received a portion of previously paid IEEPA tariffs. However, as a relatively small percentage of our products were subject to IEEPA tariffs, cash refunds received were not material. We will continue to monitor developments on tariff policy and evaluate any changes to the applicability of tariffs to our business as the occur.

Non-GAAP Financial Measures

In addition to the GAAP financial measures included in this item, we have presented certain non-GAAP financial measures. We use non-GAAP measures as supplements to our GAAP results of operations in evaluating certain aspects of our business, and our executive management team and Board of Directors focus on non-GAAP items as key measures of our performance for business planning purposes. These measures assist us in comparing our performance between various reporting periods on a consistent basis, as these measures remove from operating results the impact of items that, in our opinion, do not reflect our core operating performance. We believe that our presentation of non-GAAP financial measures is useful because it provides investors and securities analysts with the same information that we use internally for purposes of assessing our core operating performance. The Company does not consider these non-GAAP financial measures to be a substitute for the information provided by GAAP financial results. For a reconciliation of these non-GAAP financial measures to the most directly comparable GAAP financial measures, see the reconciliation included herein.

Results of Operations for the Three Months Ended June 30, 2026 compared with the Three Months Ended June 30, 2025

Revenues

Revenues for the second quarter of 2026 were $166.8 million, compared with $145.9 million for the second quarter of 2025, an increase of $20.9 million or 14.3%. Precision Devices ("PD") revenues increased $19.8 million due to higher demand in the industrial, electrification, medtech, and defense markets, as well as higher average pricing. MedTech & Specialty Audio ("MSA") revenues increased $1.1 million, primarily due to higher shipping volumes into the hearing health market, partially offset by lower shipping volumes into the specialty audio market.

Cost of Goods Sold

Cost of goods sold ("COGS") for the second quarter of 2026 was $92.1 million, compared with $81.7 million for the second quarter of 2025, an increase of $10.4 million or 12.7%. This increase was primarily due to higher shipping volumes, unfavorable product mix, and increased production transfer costs in our ceramic capacitor business.

Impairment Charges

During the second quarter of 2025, we recorded an impairment charge of $3.6 million to write down the carrying value of certain machinery and equipment to fair value. For additional information, refer to Note 1. Basis of Presentation to our Consolidated Financial Statements.

Restructuring Charges

During the second quarter of 2026, we recorded restructuring charges of $0.1 million within Gross profit and $0.1 million within Operating expenses related primarily to headcount reductions within our PD segment. No restructuring charges were recorded during the second quarter of 2025. For additional information, refer to Note 8. Restructuring and Related Activities to our Consolidated Financial Statements.

Gross Profit and Non-GAAP Gross Profit

Gross profit for the second quarter of 2026 was $74.6 million, compared with $60.6 million for the second quarter of 2025, an increase of $14.0 million or 23.1%. Gross profit margin (gross profit as a percentage of revenues) for the second quarter of 2026 was 44.7%, compared with 41.5% for the second quarter of 2025. The increases in gross profit and gross profit margin were primarily due to higher shipping volumes, impairment charges in 2025 that did not recur in 2026, pricing, and increased factory capacity utilization, partially offset by unfavorable product mix and increased production transfer costs in our ceramic capacitor business.

Non-GAAP gross profit for the second quarter of 2026 was $75.7 million, compared with $64.5 million for the second quarter of 2025, an increase of $11.2 million or 17.4%. Non-GAAP gross profit margin (non-GAAP gross profit as a percentage of revenues) for the second quarter of 2026 was 45.4% compared with 44.2% for the second quarter of 2025. The increases in non-GAAP gross profit and non-GAAP gross profit margin were primarily due to higher shipping volumes, pricing, and increased factory capacity utilization, partially offset by unfavorable product mix.

Research and Development Expenses

Research and development expenses for the second quarter of 2026 were $10.6 million, compared with $10.0 million for the second quarter of 2025, an increase of $0.6 million or 6.0%. Research and development expenses as a percentage of revenues for the second quarter of 2026 and 2025 were 6.4% and 6.9%, respectively. The increase in expenses was primarily driven by increased development activities related to new products and applications.

Selling and Administrative Expenses

Selling and administrative expenses for the second quarter of 2026 were $39.2 million, compared with $35.9 million for the second quarter of 2025, an increase of $3.3 million or 9.2%. Selling and administrative expenses as a percentage of revenues for the second quarter of 2026 and 2025 were 23.5% and 24.6%, respectively. The increase in expenses was primarily driven by higher commissions, an increase to our deferred compensation liability, higher incentive compensation, additional headcount within the PD segment to support future growth, and annual merit increases. The decrease in expenses as a percentage of revenues was driven by higher revenues.

Interest Expense, net

Interest expense for the second quarter of 2026 was $1.7 million, compared with $2.5 million for the second quarter of 2025, a decrease of $0.8 million. The decrease is primarily due to the absence of imputed interest expense in 2026 on our Seller Note from the CD acquisition, which was paid in full in 2025. For additional information on borrowings and interest expense, refer to Note 9. Borrowings to our Consolidated Financial Statements.

Other Expense, net

Other expense for the second quarter of 2026 was $0.4 million, compared with expense of $0.9 million for the second quarter of 2025, a change of $0.5 million. Expense in 2026 and 2025 is primarily due to unfavorable foreign currency exchange rate changes, partially offset by unrealized gains in our investment balances.

Provision for Income Taxes and Non-GAAP Provision for Income Taxes

The effective tax rate ("ETR") from continuing operations for the second quarter of 2026 and 2025 was 18.6% and 31.0%, respectively. The ETR from continuing operations for the second quarter of 2026 and 2025 includes discrete items totaling $0.9 million of tax benefit and $0.1 million of tax expense, respectively. The discrete items impacting the tax provision for 2026 and 2025 are primarily attributable to stock-based compensation. Absent the discrete items, the ETR from continuing operations for the second quarter of 2026 and 2025 was 22.6% and 30.1%, respectively. The Company accrues taxes in various countries where it generates income and applies a valuation allowance in other jurisdictions, which resulted in the provision for the second quarter of 2026 and 2025. The change in the ETR from was due to the mix of earnings and losses by taxing jurisdictions and net discrete items, primarily stock-based compensation.

The non-GAAP ETR from continuing operations for the second quarter of 2026 and 2025 was 16.9% and 15.9%, respectively. The non-GAAP ETR from continuing operations includes no discrete impact for the second quarter of 2026 or 2025. The change in the non-GAAP ETR was primarily due to decreased utilization of foreign tax credits and the mix of earnings and losses by taxing jurisdictions.

Earnings from Continuing Operations

Earnings from continuing operations for the second quarter of 2026 was $18.4 million, compared with $7.8 million for the second quarter of 2025, an improvement of $10.6 million. As described above, the improvement is primarily due to higher gross profit, lower interest expense, and lower other expense, partially offset by higher operating expenses and higher income tax expense.

Earnings and Adjusted Earnings from Continuing Operations Before Interest and Income Taxes

Earnings from continuing operations before interest and income taxes ("EBIT") for the second quarter of 2026 was $24.3 million, compared with $13.8 million for the second quarter of 2025, an increase of $10.5 million. EBIT margin (EBIT as a percentage of revenues) for the second quarter of 2026 was 14.6%, compared with 9.5% for the second quarter of 2025. The increases in EBIT and EBIT margin were primarily due to higher gross profit, partially offset by higher operating expenses.

Adjusted earnings before interest and income taxes ("Adjusted EBIT") from continuing operations for the second quarter of 2026 was $36.1 million, compared with $27.7 million for the second quarter of 2025, an increase of $8.4 million. Adjusted EBIT margin (Adjusted EBIT from continuing operations as a percentage of revenues) for the second quarter of 2026 was 21.6%, compared with 19.0% for the second quarter of 2025. The increases in Adjusted EBIT and Adjusted EBIT margin were primarily due to higher non-GAAP gross profit, partially offset by higher non-GAAP operating expenses.

Earnings from Discontinued Operations, net

We recorded earnings from discontinued operations of $1.0 million for the second quarter of 2026, which was driven by final adjustments to the CMM sale transaction. There was no activity for discontinued operations for the second quarter of 2025. For additional information, refer to Note 3. Discontinued Operations to our Consolidated Financial Statements.

Diluted Earnings per Share from Continuing Operations and Non-GAAP Diluted Earnings per Share from Continuing Operations

Diluted earnings per share from continuing operations was $0.21 for the second quarter of 2026, compared with $0.09 for the second quarter of 2025, an improvement of $0.12. As described above, the improvement is primarily due to higher gross profit, partially offset by higher operating expenses.

Non-GAAP diluted earnings per share from continuing operations was $0.33 for the second quarter of 2026, compared with $0.24 for the second quarter of 2025, an improvement of $0.09. As described above, the improvement is primarily due to higher non-GAAP gross profit, partially offset by higher non-GAAP operating expenses.

Results of Operations for the Six Months Ended June 30, 2026 compared with the Six Months Ended June 30, 2025

Revenues

Revenues for the six months ended June 30, 2026 were $319.9 million, compared with $278.1 million for the six months ended June 30, 2025, an increase of $41.8 million or 15.0%. PD revenues increased $32.4 million due to higher demand in the industrial, electrification, defense, and medtech markets, as well as higher average pricing. MSA revenues increased $9.4 million, primarily due to higher shipping volumes into the hearing health market, partially offset by lower shipping volumes into the specialty audio market.

Cost of Goods Sold

COGS for the six months ended June 30, 2026 was $178.0 million, compared with $160.1 million for the six months ended June 30, 2025, an increase of $17.9 million or 11.2%. This increase was primarily due to higher shipping volumes and higher production transfer costs in our ceramic capacitor business, partially offset by favorable product mix in our MSA segment.

Impairment Charges

During the six months ended June 30, 2025, we recorded an impairment charge of $3.6 million to write down the carrying value of certain machinery and equipment to fair value. For additional information, refer to Note 1. Basis of Presentation to our Consolidated Financial Statements

Restructuring Charges

During the six months ended June 30, 2026, we recorded restructuring charges of $0.2 million within Gross profit and $0.2 million within Operating expenses related primarily to headcount reductions within our PD segment.

During the six months ended June 30, 2025, we recorded restructuring charges of $0.5 million within Gross profit and $2.4 million within Operating expenses related to headcount reductions across the Company to rightsize operating expenses subsequent to the sale of the CMM business. For additional information, refer to Note 8. Restructuring and Related Activities to our Consolidated Financial Statements.

Gross Profit and Non-GAAP Gross Profit

Gross profit for the six months ended June 30, 2026 was $141.7 million, compared with $113.9 million for the six months ended June 30, 2025, an increase of $27.8 million or 24.4%. Gross profit margin for the six months ended June 30, 2026 was 44.3%, compared with 41.0% for the six months ended June 30, 2025. The increases in gross profit and gross profit margin were primarily due to higher shipping volumes, impairment charges in 2025 that did not recur in 2026, increased factory capacity utilization, pricing in the PD segment, and favorable product mix in our MSA segment, partially offset by higher production transfer costs in our ceramic capacitor business.

Non-GAAP gross profit for the six months ended June 30, 2026 was $145.4 million, compared with $119.5 million for the six months ended June 30, 2025, an increase of $25.9 million or 21.7%. Non-GAAP gross profit margin for the six months ended June 30, 2026 was 45.5% compared with 43.0% for the six months ended June 30, 2025. The increases in non-GAAP gross profit and non-GAAP gross profit margin were primarily due to higher shipping volumes, increased factory capacity utilization, pricing in the PD segment, and favorable product mix in our MSA segment.

Research and Development Expenses

Research and development expenses for the six months ended June 30, 2026 were $22.3 million, compared with $19.7 million for the six months ended June 30, 2025, an increase of $2.6 million or 13.2%. Research and development expenses as a percentage of revenues for the six months ended June 30, 2026 and 2025 were 7.0% and 7.1%, respectively. The increase in expenses was primarily driven by increased development activities related to new products and applications.

Selling and Administrative Expenses

Selling and administrative expenses for the six months ended June 30, 2026 were $78.6 million, compared with $73.1 million for the six months ended June 30, 2025, an increase of $5.5 million or 7.5%. Selling and administrative expenses as a percentage of revenues for the six months ended June 30, 2026 and 2025 were 24.6% and 26.3%, respectively. The increase in expenses was primarily driven by higher commissions, additional headcount within the PD segment to support future growth, annual merit increases, higher incentive compensation, and a change in our deferred compensation liability. The decrease in expenses as a percentage of revenues was driven by higher revenues.

Interest Expense, net

Interest expense for the six months ended June 30, 2026 was $3.2 million, compared with $5.2 million for the six months ended June 30, 2025, a decrease of $2.0 million. The decrease is primarily due to the absence of imputed interest expense in 2026 on our Seller Note from the CD acquisition, which was paid in full in 2025. For additional information on borrowings and interest expense, refer to Note 9. Borrowings to our Consolidated Financial Statements.

Other Expense, net

Other expense for the six months ended June 30, 2026 was $3.8 million, compared with expense of $1.4 million for the six months ended June 30, 2025, a change of $2.4 million. Expense in 2026 and 2025 is primarily due to unfavorable foreign currency changes, partially offset by unrealized gains in our investment balances.

Provision for Income Taxes and Non-GAAP Provision for Income Taxes

The ETR from continuing operations for the six months ended June 30, 2026 and 2025 was 11.6% and 38.8%, respectively. The ETR from continuing operations for the six months ended June 30, 2026 and 2025 includes discrete items totaling $4.7 million and $0.3 million of tax benefit, respectively. The discrete items impacting the tax benefit and provision for 2026 and 2025 are primarily attributable to stock-based compensation. Absent the discrete items, the ETR from continuing operations for the six months ended June 30, 2026 and 2025 was 25.6% and 41.3%, respectively. The Company accrues taxes in various countries where it generates income and applies a valuation allowance in other jurisdictions, which resulted in the provision for the six months ended June 30, 2026 and 2025. The change in the ETR was due to the mix of earnings and losses by taxing jurisdictions and net discrete items, primarily stock-based compensation.

The non-GAAP ETR from continuing operations for the six months ended June 30, 2026 and 2025 was 16.8% and 15.4%, respectively. The non-GAAP ETR from continuing operations includes discrete items totaling $0.1 million of tax benefit and no discrete impact for the six months ended June 30, 2026 and 2025, respectively. Absent the discrete items, the non-GAAP ETR from continuing operations for six months ended June 30, 2026 and 2025 was 17.0% and 15.4%, respectively. The change in the non-GAAP ETR was primarily due to decreased utilization of foreign tax credits and the mix of earnings and losses by taxing jurisdictions.

Earnings from Continuing Operations

Earnings from continuing operations for the six months ended June 30, 2026 was $29.7 million, compared to $7.4 million for the six months ended June 30, 2025, an improvement of $22.3 million. As described above, the improvement is primarily due to higher gross profit, lower interest expense, and lower income tax expense, partially offset by higher operating expenses and higher other expense.

Earnings and Adjusted Earnings from Continuing Operations Before Interest and Income Taxes

Earnings from continuing operations before interest and income taxes for the six months ended June 30, 2026 was $36.8 million, compared with $17.3 million for the six months ended June 30, 2025, an increase of $19.5 million. EBIT margin for the six months ended June 30, 2026 was 11.5%, compared with 6.2% for the six months ended June 30, 2025. The increases in EBIT and EBIT margin were primarily due to higher gross profit, partially offset by higher operating expenses.

Adjusted earnings before interest and income taxes from continuing operations for the six months ended June 30, 2026 was $66.2 million, compared with $49.4 million for the six months ended June 30, 2025, an increase of $16.8 million. Adjusted EBIT margin for the six months ended June 30, 2026 was 20.7%, compared with 17.8% for the six months ended June 30, 2025. The increases in Adjusted EBIT and Adjusted EBIT margin were primarily due to higher non-GAAP gross profit, partially offset by higher non-GAAP operating expenses.

Loss from Discontinued Operations, net

We recorded a loss from discontinued operations of $0.6 million for the six months ended June 30, 2026 and a loss of $1.6 million for the six months ended June 30, 2025. The loss from discontinued operations for the six months ended June 30, 2026 was driven by updates to estimates regarding certain tax liabilities related to CMM's historical operations, partially offset by final adjustments to the CMM sale transaction. The loss from discontinued operations for the six months ended June 30, 2025 was primarily driven by unfavorable working capital adjustments for the disposal of CMM. For additional information, refer to Note 3. Discontinued Operations to our Consolidated Financial Statements.

Diluted Earnings per Share from Continuing Operations and Non-GAAP Diluted Earnings per Share from Continuing Operations

Diluted earnings per share from continuing operations was $0.34 for the six months ended June 30, 2026, compared with $0.08 for the six months ended June 30, 2025, an improvement of $0.26. As described above, the improvement is primarily due to higher gross profit, partially offset by higher operating expenses.

Non-GAAP diluted earnings per share from continuing operations was $0.60 for the six months ended June 30, 2026, compared with $0.42 for the six months ended June 30, 2025, an improvement of $0.18. As described above, the improvement is primarily due to higher non-GAAP gross profit, partially offset by higher non-GAAP operating expenses.

Reconciliation of GAAP Financial Measures to Non-GAAP Financial Measures (1)

(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. Knowles believes that non-GAAP measures are useful as supplements to its GAAP results of operations to evaluate certain aspects of its operations and financial performance, and its management team primarily focuses on non-GAAP items in evaluating Knowles' performance for business planning purposes. Knowles also believes that these measures assist it with comparing its performance between various reporting periods on a consistent basis, as these measures remove from operating results the impact of items that, in Knowles' opinion, do not reflect its core operating performance. 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 migrate manufacturing to existing facilities.

(3) Transition services represent amounts charged to Syntiant in connection with post-closing transition and separation costs.

(4) Other expenses include foreign currency exchange rate impacts on restructuring balances. Other expenses for the three and six months ending June 30, 2026 also includes foreign currency exchange rate adjustments related to certain balances retained subsequent to the disposal of CMM; these adjustments were not deemed material for 2025 periods.

(5) These expenses include ongoing costs to facilitate integration of the CD acquisition by the PD segment.

(6) Income tax effects of non-GAAP reconciling adjustments are calculated using the applicable tax rates in the jurisdictions of the underlying adjustments.

(7) The non-GAAP reconciling adjustments include stock-based compensation expense, intangibles amortization expense, impairment charges, restructuring charges, production transfer costs, acquisition-related costs, and other expenses, partially offset by a credit to transition services.

(8) In the third quarter of 2025, the Company modified its calculation method of non-GAAP diluted average shares outstanding to exclude the potential dilution impact from performance share units ("PSUs") as these equity awards have not yet been earned. Our PSUs are market-based awards and fluctuate based on the Company's total shareholder return performance relative to the Russell 2000 during the measurement period. The calculation methodology change in non-GAAP diluted average shares outstanding increased non-GAAP diluted earnings per share by $0.01 for the six months ended June 30, 2025.

(9) The number of shares used in the diluted average shares outstanding 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. Non-GAAP diluted average shares outstanding also excludes the impact of certain equity awards that are not yet earned.

Segment Results of Operations for the Three Months Ended June 30, 2026 compared with the Three Months Ended June 30, 2025

The following is a summary of the results of operations of our two reportable segments: Precision Devices and Medtech & Specialty Audio.

See Note 15. Segment Information to the Consolidated Financial Statements for (i) a reconciliation of segment revenues to our consolidated revenues and (ii) a reconciliation of segment adjusted earnings before interest and income taxes to our consolidated earnings before income taxes and discontinued operations.

Precision Devices

Revenues

PD revenues were $98.3 million for the second quarter of 2026, compared with $78.5 million for the second quarter of 2025, an increase of $19.8 million or 25.2%. Revenues increased due to higher demand in the industrial, electrification, medtech, and defense markets, as well as higher average pricing.

Earnings and Adjusted Earnings from Continuing Operations Before Interest and Income Taxes

PD EBIT was $13.9 million for the second quarter of 2026, compared with $8.2 million for the second quarter of 2025, an increase of $5.7 million. EBIT margin for the second quarter of 2026 was 14.1%, compared to 10.4% for the second quarter of 2025. The increases were due to higher gross profit, partially offset by higher operating expenses driven by higher commissions, additional headcount to support future growth, and higher incentive compensation. The gross profit increase was primarily driven by higher shipping volumes and pricing, partially offset by increased production transfer costs in our ceramic capacitor business.

PD Adjusted EBIT was $20.3 million for the second quarter of 2026, compared with $13.9 million for the second quarter of 2025, an increase of $6.4 million. Adjusted EBIT margin for the second quarter of 2026 was 20.7%, compared with 17.7% for the second quarter of 2025. The increases were due to higher non-GAAP gross profit, partially offset by higher non-GAAP operating expenses driven by higher commissions, additional headcount to support new product initiatives, and higher incentive compensation. The non-GAAP gross profit increase was primarily driven by higher shipping volumes and pricing.

MedTech & Specialty Audio

Revenues

MSA revenues were $68.5 million for the second quarter of 2026, compared with $67.4 million for the second quarter of 2025, an increase of $1.1 million or 1.6%. Revenues increased primarily due to higher shipping volumes into the hearing health market, partially offset by lower shipping volumes into the specialty audio market.

Earnings and Adjusted Earnings from Continuing Operations Before Interest and Income Taxes

MSA EBIT was $26.3 million for the second quarter of 2026, compared with $21.0 million for the second quarter of 2025, an increase of $5.3 million. EBIT margin for the second quarter of 2026 was 38.4%, compared with 31.2% for the second quarter of 2025. The increases in EBIT and EBIT margin were primarily due to higher gross profit, partially offset by higher operating expenses driven by higher incentive compensation. The increase in gross profit was driven by impairment charges recorded in 2025 that did not recur in 2026, increased factory capacity utilization, and higher shipping volumes, partially offset by unfavorable product mix.

MSA Adjusted EBIT was $27.6 million for the second quarter of 2026, compared with $26.1 million for the second quarter of 2025, an increase of $1.5 million. Adjusted EBIT margin for the second quarter of 2026 was 40.3%, compared to 38.7% for the second quarter of 2025. The increases in adjusted EBIT and adjusted EBIT margin were primarily due to higher non-GAAP gross profit, partially offset by higher operating expenses driven by higher incentive compensation. Higher non-GAAP gross profit was driven by increased factory capacity utilization and higher shipping volumes, partially offset by unfavorable product mix.

Segment Results of Operations for the Six Months Ended June 30, 2026 compared with the Six Months Ended June 30, 2025

Precision Devices

Revenues

PD revenues were $183.4 million for the six months ended June 30, 2026, compared with $151.0 million for the six months ended June 30, 2025, an increase of $32.4 million or 21.5%. Revenues increased due to higher demand in the industrial, electrification, defense, and medtech markets, as well as higher average pricing.

Earnings and Adjusted Earnings from Continuing Operations Before Interest and Income Taxes

PD EBIT was $21.5 million for the six months ended June 30, 2026, compared with $11.4 million for the six months ended June 30, 2025, an increase of $10.1 million. EBIT margin for the six months ended June 30, 2026 was 11.7%, compared to 7.5% for the six months ended June 30, 2025. The increases were due to higher gross profit, partially offset by higher operating expenses driven by higher commissions, additional headcount to support future growth, and higher incentive compensation. The gross profit increase was primarily driven by higher shipping volumes, pricing, and increased factory capacity utilization, partially offset by higher production transfer costs in our ceramic capacitor business and unfavorable product mix.

PD Adjusted EBIT was $35.4 million for the six months ended June 30, 2026, compared with $24.6 million for the six months ended June 30, 2025, an increase of $10.8 million. Adjusted EBIT margin for the six months ended June 30, 2026 was 19.3%, compared with 16.3% for the six months ended June 30, 2025. The increases were due to higher non-GAAP gross profit, partially offset by higher non-GAAP operating expenses driven by higher commissions, additional headcount to support future growth, and higher incentive compensation. The non-GAAP gross profit increase was driven by higher shipping volumes, pricing, and increased factory capacity utilization, partially offset by unfavorable product mix.

MedTech & Specialty Audio

Revenues

MSA revenues were $136.5 million for the six months ended June 30, 2026, compared with $127.1 million for the six months ended June 30, 2025, an increase of $9.4 million or 7.4%. Revenues increased primarily due to higher shipping volumes into the hearing health market, partially offset by lower shipping volumes into the specialty audio market.

Earnings and Adjusted Earnings from Continuing Operations Before Interest and Income Taxes

MSA EBIT was $52.3 million for the six months ended June 30, 2026, compared with $40.3 million for the six months ended June 30, 2025, an increase of $12.0 million. EBIT margin for the six months ended June 30, 2026 was 38.3%, compared with 31.7% for the six months ended June 30, 2025. The increases in EBIT and EBIT margin were primarily due to higher gross profit, partially offset by higher operating expense driven by higher incentive compensation. The increase in gross profit was driven by higher shipping volumes, impairment charges in 2025 that did not recur in 2026, favorable product mix, and increased factory capacity utilization, partially offset by lower average pricing.

MSA Adjusted EBIT was $55.3 million for the six months ended June 30, 2026, compared with $47.4 million for the six months ended June 30, 2025, an increase of $7.9 million. Adjusted EBIT margin for the six months ended June 30, 2026 was 40.5%, compared to 37.3% for the six months ended June 30, 2025. The increases in adjusted EBIT and adjusted EBIT margin were primarily due to higher non-GAAP gross profit, partially offset by higher non-GAAP operating expense driven by higher incentive compensation. The increase in gross profit was driven by higher shipping volumes, favorable product mix, and increased factory capacity utilization, partially offset by lower average pricing.

Liquidity and Capital Resources

Historically, we have generated and expect to continue to generate positive cash flow from operations. Our ability to fund our operations and capital needs will depend on our ongoing ability to generate cash from operations and access capital markets. We believe that our future cash flow from operations and access to capital markets will provide adequate resources to fund our working capital needs, capital expenditures, strategic investments, and share repurchases. We have secured a revolving line of credit in the United States from a syndicate of commercial banks to provide additional liquidity. Furthermore, if we were to require additional cash above and beyond our cash on the balance sheet, the free cash flow generated by the business, and availability under our revolving credit facility, we would most likely seek to raise long-term financing through the U.S. debt or bank markets.

On December 27, 2024, we completed the sale of CMM to Syntiant for approximately $140.8 million in total consideration, consisting of $63.6 million in cash ($58.0 million net of cash sold) and Syntiant Series D-2 preferred stock with a fair value of $77.2 million. For additional information, refer to Note 3. Discontinued Operations to our Consolidated Financial Statements. The Company shares in certain separation costs pursuant to a credit for up to $13.5 million that Syntiant may apply to specified separation costs post-closing. For additional information, refer to Note 1. Basis of Presentation.

On February 24, 2020, we announced that our Board of Directors had authorized a share repurchase program of up to $100.0 million of our common stock. On April 28, 2022, we announced that our Board of Directors had increased the authorization by up to $150.0 million in additional aggregate value. On February 13, 2025, the Company announced another authorization increase of up to $150.0 million in additional aggregate value, for a total of $400.0 million of aggregate value. At June 30, 2026, we have $106.5 million remaining that may yet be repurchased under our share repurchase program. The timing and amount of any shares repurchased will be determined by us based on our evaluation of market conditions and other factors, and will be made in accordance with applicable securities laws in either the open market or in privately negotiated transactions. We are not obligated to purchase any shares under the program, and the program may be suspended or discontinued at any time. Any shares repurchased will be held as treasury stock. During the six months ended June 30, 2026 and 2025, the Company repurchased 692,369 and 2,182,462 shares of common stock, respectively, for a total of $22.5 million and $35.0 million, respectively.

Cash flows from operating, investing, and financing activities as reflected in our Consolidated Statements of Cash Flows and are presented on a consolidated basis, including discontinued operations. Cash flows are summarized in the following table:

Operating Activities

Cash provided by operating activities adjusts net earnings for certain non-cash items, including depreciation expense, amortization of intangible assets, stock-based compensation, changes in deferred income taxes, impairment charges, and the effects of changes in operating assets and liabilities. The decrease in cash provided by operating activities for the six months ended June 30, 2026 is primarily due to an increase in working capital in 2026 and a customer prepayment in 2025 that did not recur in 2026, partially offset by higher earnings from continuing operations and less cash used in 2026 to settle obligations related to CMM.

Investing Activities

The increase in cash used in investing activities during the six months ended June 30, 2026 was driven by higher capital expenditures. Our increased capital expenditures in 2026 were due to capacity expansion in our PD segment, including our specialty film product line.

In 2026, we expect capital expenditures to be approximately 5% of revenues.

Financing Activities

Cash used in financing activities during the six months ended June 30, 2026 was primarily related to $22.5 million of repurchases of common stock and $14.8 million of tax payments related to net share settlement of equity awards, partially offset by $17.0 million of net proceeds on the revolving credit facility and proceeds of $5.8 million from the exercise of options. Cash used in financing activities during the six months ended June 30, 2025 was primarily related to $35.0 million of repurchases of common stock, $15.0 million of payments on the revolving credit facility, and $6.9 million of tax payments related to net share settlement of equity awards, partially offset by proceeds of $0.6 million from the exercise of options.

Adjusted Free Cash Flow

In addition to measuring cash flow generation based on the operating, investing, and financing classifications included in the Consolidated Statement of Cash Flows (including discontinued operations), Knowles also measures adjusted free cash flow and adjusted free cash flow as a percentage of revenues. Adjusted free cash flow is defined as non-GAAP net cash attributable to continuing operations less non-GAAP capital expenditures attributable to continuing operations. Non-GAAP net cash attributable to continuing operations is defined as net cash provided by operating activities less amounts generated or utilized by discontinued operations. 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. 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. 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 following table reconciles our adjusted free cash flow to cash flow provided by operating activities:

During the six months ended June 30, 2026 we generated adjusted free cash flow of $19.8 million compared to $57.9 million during the six months ended June 30, 2025. The decrease in adjusted free cash flow in 2026 was primarily due to an increase in working capital, a customer prepayment in 2025 that did not recur in 2026, and higher capital expenditures, partially offset by higher earnings from continuing operations.

Contingent Obligations

We are involved in various legal proceedings, claims, and investigations arising in the ordinary course of business. Legal contingencies are discussed in Note 14. Commitments and Contingent Liabilities to our Consolidated Financial Statements.

Critical Accounting Estimates

This discussion and analysis of results of operations and financial condition is based on our Consolidated Financial Statements, which have been prepared in conformity with U.S. GAAP. The preparation of these financial statements requires the use of estimates and assumptions related to the reporting of assets, liabilities, revenues, expenses, and related disclosures. In preparing these financial statements, we have made our best estimates and judgments of certain amounts included in the financial statements. Estimates are revised periodically. Actual results could differ from these estimates.

The information concerning our critical accounting estimates can be found under Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended December 31, 2025 filed with the Securities and Exchange Commission on February 9, 2026. There are no material changes in our previously reported critical accounting estimates.

Recent Accounting Standards

The issuance of recent accounting standards, as included in Note 2. Recent Accounting Standards to our Consolidated Financial Statements, is not expected to have a significant impact on our revenue, earnings, or liquidity.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

During the six months ended June 30, 2026, there were no material changes to the information on market risk exposure disclosed in our Annual Report on Form 10-K for the year ended December 31, 2025. For a discussion of our exposure to market risk as of December 31, 2025, refer to Item 7A, Quantitative and Qualitative Disclosures about Market Risk, contained in our Annual Report on Form 10-K for the year ended December 31, 2025.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Our management has evaluated, under the supervision and with the participation of our chief executive officer ("CEO") and chief financial officer ("CFO"), the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act")) as of the end of the period covered by this report. Based on that evaluation, our CEO and CFO have concluded that, as of the end of the period covered by this report, our disclosure controls and procedures are effective in ensuring that information required to be disclosed in our Exchange Act reports is (1) recorded, processed, summarized, and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and (2) accumulated and communicated to our management, including our CEO and CFO, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control Over Financial Reporting

There has been no change in our internal control over financial reporting that occurred during the second quarter of 2026 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Inherent Limitations on Effectiveness of Controls

Our management, including the CEO and CFO, do not expect that our disclosure controls or our internal control over financial reporting will prevent or detect all error and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. The design of a control system must reflect the fact that the benefits of controls must be considered relative to their costs. Further, because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, will be detected. These inherent limitations include the realities that judgments in decision making can be faulty and that breakdowns can occur because of simple error or mistake. Controls can also be circumvented by the individual acts of some persons, by intentionally falsified documentation, by collusion of two or more individuals within Knowles or third parties, or by management override of the controls. The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Projections of any evaluation of controls effectiveness to future periods are subject to risks. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures.

PART II — OTHER INFORMATION

Item 1. Legal Proceedings

For a discussion of contingencies related to legal proceedings, see Note 14. Commitments and Contingent Liabilities to our Consolidated Financial Statements, which is incorporated herein by reference.

Except as otherwise noted above, there have been no material developments in legal proceedings.

Item 1A. Risk Factors

There have been no material changes from the risk factors previously disclosed under the heading “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2025.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Issuer Purchases of Equity Securities

On February 24, 2020, the Company announced that its Board of Directors had authorized a share repurchase program of up to $100.0 million of the Company's common stock. On April 28, 2022, the Company announced that its Board of Directors had increased the authorization by up to $150.0 million in additional aggregate value. On February 13, 2025, the Company announced another authorization increase of up to $150.0 million in additional aggregate value, for a total of $400.0 million of aggregate value. The timing and amount of any shares repurchased will be determined by the Company based on its evaluation of market conditions and other factors, and will be made in accordance with applicable securities laws in either the open market or in privately negotiated transactions. The Company is not obligated to purchase any shares under the program, and the program may be suspended or discontinued at any time. Any shares repurchased will be held as treasury stock.

Below is a summary of share repurchases for the three months ended June 30, 2026:

Item 5. Other Information

Director and Officer Trading Plans and Arrangements

• Intended to satisfy the affirmative defense conditions of Rule 10b5-1(c)

** Not intended to satisfy the affirmative defense of Rule 10b5-1(c)

Item 6. Exhibits

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31.1 Certification of the Chief Executive Officer pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 31.2 Certification of the Chief Financial Officer pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 32.1 Joint Certification of the Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (101) The following financial information from Knowles Corporation's Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2026 formatted in Inline XBRL: (i) Consolidated Statements of Earnings (Unaudited) for the three and six months ended June 30, 2026 and 2025, (ii) Consolidated Statements of Comprehensive Earnings (Unaudited) for the three and six months ended June 30, 2026 and 2025, (iii) Consolidated Balance Sheets (Unaudited) as of June 30, 2026 and December 31, 2025, (iv) Consolidated Statements of Stockholders’ Equity (Unaudited) for the three and six months ended June 30, 2026 and 2025, (v) Consolidated Statements of Cash Flows (Unaudited) for the six months ended June 30, 2026 and 2025, and (vi) the Notes to the Consolidated Financial Statements (Unaudited) tagged as blocks of text and including detailed tags. (104) The cover page from the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2026, formatted in Inline XBRL and contained in Exhibit 101.