Knowles Corporation CAPEX jumped on 55.2% and Revenue surged on 11.1%
02/07/2019 • About Knowles Corporation (
$KN) • By InTwits
Knowles Corporation reported 2018 financial results today. Here are the key drivers of the company's long term financial model:
- Knowles Corporation has medium CAPEX intensity: 5 year average CAPEX/Revenue was 7.2%. At the same time it's a lot of higher than industry average of 7.6%.
- CAPEX is quite volatile: $7m in FY2018, $3m in FY2017, $6m in FY2016, $9m in FY2015, $12m in FY2014
- The company has potentially unprofitable business model: ROIC is 5.8%
- It operates with medium-size leverage: Net Debt/EBITDA is 0.7x while industry average is -0.7x
Below you can find a comprehensive analysis of the key data driving the company's performance and the stock price.
Revenue and profitability
The company's Revenue surged on 11.1%. Revenue growth showed slowdown in 18Q4 - it was 3.9% YoY. Revenue decline was accompanies by EBITDA margin decline. EBITDA Margin dropped on 10.9 pp from 12.8% to 1.9% in 2018.
Gross Margin increased slightly on 0.54 pp from 38.5% to 39.0% in 2018. Gross Margin followed a growing trend in the last 5 years. SG&A as a % of Revenue showed almost no change in 2018.
Net Income margin decreased slightly on 0.99 pp from 9.2% to 8.2% in 2018.
Investments (CAPEX, working capital and M&A)
In 2018 Knowles Corporation had CAPEX/Revenue of 9.7%. Knowles Corporation's CAPEX/Revenue increased on 2.3 pp from 7.4% in 2015 to 9.7% in 2018. For the last three years the average CAPEX/Revenue was 7.0%. To deliver its fast growth the company invested a large share of EBITDA (61.5%) to CAPEX.
Return on investment
The company operates at low ROIC (5.8%) and ROE (5.8%). ROIC increased on 2.7 pp from 3.0% to 5.8% in 2018. ROE decreased slightly on 0.60 pp from 6.4% to 5.8% in 2018. ROIC followed a growing trend at 1.8 pp per annum in the last 5 years.
Leverage (Debt)
Debt level is 0.7x Net Debt / EBITDA and 1.3x Debt / EBITDA. Net Debt / EBITDA dropped on 0.2x from 1.0x to 0.7x in 2018. Debt dropped on 17.7% while cash dropped on 34.2%. Net Debt/EBITDA stuck to a declining trend at -0.7x per annum in 2014-2018.
Knowles Corporation has no short term refinancing risk: cash is higher than short term debt (3,062.5%).
Valuation and dividends
The company's trades at EV/EBITDA 11.8x and P/E 21.3x.
Management team
The company's CEO is Jeffrey S Niew "Jeff". Jeffrey S Niew "Jeff" is a founder and has 5 years tenure with the company. The company's CFO John S Anderson has spent 5 years with the company.
Financial and operational results
FY ended 12/31/2018
Knowles Corporation ($KN) key annual financial indicators| mln. $ | 2014 | 2015 | 2016 | 2017 | 2018 | 2018/2017 |
|---|
P&L
|
|---|
| Revenue | 1,141 | 850 | 859 | 744 | 827 | 11.1% |
| Gross Profit | 233 | 312 | 329 | 286 | 323 | 12.7% |
| SG&A | 197 | 172 | 171 | 126 | 142 | 12.8% |
| EBITDA | 99 | 172 | 121 | 98 | 130 | 33.1% |
| Net Income | -87 | -234 | -42 | 68 | 68 | -0.9% |
Balance Sheet
|
|---|
| Cash | 55 | 63 | 66 | 112 | 74 | -34.2% |
| Short Term Debt | 15 | 33 | 12 | 3 | 2 | -4.0% |
| Long Term Debt | 385 | 415 | 302 | 205 | 168 | -17.9% |
Cash flow
|
|---|
| Capex | 84 | 63 | 39 | 52 | 80 | 55.2% |
Ratios
|
|---|
| Revenue growth | -6.1% | -25.6% | 1.1% | -13.4% | 11.1% | |
| EBITDA growth | -64.1% | 74.3% | -29.6% | -19.0% | 33.1% | |
|
|---|
| Gross Margin | 20.4% | 36.8% | 38.2% | 38.5% | 39.0% | 0.5% |
| EBITDA Margin | 8.6% | 20.2% | 14.1% | 13.1% | 15.7% | 2.6% |
| SG&A, % of revenue | 17.2% | 20.2% | 19.9% | 17.0% | 17.2% | 0.3% |
| Net Income Margin | -7.6% | -27.5% | -4.9% | 9.2% | 8.2% | -1.0% |
| CAPEX, % of revenue | 7.4% | 7.4% | 4.5% | 6.9% | 9.7% | 2.8% |
|
|---|
| ROIC | -3.0% | 2.3% | 3.4% | 3.0% | 5.8% | 2.7% |
| ROE | -5.6% | -20.8% | -4.2% | 6.4% | 5.8% | -0.6% |
| Net Debt/EBITDA | 3.5x | 2.2x | 2.0x | 1.0x | 0.7x | -0.2x |
Knowles Corporation ($KN) key quoterly financial indicators
| mln. $ | 18Q1 | 18Q2 | 18Q3 | 18Q4 | | YoY change |
|---|
P&L
|
|---|
| Revenue | 179 | 188 | 236 | 224 | | 6.1% | 14.6% | 20.5% | 3.9% |
| EBITDA | 18 | 23 | 43 | 46 | | 7.2% | | 26.3% | -8.3% |
| Net Income | -0 | 5 | -16 | 80 | | | | -203.2% | -6.9% |
Balance Sheet
|
|---|
| Cash | 63 | 51 | 69 | 74 | | -0.9% | 4.5% | 18.9% | -34.2% |
| Short Term Debt | 0 | 0 | 0 | 2 | | -100.0% | -100.0% | -100.0% | -4.0% |
| Long Term Debt | 194 | 196 | 188 | 168 | | -32.2% | -31.1% | -36.9% | -17.9% |
Ratios
|
|---|
| Gross Margin | 36.6% | 38.9% | 38.0% | 42.1% | | 1.3% | 0.4% | 0.2% | 0.6% |
| EBITDA Margin | 10.0% | 12.4% | 18.1% | 20.7% | | 0.1% | 14.4% | 0.8% | -2.7% |
| Net Income Margin | -0.2% | 2.4% | -6.9% | 35.6% | | 1.7% | 20.5% | -14.9% | -4.1% |
Peers in Electronic Components
Below we provide Knowles Corporation benchmarking against other companies in Electronic Components industry for the last 5 years. We show data for the top-5 companies by key financial metric together with the median value for all the companies in the industry.
Top companies by Revenue growth, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Superconductor Technologies Inc. ($SCON) | | -61.4% | -46.3% | 240.5% | 248.9% |
| Akoustis Technologies, Inc. ($AKTS) | | | | | 148.3% |
| CPS Technologies Corp. ($CPSH) | | -5.9% | -29.5% | -5.0% | 48.0% |
| Littelfuse, Inc. ($LFUS) | | 1.9% | 21.7% | 15.7% | 40.7% |
| Cavitation Technologies Inc ($CVAT) | | -73.6% | 267.5% | -40.9% | 22.6% |
| |
|---|
| Median (22 companies) | | 0.0% | 2.1% | 8.3% | 16.6% |
|---|
| Knowles Corporation ($KN) | | -25.6% | 1.1% | -13.4% | 11.1% |
Top companies by Gross margin, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Cavitation Technologies Inc ($CVAT) | 93.5% | 85.0% | 93.2% | 93.5% | 90.6% |
| Dolby Laboratories ($DLB) | 92.7% | 90.2% | 89.4% | 89.1% | 87.9% |
| Flexpoint Sensor Systems Inc ($FLXT) | 96.7% | 95.2% | 92.7% | 87.9% | 86.1% |
| Airgain, Inc. ($AIRG) | 44.6% | 41.9% | 44.4% | 47.1% | 43.7% |
| II-VI Incorporated ($IIVI) | 33.2% | 36.6% | 37.8% | 40.0% | 39.8% |
| |
|---|
| Median (22 companies) | 33.2% | 36.6% | 33.7% | 34.9% | 36.3% |
|---|
| Knowles Corporation ($KN) | 20.4% | 36.8% | 38.2% | 38.5% | 39.0% |
Top companies by EBITDA margin, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Corning Incorporated ($GLW) | 32.2% | 27.5% | 27.9% | 27.3% | 25.4% |
| Dolby Laboratories ($DLB) | 34.1% | 29.1% | 30.9% | 30.8% | 25.1% |
| Amphenol Corporation ($APH) | 22.5% | 22.9% | 22.6% | 23.6% | 24.2% |
| Vishay Intertechnology, Inc. ($VSH) | 14.8% | 11.9% | 15.4% | 18.7% | 21.3% |
| IEH Corp ($IEHC) | 18.4% | 21.2% | 18.0% | 16.3% | 20.2% |
| |
|---|
| Median (22 companies) | 9.4% | 11.9% | 13.6% | 8.7% | 9.3% |
|---|
| Knowles Corporation ($KN) | 8.6% | 20.2% | 14.1% | 13.1% | 15.7% |
Top companies by CAPEX/Revenue, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Akoustis Technologies, Inc. ($AKTS) | | | | 334.0% | 574.7% |
| CBAK Energy Technology, Inc. ($CBAK) | 8.0% | 92.4% | 57.2% | 20.6% | 30.1% |
| Corning Incorporated ($GLW) | 11.1% | 13.7% | 12.0% | 17.8% | 19.9% |
| II-VI Incorporated ($IIVI) | 4.3% | 7.1% | 7.0% | 14.3% | 13.2% |
| Superconductor Technologies Inc. ($SCON) | 586.1% | 57.8% | 0.0% | 34.1% | 12.1% |
| |
|---|
| Median (22 companies) | 3.9% | 2.7% | 3.0% | 4.2% | 3.8% |
|---|
| Knowles Corporation ($KN) | 7.4% | 7.4% | 4.5% | 6.9% | 9.7% |
Top companies by ROIC, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Vishay Intertechnology, Inc. ($VSH) | 8.3% | 4.5% | 9.8% | 18.4% | 27.8% |
| IEH Corp ($IEHC) | 27.7% | 28.2% | 24.2% | 19.2% | 26.1% |
| Amphenol Corporation ($APH) | 19.1% | 18.5% | 18.3% | 19.2% | 21.1% |
| Inrad Optics Inc ($INRD) | -26.7% | -5.2% | -9.2% | -10.4% | 17.7% |
| Littelfuse, Inc. ($LFUS) | 14.3% | 11.1% | 11.7% | 15.8% | 12.1% |
| |
|---|
| Median (22 companies) | 6.9% | 6.1% | 6.4% | 7.0% | 8.4% |
|---|
| Knowles Corporation ($KN) | -3.0% | 2.3% | 3.4% | 3.0% | 5.8% |
Top companies by Net Debt / EBITDA
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Belden Inc ($BDC) | 3.9x | 5.2x | 2.1x | 2.6x | 2.3x |
| Inrad Optics Inc ($INRD) | | 9.9x | | | 1.4x |
| Corning Incorporated ($GLW) | -0.7x | -0.0x | -0.5x | 0.3x | 1.3x |
| Bel Fuse Inc. ($BELFA) | 4.6x | 2.0x | | 1.4x | 1.3x |
| Amphenol Corporation ($APH) | 1.4x | 0.8x | 1.4x | 1.1x | 1.2x |
| |
|---|
| Median (14 companies) | -0.6x | -0.3x | -0.5x | -0.3x | 0.5x |
|---|
| Knowles Corporation ($KN) | 3.5x | 2.2x | 2.0x | 1.0x | 0.7x |
