Knowles Corporation reports 86.6% Net Income decline in 2020 and 10.6% Revenue decline
02/04/2021 • About Knowles Corporation (
$KN) • By InTwits
Knowles Corporation reported 2020 financial results today. Here are the key drivers of the company's long term financial model:
- Knowles Corporation is a company in decline: 2020 revenue growth was -10.6%, 5 years revenue CAGR was -2.1%
- Knowles Corporation has medium CAPEX intensity: 5 year average CAPEX/Revenue was 6.0%. At the same time it's a lot of higher than industry average of 3.2%.
- CAPEX is quite volatile: $32m in 2020, $41m in 2019, $80m in 2018, $52m in 2017, $39m in 2016
- The company has potentially unprofitable business model: ROIC is 2.1%
- It operates with medium-size leverage: Net Debt/EBITDA is 0.6x 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 dropped on 10.6%. Annual revenue decline showed slowdown in 20Q4 - revenue increased on 4.0%. Revenue decline was worsened by EBITDA margin decline. EBITDA Margin decreased on 4.0 pp from 16.7% to 12.7% in 2020.
Gross Margin decreased on 2.9 pp from 38.4% to 35.5% in 2020. During the last 5 years Gross Margin topped in 2018 at 39.0% and was declining since that time. SG&A as a % of Revenue showed almost no change in 2020.
Net Income margin decreased on 4.9 pp from 5.7% to 0.86% in 2020. During the last 5 years Net Income margin topped in 2017 at 9.2% and was declining since that time.
Investments (CAPEX, working capital and M&A)
Knowles Corporation's CAPEX/Revenue was 4.2% in 2020. The company showed decline in CAPEX/Revenue of 2.8 pp from 6.9% in 2017 to 4.2% in 2020. It's average CAPEX/Revenue for the last three years was 6.2%. During the last 5 years CAPEX as a % of Revenue topped in 2018 at 9.7% and was declining since that time.
Return on investment
The company operates at low ROIC (2.1%) and ROE (0.5%). ROIC decreased on 3.7 pp from 5.8% to 2.1% in 2020. ROE decreased on 3.4 pp from 3.9% to 0.51% in 2020. During the last 5 years ROE topped in 2017 at 6.4% and was declining since that time.
Leverage (Debt)
Debt level is 0.6x Net Debt / EBITDA and 2.1x Debt / EBITDA. Net Debt / EBITDA dropped on 0.3x from 0.9x to 0.6x in 2020. Debt increased slightly on 0.80% while cash jumped on 88.5%.
Knowles Corporation has short term refinancing risk: cash is only 83.1% of short term debt.
Valuation and dividends
The company's trades at EV/EBITDA 20.2x and P/E 287.8x.
Management team
The company's CEO Jeffrey S Niew "Jeff" has spent 7 years with the company. John S Anderson is a Knowles Corporation's CFO. John S Anderson has spent 7 years at the company.
Financial and operational results
FY ended 12/31/2020
Knowles Corporation ($KN) key annual financial indicators| mln. $ | 2016 | 2017 | 2018 | 2019 | 2020 | 2020/2019 |
|---|
P&L
|
|---|
| Revenue | 859.3 | 744.2 | 826.9 | 854.8 | 764.3 | -10.6% |
| Gross Profit | 328.6 | 286.3 | 322.6 | 328.0 | 271.2 | -17.3% |
| SG&A | 170.7 | 126.3 | 142.5 | 145.7 | 131.5 | -9.7% |
| EBITDA | 120.8 | 97.8 | 130.2 | 142.5 | 96.7 | -32.1% |
| Net Income | -42.3 | 68.3 | 67.7 | 49.1 | 6.6 | -86.6% |
Balance Sheet
|
|---|
| Cash | 66.2 | 111.7 | 73.5 | 78.4 | 147.8 | 88.5% |
| Short Term Debt | 12.1 | 2.5 | 2.4 | 11.7 | 177.9 | 1,420.5% |
| Long Term Debt | 301.7 | 204.9 | 168.2 | 188.8 | 24.2 | -87.2% |
Cash flow
|
|---|
| Capex | 38.7 | 51.6 | 80.1 | 41.2 | 31.9 | -22.6% |
Ratios
|
|---|
| Revenue growth | 1.1% | -13.4% | 11.1% | 3.4% | -10.6% | |
| EBITDA growth | -29.6% | -19.0% | 33.1% | 9.4% | -32.1% | |
|
|---|
| Gross Margin | 38.2% | 38.5% | 39.0% | 38.4% | 35.5% | -2.9% |
| EBITDA Margin | 14.1% | 13.1% | 15.7% | 16.7% | 12.7% | -4.0% |
| SG&A, % of revenue | 19.9% | 17.0% | 17.2% | 17.0% | 17.2% | 0.2% |
| Net Income Margin | -4.9% | 9.2% | 8.2% | 5.7% | 0.9% | -4.9% |
| CAPEX, % of revenue | 4.5% | 6.9% | 9.7% | 4.8% | 4.2% | -0.6% |
|
|---|
| ROIC | 3.4% | 3.0% | 5.8% | 5.8% | 2.1% | -3.7% |
| ROE | -4.2% | 6.4% | 5.8% | 3.9% | 0.5% | -3.4% |
| Net Debt/EBITDA | 2.0x | 1.0x | 0.7x | 0.9x | 0.6x | -0.3x |
Knowles Corporation ($KN) key quoterly financial indicators
| mln. $ | 20Q1 | 20Q2 | 20Q3 | 20Q4 | | YoY change |
|---|
P&L
|
|---|
| Revenue | 163 | 152 | 206 | 243 | | -9.3% | -25.8% | -12.8% | 4.0% |
| EBITDA | 6 | 3 | 29 | 53 | | -70.8% | -90.0% | -40.5% | 12.4% |
| Net Income | -9 | -20 | 6 | 30 | | - | -430.5% | -78.0% | 44.4% |
Balance Sheet
|
|---|
| Cash | 148 | 168 | 139 | 148 | | 257.9% | 214.0% | 99.6% | 88.5% |
| Short Term Debt | 10 | 110 | 10 | 178 | | -15.9% | 863.2% | -13.8% | 1,420.5% |
| Long Term Debt | 283 | 183 | 234 | 24 | | 35.4% | -12.3% | 23.4% | -87.2% |
Ratios
|
|---|
| Gross Margin | 34.5% | 31.4% | 36.5% | 37.8% | | -3.6% | -5.8% | -3.1% | -0.5% |
| EBITDA Margin | 3.5% | 1.8% | 14.0% | 21.6% | | -7.4% | -11.8% | -6.5% | 1.6% |
| Net Income Margin | -5.6% | -12.8% | 2.7% | 12.2% | | -4.1% | -15.7% | -8.0% | 3.4% |
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 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| Cavitation Technologies Inc ($CVAT) | - | -40.9% | 22.6% | -16.3% | 52.6% |
| IEH Corp ($IEHC) | - | 4.0% | 16.6% | 21.0% | 13.2% |
| Amphenol Corporation ($APH) | - | 11.5% | 17.0% | 0.3% | 4.5% |
| Corning Incorporated ($GLW) | - | 7.7% | 11.6% | 1.9% | -1.7% |
| CPS Technologies Corp. ($CPSH) | - | -5.0% | 48.0% | -0.5% | -2.8% |
| |
|---|
| Median (12 companies) | -10.4% | 8.3% | 16.6% | -4.3% | -4.6% |
|---|
| Knowles Corporation ($KN) | - | -13.4% | 11.1% | 3.4% | -10.6% |
Top companies by Gross margin, %
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| Cavitation Technologies Inc ($CVAT) | 93.2% | 93.5% | 90.6% | 93.7% | 97.6% |
| Dolby Laboratories ($DLB) | 89.4% | 89.1% | 87.9% | 87.0% | 87.4% |
| Airgain, Inc. ($AIRG) | 44.4% | 47.1% | 43.7% | 45.4% | 46.6% |
| Rogers Corporation ($ROG) | 38.0% | 38.8% | 35.4% | 35.0% | 36.4% |
| Belden Inc ($BDC) | 41.6% | 39.1% | 39.0% | 37.2% | 35.6% |
| |
|---|
| Median (12 companies) | 33.7% | 34.9% | 36.3% | 35.5% | 33.3% |
|---|
| Knowles Corporation ($KN) | 38.2% | 38.5% | 39.0% | 38.4% | 35.5% |
Top companies by EBITDA margin, %
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| Dolby Laboratories ($DLB) | 30.9% | 30.8% | 25.1% | 27.6% | 28.7% |
| Amphenol Corporation ($APH) | 22.6% | 23.6% | 24.2% | 24.7% | 22.6% |
| Littelfuse, Inc. ($LFUS) | 17.4% | 23.0% | 19.1% | 19.5% | 18.5% |
| Corning Incorporated ($GLW) | 27.9% | 27.3% | 25.4% | 25.7% | 18.0% |
| Rogers Corporation ($ROG) | 18.5% | 21.3% | 18.5% | 18.1% | 17.7% |
| |
|---|
| Median (12 companies) | 13.6% | 8.7% | 9.3% | 17.5% | 15.4% |
|---|
| Knowles Corporation ($KN) | 14.1% | 13.1% | 15.7% | 16.7% | 12.7% |
Top companies by CAPEX/Revenue, %
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| Corning Incorporated ($GLW) | 12.0% | 17.8% | 19.9% | 17.2% | 12.2% |
| Dolby Laboratories ($DLB) | 9.8% | 9.2% | 6.9% | 7.8% | 5.7% |
| Rogers Corporation ($ROG) | 2.8% | 3.3% | 5.4% | 5.7% | 5.0% |
| Vishay Intertechnology, Inc. ($VSH) | 5.8% | 6.6% | 7.6% | 5.9% | 4.9% |
| Belden Inc ($BDC) | 2.3% | 2.7% | 3.8% | 5.2% | 4.8% |
| |
|---|
| Median (12 companies) | 3.0% | 4.2% | 3.8% | 4.6% | 3.6% |
|---|
| Knowles Corporation ($KN) | 4.5% | 6.9% | 9.7% | 4.8% | 4.2% |
Top companies by ROIC, %
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| Amphenol Corporation ($APH) | 18.3% | 19.2% | 21.1% | 19.4% | 18.0% |
| CPS Technologies Corp. ($CPSH) | -10.8% | -19.4% | -11.9% | -9.3% | 13.8% |
| IEH Corp ($IEHC) | 24.2% | 19.2% | 26.1% | 36.6% | 12.8% |
| Vishay Intertechnology, Inc. ($VSH) | 9.8% | 18.4% | 27.8% | 13.2% | 9.9% |
| Dolby Laboratories ($DLB) | 12.2% | 12.0% | 8.4% | 11.4% | 9.6% |
| |
|---|
| Median (12 companies) | 6.4% | 7.0% | 8.4% | 8.5% | 6.9% |
|---|
| Knowles Corporation ($KN) | 3.4% | 3.0% | 5.8% | 5.8% | 2.1% |
Top companies by Net Debt / EBITDA
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| Belden Inc ($BDC) | 2.1x | 2.6x | 2.3x | 3.1x | 4.6x |
| Corning Incorporated ($GLW) | -0.5x | 0.3x | 1.3x | 2.1x | 2.6x |
| Amphenol Corporation ($APH) | 1.4x | 1.1x | 1.2x | 1.4x | 1.1x |
| Bel Fuse Inc. ($BELFA) | - | 1.4x | 1.3x | 3.7x | 1.1x |
| Littelfuse, Inc. ($LFUS) | 1.0x | 0.2x | 0.6x | 0.6x | 0.1x |
| |
|---|
| Median (11 companies) | -0.5x | -0.3x | 0.5x | 0.6x | 0.0x |
|---|
| Knowles Corporation ($KN) | 2.0x | 1.0x | 0.7x | 0.9x | 0.6x |
