Knowles Corp (KN) Business

ITEM 1. BUSINESS

Unless the context otherwise requires, references in this Annual Report on Form 10-K to “Knowles,” the “Company,” “we,” “our,” or “us” refer to Knowles Corporation and its consolidated subsidiaries.

Our Company

We are a leading manufacturer of specialty electronic components. We design parts that perform unique, critical functions for innovative technologies. Through extreme reliability, custom engineering, and scalable manufacturing, our high-performance capacitors, radio frequency (“RF”) filters, advanced microphones, and balanced armature speakers enable and enhance the most demanding applications across medtech, defense, industrial, and electrification/energy markets with the power to change, improve, and save lives. Founded in 1946 and headquartered in Itasca, Illinois, Knowles has grown into a global organization with approximately 5,200 employees at facilities located in 11 countries around the world.

Our Strategy

The Company is focused on leveraging its unique technologies to design custom engineered solutions and then deliver them at scale for customers in high growth markets that value our solutions.

In our Precision Devices ("PD") segment, our high-performance capacitors and RF filtering solutions enable some of the most demanding applications in the defense, industrial, medtech, and electrification/energy markets. Our capacitor portfolio includes products with highly specialized requirements including high voltage, high temperature, and high reliability. We also deliver RF filtering solutions across a broad range of applications and frequencies primarily serving the defense market. We continue to focus on sales growth and improved margins by expanding our presence in profitable markets through organic initiatives and acquisitions.

In our Medtech & Specialty Audio ("MSA") segment, our primary focus is to deliver high reliability and industry leading balanced armature speakers and microphones to leading hearing health manufacturers and specialty audio markets. We work collaboratively with customers to ensure that our solutions meet their size, broad frequency response, and low power or custom acoustic module requirements. We continue to focus on sales growth and improved margins by leveraging our core strengths in manufacturing and research and development.

Our Business Segments

We have two reportable segments - Precision Devices ("PD") and MedTech & Specialty Audio ("MSA"). These segments were determined in accordance with Financial Accounting Standards Board Accounting Standards Codification 280 - Segment Reporting. The segments are aligned around similar product applications serving our key end markets to enhance focus on end market growth strategies.

Our reportable segments are as follows:

•PD Segment

Our PD segment specializes in the custom design and delivery of high performance capacitor products and RF solutions primarily serving the defense, industrial, medtech, and electrification/energy markets. PD has sales, support, and engineering facilities in North America, Europe, and Asia as well as manufacturing facilities in North America and Asia.

•MSA Segment

Our MSA segment designs and manufactures balanced armature speakers and microphones used in hearing health and specialty audio applications that serve the medtech and industrial markets. MSA has sales, support, and engineering facilities in North America, Europe, and Asia, as well as manufacturing facilities in Asia.

We sell our products directly to original equipment manufacturers ("OEMs") and through sales representatives and distributors worldwide.

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Market Trends

In our PD segment, global conflict has given rise to increasing defense spending on electronic warfare, including an increasing array of new technologies to address rapidly evolving threats and adversaries. Many suppliers that provide technical, engineering, and manufacturing services for the defense sector are located in, or have facilities located in, countries that are viewed as potential strategic adversaries. As a result, there is a rising demand for supply partners throughout the value chain that can reliably and rapidly deliver custom solutions with strong domestic manufacturing footprints.

Within PD, the demand for high performance capacitors, including specialty film, is seeing potentially large growth as alternative technologies emerge to address the accelerating demand for power.

The trend toward domestic manufacturing footprints in the PD segment is amplified and extends across many of the markets we serve by the recent rise of trade barriers, including tariffs, as companies seek to mitigate the effect on their costs and the prices passed through to their customers.

In our MSA segment, as life expectancy rates increase and the aging population grows, the correlating health care expenditures are increasing. These demographic changes and the expansion of hearing health care access in emerging markets is expected to drive volume growth for hearing aids. In addition, recent U.S. government regulations have enabled people with mild hearing loss to buy hearing aids over-the-counter. This opens new channels for individuals in a demographic with extremely low hearing aid adoption, and may serve to reduce the stigma associated with hearing aids.

Competitive Landscape

Success in the specialty electronic components industry is primarily driven by innovation and customization. Our customers drive innovation and change, and with our strong intimacy of customer applications, we are able to produce solutions that are critical for the success and creation of their products. Another of our differentiators is our ability to customize at scale. Through our deep engineering expertise we are positioned to offer our customers uniquely customized components, rooted in the standards of exceptional quality and reliability. Key competitors of our PD segment include: Kyocera AVX, Yageo Corporation's Kemet products, Vishay Intertechnology, and a broad range of specialty companies and brands. Our MSA segment's primary competitor is Sonion.

In the PD segment, the end markets tend to have less pricing pressure. We see a fragmented set of competitors across high end capacitors and RF filters for a diverse set of end markets including defense, medtech, industrial, and electrification/energy.

In the MSA segment, our leading technology and our investments in research and development enable us to introduce new products focused on high reliability, size, broad frequency response, and low power. Our customers are adopting these high-value microphones and balanced armature speakers to improve the overall audio performance of their devices which in turn improves the end user experience. For products that were introduced in prior years, we strive to offset anticipated price erosion through bill of material cost reductions, productivity improvements, and equipment efficiency.

Customers, Sales, and Distribution

We serve customers in the medtech, defense, industrial, and electrification/energy markets. Our customers include some of the largest OEMs and operators in these markets. In addition, many of our OEM customers outsource to contract manufacturers.

We manufacture and develop our products as well as maintain sales and technical customer support offices in North America, Europe, and Asia. We supplement our direct sales force with external sales representatives and distributors. Our global distribution center is located in Penang, Malaysia. Our worldwide sales force provides geographically specific support to our customers and specialized selling of product lines to various customer bases.

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The Company's customers that accounted for 10% or more of total revenues in 2025 were WS Audiology A/S and TTI, Inc. WS Audiology is a hearing aid manufacturer and TTI is a distributor of electromechanical components. They each represented the following percentages of total Company revenues:

* Less than 10% of total revenues.

For further detail and for additional disclosures regarding sales and long-lived assets by geographic location, see Note 17. Segment Information to our Consolidated Financial Statements under Item 8, "Financial Statements and Supplementary Data."

Raw Materials

We use a wide variety of raw materials, primarily metals, ceramic powder, and semi-processed or finished components. Commodity pricing for various metals, such as palladium, gold, brass, stainless steel, and copper, fluctuates. As a result, our operating results are exposed to such fluctuations. Although some cost increases may be recovered through increased prices to customers, if commodity prices trend upward, we attempt to control such costs through fixed-price contracts with suppliers and various other programs.

We rely on highly specialized suppliers or foundries for critical materials, components, or subassemblies that are used in our products which, in some cases, may be sole sourced from such suppliers or foundries or, such suppliers or foundries may also be a strategic supplier to one of our competitors or a customer. The loss of any single supplier has not had a material impact on operating profits. However, should an event occur which affects the ability or willingness of any supplier or foundry to continue to deliver materials or components to us in a timely manner, we may not be able to identify or qualify an alternative supplier in a timely manner which, in any such period and future periods, could have a material adverse impact on our results of operations. See Item 1A. Risk Factors for additional information regarding risks related to our business.

Research and Development

We concentrate our research and development efforts on the design and development of new products for each of our principal markets. We also fund certain other emerging product and technology opportunities. Our future success is highly dependent upon our ability to develop complex new products, having them selected for design into our customers’ products at competitive prices, transfer new products to volume production, and introduce them into the marketplace in a timely fashion. We may benefit from increasing content in our customers’ products, including assisting our customers with integration of our products into their new products and providing support from the concept stage through design, launch, and production ramp.

Intellectual Property and Intangible Assets

We rely on patent, copyright, trademark, and trade secret laws to protect our intellectual property, products, and technology. Our U.S. patents expire in calendar years 2026 through 2045. While our patents are an important element of our success, our business as a whole is not dependent on any one patent or group of patents. We do not anticipate any material effect on our business due to any patents expiring in 2026, and we continue to obtain new patents through our ongoing research and development. We have maintained U.S. federal trademark registrations for KNOWLES and Knowles logo designs, along with various other trademarks. These U.S. registrations may be renewed as long as the marks continue to be used in interstate commerce. We have also filed or obtained foreign registration for these marks in other countries or jurisdictions where we conduct, or anticipate conducting, international business. To complement our own research and development efforts, we have also licensed and expect to continue to license, a variety of intellectual property and technologies important to our business from third parties. See Item 1A. Risk Factors for additional information regarding risks related to our business.

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Cybersecurity

We regularly perform risk assessments relating to cybersecurity and technology risks. We have a risk-based cybersecurity program, dedicated to protecting our data as well as data belonging to our customers and partners. We utilize a defensive in-depth strategy, with multiple layers of security controls to protect our data and solutions. We mitigate cybersecurity risks by employing extensive measures, including employee training, systems monitoring and testing, and maintenance of protective systems and contingency plans. We continually evaluate ourselves for appropriate business continuity and disaster recovery planning, with test scenarios that include tabletop exercise simulations and penetration tests. We also install and regularly update antivirus software on all Company-managed systems to detect and prevent malicious code from impacting our systems.

Seasonality

Our PD segment is not typically subject to seasonality, while our MSA segment tends to have stronger revenues in the fourth quarter of each fiscal year in connection with our customers' new product introductions.

Human Capital Management

As of December 31, 2025, Knowles employed approximately 5,200 employees across facilities located in 11 countries around the world. Our ability to attract, develop, and retain a high‑performing workforce is essential to executing our business strategy and driving sustainable growth. Oversight of our human capital strategy resides with our Chief Human Resources Officer and the Compensation Committee of the Board of Directors.

We recognize that our people are our most valuable asset. To successfully execute our strategy, we implement targeted recruitment efforts to attract top talent with the skills and experience necessary to advance our business objectives. This includes positioning Knowles as an employer of choice through digital platforms, industry events, and university partnerships; leveraging regional talent networks across 11 countries; and utilizing technology‑driven hiring solutions that expand candidate reach, enhance engagement, and accelerate hiring timelines.

We invest in continuous learning and career development to ensure employees have the skills and opportunities to thrive. This includes tuition reimbursement and education assistance programs, structured training focused on technical skills, leadership development and compliance, robust succession planning to prepare future leaders, and mentorship and coaching programs that foster knowledge sharing and career progression.

Knowles is committed to the advancement of women in engineering and the broader representation of women in STEM careers. To help bridge the gender gap and shape the next generation of women technology leaders, we partner with local organizations and universities. For example, Knowles is the perennial sponsor of the University of Illinois at Chicago’s Women in Engineering Summer Program and has supported UIC’s women engineering students through academic scholarships, summer internships, mentorship opportunities, and full‑time employment pathways.

We are also deeply committed to supporting our communities. In 2025, Knowles continued its support of PEAK (Partnership to Educate and Advance Kids), a Chicago‑based nonprofit that provides educational and personal support to underserved students. Knowles pledges $10,000 annually to fund a PEAK student’s high‑quality high school education.

To attract and retain top talent, we offer a competitive total rewards program aligned with our pay‑for‑performance philosophy. Our offerings include base pay, short‑ and long‑term incentive plans, healthcare benefits, retirement plans, paid time off, family leave, and employee assistance programs.

We believe it is important to provide a healthy and safe workplace for our employees. As part of our Environmental, Health, and Safety Policy, we train employees and managers on preventing work-related injuries and illnesses. In addition, our Environmental, Health & Safety ("EHS") Managers across the globe conduct regular reviews of key EHS performance indicators, which include the reporting and correction of any unsafe workplace behaviors, working conditions that could potentially lead to injury, or workplace incidents or illnesses that required first air or other medical treatment.

Additional information regarding Knowles' activities related to its people and sustainability, as well as workforce data, can be found in the Knowles 2025 Corporate Sustainability Report, which is located on our website. The contents of our website and our Corporate Sustainability Report are referenced for general information only and are not incorporated into this Annual Report on Form 10-K.

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Other Information

The address of our principal executive offices is 1151 Maplewood Drive, Itasca, Illinois 60143. Our telephone number is 630-250-5100.

Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and any amendments to these reports are available, free of charge, on the "Financial Information - SEC Filings” link on the Investor Relations section of our website, www.knowles.com. We post each of these reports on our website as soon as reasonably practicable after the report is filed with or furnished to the Securities and Exchange Commission ("SEC"). The SEC maintains a website that contains these reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC (www.sec.gov).

Our corporate governance policies, Code of Business Conduct, and Board committee charters and policies are also posted on the Investor Relations section of our website. The information contained in, and that can be accessed through our website is not incorporated into and does not form a part of this Annual Report on Form 10-K.