Good afternoon, and thank you for attending today's Knowles second quarter 2023 earnings conference call. My name is Kayla Baker, and I will be your conference operator today. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session. If you'd like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you'd like to withdraw your question, again, press the star and one. I will now pass the conference over to your host, Patton Hofer, Vice President of Investor Relations with Knowles. Thank you, and you may proceed. Thanks, Kayla, and welcome to our Q2 2023 earnings call. I'm Patton Hofer, Vice President of Investor Relations, and presenting with me on the call today are Jeffrey Niew, our President and CEO, and John Anderson, our Senior Vice President and CFO. Our call today will include remarks about future expectations, plans, and prospects for Knowles, which constitute forward-looking statements for purposes of the safe harbor provisions under applicable federal securities law. Forward-looking statements in this call will include comments about demand for company products, anticipated trends in company sales, expenses, and profits, involve a number of risks and uncertainties that could cause actual results to differ materially from current expectations. The company urges investors to review the risks and uncertainties that the company's SEC filings, including but not limited to, the annual report on Form 10-K for the fiscal year ended December 31st, 2022, periodic reports filed from time to time with the SEC, and the risks and uncertainties identified in today's earnings release. All forward-looking statements are made as of the date of this call, Knowles disclaims any duty to update such statements, except as required by law. In addition, pursuant to Reg G, any non-GAAP financial measures referenced during today's conference call can be found in our press release posted on our website at knowles.com, and in our current report on Form 8-K, filed today with the SEC, including a reconciliation to the most directly comparable GAAP measure. All financial references on this call will be on a non-GAAP continuing operation basis, unless otherwise indicated. We've made selected financial information available on the webcast slides, which can be found on the investor relations section of our website. With that, let me turn the call over to Jeff, who will provide some details on our results. Jeff? Thanks, Patton, and thanks to all of you for joining us today. Knowles delivered solid results for the second quarter, with revenues of $173 million, adjusted EBIT margins of 16%, and EPS of $0.23, all finishing above the midpoint of our guided range. Gross margins of 42% finished above the high end of the guided range, as our teams around the globe continued to improve efficiency, reduce fixed costs, and improve mix in light of the macro challenges in certain end markets. In Precision Devices, Q2 revenue was down 20% from the prior year. Inventory challenges in the industrial, distribution, and telecom markets have continued as we've experienced further revenue weakness in Q2. Defense was down versus the prior year, as delays in project awards impacted Q2 bookings and revenue. Finally, the electric vehicle market remains exciting for Knowles, growing again in Q2 versus the prior year, as we continue to secure additional design wins for onboard and fixed infrastructure charging. In MedTech and Specialty Audio, revenue was down 2% from the prior year, but up more than 30% sequentially, as customer inventory levels declined faster than we originally anticipated. We are definitely past the inventory correction we experienced in the first quarter of 2023. I'd also like to take a moment to commend our MSA team, as they delivered outstanding margins in the quarter, a true testament to our differentiated products and operational excellence in our factories. In Consumer MEMS Microphones, revenue is down 3% from last year. Non-mobile was up versus the prior year, driven by new product launches and improved demand in ear and IoT. Computing was also a bright spot in the quarter, finishing better than expected, as channel inventory sell-through has improved and upgrade cycles are returning earlier than previously expected. While the smartphone market continues to be very difficult, especially in China, the shift of mix toward ear, IoT, and compute is positively impacting gross margins in this segment. I'll spend a few minutes discussing the current customer and market conditions for each segment before turning the call over to John to provide the third quarter guidance. Starting with Precision Devices segment, in the industrial and telecom markets, which currently make up approximately 10% of total company revenue, we are seeing continued weakness as inventory levels remain elevated. We previously expected the inventory situation to improve in the second half, but based on the current outlook, we are now expecting these markets to be down the remainder of the year. For our three key end markets, Defense, MedTech, and EV, the long-term outlook is unchanged from our previous expectations. Knowles continues to expand its design wins in these growth markets with a broad range of customers. Based on current demand, we expect to return to year-over-year growth starting in Q3. For Defense, our previous revenue projections for the year factored a number of bookings in Q2 for communications, radar, and electronic warfare programs, which have been delayed. While we believe our position in our core markets for PD, along with the secular trends within these markets, are unchanged, continued weakness in industrial and in delayed bookings in Defense are reducing our expectations for revenue in the second half of 2023. To mitigate the impact of these delays, we've implemented several measures to reduce costs in Precision Devices to improve profitability. John will provide more detail on these actions during his portion of the call. Moving to MedTech & Specialty Audio, the hearing health market demand has stabilized as hearing aid inventories around the globe have returned to more normal levels. Our Q3 guide reflects a more than 20% revenue growth versus the prior year, driven by the improved inventory situation and increases in demand in the traditional hearing aid market, particularly in the US. It is a very positive sign that we are returning to growth in the second half of 2023, which provides confidence for growth in 2024. Lastly, on to our Consumer MEMS Microphone segment. Due to the normal seasonality of this business and improving market conditions in non-mobile, we are expecting sequential improvement for revenue throughout the remainder of the year. The second half recovery is now expected to be less pronounced than we previously discussed, driven primarily by the smartphone market. In non-mobile applications, second half demand in computing and ear IoT are expected to be up significantly versus the prior year, driven by improved channel inventory levels and replacement cycles in computing. In the smartphone market, demand expectations for new products and further weakness in China are driving additional pressure on the recovery in this business, ultimately limiting the upside in the back half of 2023 for CMM. Overall for Knowles, although the outlook for improvements in revenue in the second half have softened, we are still expecting margin expansion and earnings growth versus the prior year. In MSA's inventory situation and hearing health market is behind us, as forecasted, we are increasingly confident of second half revenue growth. In Precision Devices, continued weakness in the industrial market, coupled with delays in defense orders, have impacted revenue expectations for the remainder of 2023. We believe, however, the secular trends in defense, MedTech, and EV markets remain robust. Lastly, for CMM, we are seeing a slower recovery in consumer electronics, primarily due to the smartphone market and softer demand in China. In summary, we are now expecting total company revenues in the second half of the year to be near prior year levels. With the cost efficiencies and actions we've implemented, along with favorable mix, we expect our second half adjusted EBIT margins to be greater than 19%. Let me turn the call over to John to detail our quarterly results and guidance. Thanks, Jeff. We reported second quarter revenues of $173 million, down 8% from the year-ago period, driven primarily by lower shipment volumes in Precision Devices and Consumer MEMS Mics. The Precision Devices segment delivered revenues of $48 million, down 20% from the prior year, driven by continued weak demand associated with excess channel inventory in the industrial and distribution markets and timing of shipments into the defense market. In the MedTech and Specialty Audio segment, revenue was $61 million, down 2% versus the prior year, as we face tough year-over-year comparables as the first half of 2022 demand benefited from strong COVID recovery. Consumer MEMS Mic revenue of $65 million was down 3% versus the prior year, driven by weak global demand for smartphones, partially offset by growth in non-mobile applications. Second quarter gross margins were 42%, 100 basis points above the high end of our guidance range and up 50 basis points from the same period a year ago. Precision Devices segment gross margins were 39.7%, down 700 basis points from the prior year due to unfavorable capacity utilization. MedTech & Specialty Audio segment gross margins were 53.5%, up 410 basis points versus the prior year, driven by productivity gains, lower factory cost, and foreign currency benefits. Consumer MEMS Microphones delivered gross margins of 33.6%, up 340 basis points versus the prior year, driven by benefits of the restructuring actions announced in August 2022, improved product mix, and a gain on the sale of assets, partially offset by pricing pressure in the mobile market. R&D expense in the quarter was $16 million, down $2 million from the prior year, with the reduction driven by the benefits of the restructuring actions taken in the Consumer MEMS Microphone segment. SG&A expenses were $30 million, $6 million higher than prior year levels, driven primarily by higher incentive compensation costs and higher professional and legal fees, partially offset by restructuring actions in the Consumer MEMS Microphone segment. For the quarter, adjusted EBIT margin was 16% at the high end of the guidance range. EPS was $0.23 in the quarter, slightly above the midpoint of our guidance range. Now, I'll turn to our balance sheet and cash flow. Cash and cash equivalents totaled $54 million at the end of the quarter. We generated cash from operations of $1 million, above the midpoint of our guidance range, driven by timing of customer collections. Capital spending was $4 million in the quarter, we repurchased approximately 300,000 shares at a total cost of $5 million. We ended the quarter with cash, net of outstanding bank borrowings of $9 million. Before moving to guidance for the third quarter, I want to comment briefly on some of the specific cost reduction actions we're taking within the Precision Devices segment to mitigate the impacts of our reduced revenue outlook. In Q3, we expect to incur a charge of roughly $2 million, which is expected to result in annualized cost savings of more than $5 million. These actions will be in place by the end of this year, when implementation is complete, we expect PD operating margins to return near 2022 levels. This will also put total company operating expenses at the low end of our previous range of $43 million-$45 million per quarter. Moving to guidance for the third quarter. We expect total company revenue to be between $170 million-$180 million, down 2% versus the same period a year-ago. We estimate gross margins for the third quarter to be approximately 41.5%-43.5%, up 400 basis points from the year-ago period. R&D expense is expected to be between $15 million-$17 million, down slightly from prior year levels, driven by restructuring actions in the Consumer MEMS Mic segment. We're projecting selling and administrative expense to be between $24 million-$26 million, down $1 million from the year-ago period, primarily driven by restructuring actions in the Consumer MEMS and Precision Devices segments. We're projecting adjusted EBIT margin for the quarter to be in the range of 18%-20% and expect EPS to be within a range of $0.26-$0.30 per share. This assumes weighted average shares outstanding during the quarter of 94.8 million on a fully diluted basis. We're forecasting an effective tax rate of 18%-19% for the quarter. We expect cash from operations to range from $20 million-$30 million. Capital spending is expected to be $7 million. I'll now turn the call back over to the operator for the question-and-answer portion of the call. Operator? At this time, I would like to remind everyone, in order to ask a question, press star, then the number one on your telephone keypad. Our first question comes from the line of Christopher Rolland with Susquehanna. Your line is open. Hey, guys, thanks so much for the question here. Just talking about maybe your largest customer, what we can kind of expect for the back half. I know you've been de-emphasizing them over time. Seems like strength came from other areas of the market as well. How does this affect seasonality? In particular, for your whole company, you were expecting to have, you know, really a strong seasonal December, like 20th, 20+% sequential, I think, was where the street was. Does this come into play here at all, or is this still just PD related that might dampen that? Thank you. Yeah, so I would sit there and say, you know, generally speaking, you know, without going into the customer specifics, I think we're pretty close to where we thought the CMM business would be in the back half. It's not altogether. It's slightly down, but driven primarily by smartphone and, you know, in, in, in China. I think, you know, ear, IoT, and compute, you know, continue to, to look relatively strong for us, but smartphone is definitely coming in weaker, and, and I would say even more specific, China is coming in weaker. As you know, our overall expectations, you know, for CMM is, is probably slightly less than we would have said, 3 months ago. I think the, you know, the primary driver of what we kind of talked about here would probably be more on the PD side, versus the prior expectations. Yeah. Then on the PD side of things as well, I get, the, the, the push-outs, defense-related and, and other. It sounds like maybe there's some inventory as well. Maybe go through where you think there's some inventory build, where you think it is in terms of weeks or however you want to, you know, define it, and when you think that inventory is, is finally gonna work through here, and what, what kind of caught you guys by surprise on the inventory side as well? Thanks. Well, I think in the original projections for PD, we were kind of starting to see a recovery in the industrial/distribution portion of the business in the back half, and right now, we're not seeing that recovery at all, quite frankly. I think that's going to be delayed into 2024, the recovery in industrial and distribution. To make a few more comments, you know, MedTech, it was stable in the first half, I'd call it. We do expect a return to growth in the back half for MedTech with the PD. Then I'll just make a comment on defense. You know, there's been a number of larger programs that have been delayed, which, you know, we, we haven't changed our position, but it's been delayed. The one I can kind of call out, Chris, is more specific. You know, Lockheed just announced about a week ago or a little more than a week ago that they were going to deliver 150 Joint Strike Fighters this year. That was the original projection, and now they're projecting to deliver only 110 due to a number of issues on their side. That's the kind of delays we're talking about here in defense. There's a couple other, you know, larger programs like that. Our position in defense really hasn't changed, and the long-term prognosis for defense still looks very good. But some of these orders are delayed, and, you know, we, we expected to get some of these orders in Q2. They didn't materialize, you know, and they're probably going to materialize in the back half, but it, it really draws into question whether we can deliver them within, the calendar year 2023. Great. Thanks so much, Jeff. Yep. The next question comes from the line of Bob Labick with CJS Securities. Your line is open. Hi, it's Lee Jagoda for Bob tonight. How are you? Okay. Hi, Lee. Just to start with, just to clarify your guidance, I think I heard you say in the back half in total, you expect flat revenues and EBITDA margins north of 19%. Is that correct? That is correct. Okay. I guess that would also imply around flat revenue for Q4. I guess the question or the first question is, how much of that is conservatism without visibility versus you have visibility to what looks to be flat revenue consolidated? Well, I would sit there and say is, you know, let me go through it by business unit. I think we're very comfortable, you know, with the projections within the MSA, the MedTech and Specialty Audio. We do have growth year-over-year in the back half. You know, as we kind of talked about in the consumer microphone business, you know, I would say, you know, that is flattish year-over-year, year-over-year, and so maybe slightly up. And then the precision device business obviously is down. Now, within the precision device area, you know, I would just sit there and say, on the defense side, you know, I think we are gonna get these orders. I, I, I can't predict the exact month we're gonna get it, so there could be a little bit of conservatism in the fact that the orders come sooner rather than later, we'll be able to deliver it within calendar year 2023. Right now, I, I wouldn't-- I can't count on that yet because I don't have the orders in hand yet, you know, and we're already in, in August. The, the, the second piece is this industrial and a distribution portion. Quite frankly, we're not seeing a lot of recovery in this market. You know, could it change? Yes. Right now, we're, we're kind of saying, "Don't expect, you know, the kind of trajectory in that market to, to shift till, till sometime in 2024. Got it. I guess along the lines of your balance sheet, balance sheet keeps getting stronger. You've talked about allocating 50% of your free cash flow towards share repurchase. Can you give us any update there? And then with regard to acquisitions, has anything changed related to either size or areas of focus versus, you know, the last 2 years? Well, I think, you know, I think firstly, we covered the acquisition portion first. You know, I think, you know, we look at the acquisitions we've done in the past since 2017, you know, the, the largest one was about $80 million. I think with our balance sheet, you know, there is the opportunity to, to probably look at some things that are larger than, than that on a purchase price basis, with the discipline around that we don't want to overpay for something. I think, you know, we kind of talked a lot about this, that in previous years, the multiples were, you know, kind of like high. We're gonna be very disciplined about what we do in terms of acquisitions, but they, they could be larger. Again, I'm optimistic that, you know, that, you know, we're, we're looking at a lot of different things, and we'll see how this all plays out, you know, over the next, you know, 6 months to a year. As far as the stock buyback, I think, you know, we've committed not 50%, but more than 50% of our free cash flow to go towards share repurchase. I think year to date, and if, if for the full year, we, we, we've, we've actually spent more than 50% of the cash flow year to date through Q2 on, on share repurchases. We'll continue to buy back shares, you know, in line with what we've talked about in the past. Great. Then just one more for me, and I'll hop back in queue. Any update on the OTC hearing aid market? Are you seeing, you know, any new entrants, more demand, anything along those lines? Yeah, you know, the, the, the short answer is we continue to see that it's actually doing better than we originally expected so far. We're not seeing a lot of sell-through data. I would sit there and say, you know, our traditional hearing aid market is doing better than expected than we would have said six months ago. I, I would say two things. Number one, I think it's a little too early till we see sell-through data on the over-the-counter market, that to say that this is sustainable. Again, it's not a super meaningful number in the first half of the year, but it is better than expected. In the meantime, you know, you know, maybe, you know, what we could be seeing here is that, you know, the over-the-counter market is actually getting people interested, you know, in looking at hearing aids, and that they're opting for the traditional hearing aid market when they see that there's only a marginal difference in price, and you get full service with a traditional hearing aid, because the, the traditional hearing aid market is doing quite well right now. Great. Appreciate it. As a reminder, if you would like to ask a question, please press star, then 1 on your telephone keypad. Our next question comes from the line of Anthony Stoss with Craig-Hallum. Your line is open. Hey, guys. Nice gross margins in a tough environment. Jeff, I wanted to follow up on Q4. If Q4 is roughly flat with a year ago, Q4 is and up 12%, are you expecting China, smartphones, et cetera, to bounce back in the December quarter? What do you really need to come through to hit kind of an up 12% sequentially for December? Yeah, I mean, we do have some sequential improvement from Q2 to Q3 and Q3 to Q4. I mean, if I go back to the numbers, you know, prior to 2022, I mean, we're nowhere near the numbers we were shipping per quarter in 2021, at the end of 2021. You know, I mean, I would sit there and say, again, our expectations have come down, you know, reasonable amount since last quarter for China, and it seems like this is doable. I mean, looking at China, essentially for the full year, being flat, flattish with 2022. I mean, that's, that's what we're talking about, which, you know, 2022 is not a great year for China. The sequential improvement, Tony, from Q3 to Q4 is very modest. Correct ... that we have built in here. Correct. Got it. Then if you, if you backed out the delays in defense on the PD side, I mean, how much of it can you tell is just business in general slowing down, or is it closer to what you guys expected if you didn't see those delays on the defense, defense side? ... I would say, you know, I would say, you know, of the shortfall, compared to what we would have thought a quarter ago, I would say probably about 30%-35% of it is defense, and the rest is the industrial distribution. You know, where we, we were expecting, if I look back at, you know, a quarter ago, we were expecting, you know, for industrial distribution to kind of start coming back in a stronger way. I mean, not quite back to 2022 levels, but starting to come back, and we're just not seeing that. We're just not seeing it rebound at this point. Say 60% industrial distribution not improving, and about 35%-40% of it delayed in defense. Got it. The last question for me, you called out, computer PC being stronger. That's definitely nice to see. I'm just curious, if you looked at that business as a whole, do you think, PCs are going to still be down year-over-year, 2023 versus 2022 for you guys? I, I would sit there and say, right now, our PC market is going to be flattish, year-over-year, but definitely growth in the back half, compared to what it was last year. You know, the first half was really low, especially Q1 in the notebook tablet market. You know, we, we had a really weak Q1. We're expecting, you know, based on orders and demand, in Q3, some, some nice growth year-over-year. Overall, for the full year, it's going to be roughly flattish, our compute, our compute market. I, I guess what I'd say, Tony, you know, in a lot of these markets, ear IoT compute, you know, we're, we're seeing a lot of it being, I would say, you know, flattish year-over-year, right? In terms of ear IoT compute, but definitely weaker in the first half and stronger in, in the back half. The one exception is, is smartphone, smartphone. We're just not seeing a recovery in that market. You know, that, that's definitely better than your peers. My, my compliments on, on how you guys are performing in the, the compute side, for sure. Then, I guess, let me throw one to John. On the OpEx $43 million-$45 million, is that a good number to use, kind of on a go-forward basis, or are there still more levers that you think you might pull and, and drop it even further? Yeah, Tony, I, I think, I think I would go toward the low end of that number from a run rate. We did have in, in this quarter, higher than normal OpEx. We had it with some professional fee spending that we pulled forward. F rom the back half of the year into Q2. You can see in my guide, OpEx go back down to, I think it's $41 million, is the midpoint of the guide for Q3. I would keep it in that kind of $41 million-$43 million for the remainder of 2023. Yeah. I mean, just to say, you know, Tony, we've taken a, you know, number of actions, you know, based on. You know, we were, at the beginning of the year, we were expecting some, you know, very nice growth from PD, which is not materializing. We've taken action on the cost side to make sure that, you know, that, you know, that we can maintain profitability. You can kind of see, even with a, you know, a, a shortfall on revenue, we're pretty close on, on the profitability, and the operating margins are holding up. Yeah, I would say both gross margins and operating margins- Yeah -are holding up fairly well, given the challenges on the top line. Yep, exactly. All right. Thanks, guys. Appreciate it. Yep. There are no further questions at this time. This concludes today's conference call, and you may now disconnect.