NYSE: KN

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.

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.

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:

Years Ended December 31,

2025 2024 2023

WS Audiology A/S 11 % 14 % 16 %

TTI Inc. 10 % * *

* 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