Knowles CorpKN
Knowles Corp Stock Compensation Disclosure
13. Equity Incentive Program
The Company maintains equity compensation plans that provide for the issuance of Knowles stock to directors, executive officers, and other employees. The maximum number of shares available for issuance under the plans is 23.4 million, of which 11.4 million were available for future awards at December 31, 2025.
The following table summarizes the stock-based compensation expense:
| Years Ended December 31, | |||||||||||||||||
| (in millions) | 2025 | 2024 | 2023 | ||||||||||||||
| Pre-tax stock-based compensation expense | |||||||||||||||||
| Cost of goods sold | $ | 1.5 | $ | 1.5 | $ | 1.6 | |||||||||||
| Research and development expenses | 3.3 | 2.4 | 1.9 | ||||||||||||||
| Selling and administrative expenses | 23.6 | 18.3 | 19.3 | ||||||||||||||
Total pre-tax stock-based compensation expense (1) | 28.4 | 22.2 | 22.8 | ||||||||||||||
| Tax benefit | 4.1 | 3.0 | 2.8 | ||||||||||||||
| Total stock-based compensation expense, net of tax | $ | 24.3 | $ | 19.2 | $ | 20.0 | |||||||||||
(1) Stock-based compensation shown here reflects the expense included in continuing operations. Stock-based compensation expense included in discontinued operations totaled $0.6 million and $6.2 million for the years ended December 31, 2024 and 2023, respectively. There was no stock-based compensation expense included in discontinued operations for the year ended December 31, 2025.
Compensation expense for stock-based awards is measured based on the fair value of the awards as of the date the stock-based awards are granted. Estimated forfeitures are reflected in expense based on historical experience at the time of grant and revised in subsequent periods if actual forfeitures differ from those estimates. Compensation costs for stock-based awards are amortized over their service period.
Stock Options
No stock options were granted during the years ended December 31, 2025, 2024, and 2023.
The exercise price per share for the stock options granted by the Company was equal to the closing price of Knowles' stock on the NYSE on the date of the grant. The period during which options granted by the Company were exercisable was fixed by Knowles' Compensation Committee of the Board of Directors at the time of grant. Generally, stock options vest one-third on each of the first three anniversaries of the grant date and expire seven years from the grant date.
The following table summarizes the Company's stock option activity:
| Number of Shares | Weighted-Average Exercise Price | Aggregate Intrinsic Value (in millions) | Weighted-Average Remaining Contractual Term (Years) | |||||||||||||||||||||||
| Outstanding at December 31, 2024 | 1,161,337 | $ | 17.59 | |||||||||||||||||||||||
Exercised (1) | (598,909) | 16.94 | ||||||||||||||||||||||||
| Expired | (148,769) | 18.54 | ||||||||||||||||||||||||
| Outstanding at December 31, 2025 | 413,659 | $ | 18.20 | $ | 1.3 | 1.6 | ||||||||||||||||||||
| Exercisable at December 31, 2025 | 413,659 | $ | 18.20 | $ | 1.3 | 1.6 | ||||||||||||||||||||
(1) The number of stock options exercised includes shares that the Company withheld on behalf of employees to satisfy the option exercise price (in the instances of net exercises) as well as statutory tax withholding requirements. | ||||||||||||||||||||||||||
There was no unrecognized compensation expense related to stock options at December 31, 2025.
Other information regarding the exercise of stock options is listed below:
| Years Ended December 31, | |||||||||||||||||
| (in millions) | 2025 | 2024 | 2023 | ||||||||||||||
| Cash received by Knowles for exercise of stock options | $ | 6.7 | $ | 5.8 | $ | 1.6 | |||||||||||
| Aggregate intrinsic value of stock options exercised | 2.9 | 2.3 | 2.9 | ||||||||||||||
| Tax benefit from stock options exercised | — | — | 0.6 | ||||||||||||||
RSUs
The following table summarizes the Company's RSU activity:
| Share units | Weighted-average grant date fair value | ||||||||||
| Unvested at December 31, 2024 | 1,819,308 | $ | 17.79 | ||||||||
| Granted | 1,057,649 | 18.10 | |||||||||
Vested (1) | (856,091) | 18.26 | |||||||||
| Forfeited | (109,340) | 17.54 | |||||||||
| Unvested at December 31, 2025 | 1,911,526 | $ | 17.76 | ||||||||
(1) The number of RSUs vested includes shares that the Company withheld on behalf of employees to satisfy statutory tax withholding requirements.
RSUs vest based on the passage of time. Generally, RSUs have a three year vesting schedule and vest one-third on each of the first three anniversaries of the grant date. The fair value of RSUs vested during the year ended December 31, 2025 was $15.4 million. At December 31, 2025, $16.7 million of unrecognized compensation expense related to RSUs is expected to be recognized over a weighted-average period of 1.4 years.
PSUs
Awards with market conditions
The Company grants PSUs to senior management. In each case, the awards cliff vest three years following the grant date. PSUs are settled in shares of the Company's common stock. Depending on the Company's overall performance relative to the applicable measures, the size of the PSU awards are subject to adjustment, up or down, resulting in awards at the end of the performance period that can range from 0% to 225% of target. The Company ratably recognizes the expense over the applicable service period for each grant of PSUs. The fair value of PSUs with market conditions is determined by using a Monte Carlo simulation. For the awards granted in February 2025, 2024, and 2023, the number of PSUs that may be earned and vest is based on total shareholder return (“TSR”) relative to the component companies of the Russell 2000 Index over a three-year performance period.
The COVID-19 pandemic brought on unique and unprecedented challenges to the Company, particularly in the hearing health and medtech markets. Many of the Company's executive compensation programs were affected, including outstanding PSU awards. Due to the impact of the COVID-19 pandemic on the Company’s overall business performance, effective February 8, 2021, the Company’s Compensation Committee approved certain modifications to PSUs granted in February 2020. For the awards granted in February 2020 (the “2020 PSUs”), the number of PSUs that may be earned and vest was originally based on TSR relative to the component companies of the S&P Semiconductor Select Industry Index over a three-year performance period. The modified award replaces the S&P Semiconductor Select Industry Index with the Russell 2000 Index. The Company is a member of the Russell 2000 Index, which represents a broader, more diversified index that better aligns with the Company's strategy. Service conditions were not modified. The modification of the 2020 PSUs affected eight employees and resulted in total incremental compensation expense of $4.7 million, which was recognized over the remaining service period. In February 2023, the 2020 PSUs were converted from 261,770 PSUs to 120,677 shares of common stock based on achievement of the modification conditions.
Awards with performance conditions
On February 18, 2025 the Company granted a special PSU award to its Chief Executive Officer of 81,788 target PSUs with a grant date fair value of $1.5 million. This award is eligible to vest based on the achievement of a minimum non-GAAP diluted earnings per share amount and specified revenue goals over a potential five-year performance period. If the goals are not met during the initial three-year performance period, it may be extended an additional two years at a reduced payout level. Achievement could range from 0% to 400% of the target number of PSUs. The Company will recognize the expense for this award over the applicable service period and adjust the expense for the expected achievement of performance conditions as necessary.
The following table summarizes the Company's PSU activity:
Share units (1) | Weighted-average grant date fair value | ||||||||||
| Unvested at December 31, 2024 | 842,866 | $ | 27.25 | ||||||||
| Granted | 455,018 | 24.08 | |||||||||
Vested (2) | (221,616) | 29.92 | |||||||||
| Unvested at December 31, 2025 | 1,076,268 | $ | 25.36 | ||||||||
(1) The number of PSUs shown reflects 100% of the target award; actual payouts may differ based on performance.
(2) The number of PSUs vested includes shares that the Company withheld on behalf of employees to satisfy statutory tax withholding requirements.
The fair value of PSUs vested during the year ended December 31, 2025 was $4.1 million. At December 31, 2025, $8.5 million of unrecognized compensation expense related to PSUs is expected to be recognized over a weighted-average period of 1.2 years.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 9, 2026 | Showing above |
| 2024 | Feb 13, 2025 | |
| 2023 | Feb 21, 2024 | |
| 2022 | Feb 9, 2023 | |
| 2020 | Feb 10, 2021 | |
| 2019 | Feb 12, 2020 | |
| 2018 | Feb 19, 2019 | |
| 2017 | Feb 20, 2018 | |
| 2016 | Feb 21, 2017 | |
| 2015 | Feb 19, 2016 | |
About Stock Compensation Disclosures
Stock-based compensation disclosures detail the equity awards granted to employees and executives — including stock options, restricted stock units (RSUs), and performance shares — along with the valuation methods and assumptions used to expense them. This section reveals the true cost of talent retention and the alignment between management incentives and shareholder interests.
Key signals: total unrecognized compensation expense and its expected recognition period signal future earnings headwinds from already-granted awards. For stock options, examine Black-Scholes assumptions — expected volatility, risk-free rate, and expected term — as understating any of these reduces reported compensation expense. Compare stock compensation expense as a percentage of revenue against peers to assess dilution cost. Watch vesting schedules for acceleration clauses tied to change-of-control events. Performance-based awards with undemanding targets may indicate weak governance. Add back stock compensation to operating cash flow to calculate a more conservative free cash flow figure.