Image source: Knowles Corp.

What: Shares of micro-acoustic solutions and specialty component supplier Knowles Corp. (KN -0.97%) tumbled on Wednesday following the company's second-quarter report. While Knowles beat analyst estimates across the board, a steep decline in earnings sent the stock 15% lower by 3:30 p.m. EDT.

So what: Knowles reported quarterly revenue of $190.3 million, down 1% year over year, excluding the speaker and receiver product line, which was sold earlier this month. The company's revenue was slightly higher than the average analyst estimate. Higher microphone shipments to Chinese handset OEMs were counteracted by lower sales in North American and Korea.

Non-GAAP EPS came in at $0.13, down 61% year over year, but $0.02 better than analysts were expecting. On a GAAP basis, Knowles swung to a loss, reporting EPS of ($0.08). Restructuring, production transfer, and inventory-related charges contributed to the loss, as did higher operating expenses compared to the same period last year.

Knowles expects to return to GAAP profitability during the third quarter, guiding for revenue between $225 million and $240 million, GAAP EPS between $0.12 and $0.18, and non-GAAP EPS between $0.27 and $0.33.

Now what: Knowles CEO Jeffrey Niew expects the second half of 2016 to bring better results:

We anticipate accelerating revenue and earnings in the second half of the year to be driven by new product launches, share gains in China, increased shipments of our intelligent audio solutions and normal seasonal patterns. As we look to the future, clearer communication and the transition to voice as a primary user interface will propel the need for high performance audio across multiple end markets. With Knowles' capabilities in acoustics, software and digital signal processing, we are solving critical customer problems and pioneering unique audio solutions that will drive higher gross margins and growth. I expect that these capabilities will continue to have a significant impact on our future product roadmap, and I'm excited to see these early design wins starting to generate revenue in 2016.

While Knowles' results came in above analyst expectations, a GAAP loss and a big slump in non-GAAP profits seem to be scaring investors away.