Bel Fuse (BELFB) 25 Jul 242024 Q2 Earnings call transcript

Good morning, and welcome to the Bel Fuse Second Quarter 2024 Earnings Call. [Operator Instructions] As a reminder, this call is being recorded. I would now like to turn the call over to Jean Marie Young with Three Part Advisors. Please go ahead, Jean.

Thank you, and good morning, everyone.

Before we begin, I'd like to remind everyone that during today's conference call, we will make statements relating to our business that will be considered forward-looking statements under federal securities laws. based as for the for date. company's future in company's statements of such and expected future as views be current views considered XXXX. These performance company's representative today financial periods, are not only will as statements reflect subsequent and company's regarding operating periods expectations of That and the should the be on any including the guidance of company statements The any or update obligation forward-looking any disclaims to outlook. may periods forward-looking that future summarized for materially a from of yesterday. these results Actual press and we are by projected differ market closed material statements number release those after in the risks to due issued other risks, uncertainties, factors. These

year potentially differ most financial results report the impact SEC of ended filed cause XX-K non-GAAP actual with call, results reconciliations XXXX, file Additional this filings from and in Commission, results materially and including reports our our recent GAAP other about information material could risks performance included to the expectations and time. We Exchange may or with we and quarterly the documents for our during annual is our that results release. time also other have discuss have to and may our our non-GAAP Securities the December discussed to fiscal Form that been in important our on from factors and XX, press

all filings at of SEC press IR are website. available release our and Our our the section

like Investor is Vice I'd to of over Farouq CFO; Hutkin, Tuweiq, the that, President the Dan? Joining CEO; Dan. call today and and Reporting call Dan Bernstein, turn me and President to on Financial Lynn Relations. With

earnings the margins, challenging second we thank joining team our improved call. environment. pleased of over top our work past results. The even morning, you Good with resulted global in and has in line quarter Jean. quarter you, second Overall, the year Thank collective were for XXXX a

of of gross releases end And we on the magnetics at million range. Each 'XX press million, from above expected as provided earnings in trended part $X.X a in well power Our modest connectivity sales the X $XXX and in being last with forecast sales. forecast groups essential offset year by margins our achieving higher reduction earnings came growth in product call. quarter relating quarter range with in

achieved are excellent We proud team. of the the results by

Protection. welcomed On the on we executive the President side, as new month, Steve the and management to this earlier team of Power Dawson Solutions

unlock us the stock. the excited X make success pivotal growth on almost by announced our deeply with Our Steve of have we program, Power him as commitment have at through thank Dennis in to stock a the and displayed, open all buyback been both Bel, today. his wish of previously to valued e-mobility $XX provide achieve and group is market have helm retirement. To best AI like opportunities. helping we and we And these friendship transition have as continued dedication His purchases class at to new his of going an update million Bel are and long-term for We drivers. markets would of to new decades with

June B and XX, of A of common Class stock of XXX,XXX As shares XX,XXX purchased a of to shares $XX.X million, program Class total stock. representing XXXX, of our date common

to the this the index requirements for of in turn for inclusion with stock overall and company would This the I to A the like in Lynn. aided XXXX the in meeting Russell to growth Lastly, to the of that, Bel's our over time first history. And is we're recent efforts, IR to added testament eligibility now Class in Lynn? pleased for a class our it be June. Index which stock late

QX at QX a on financial Dan. Thank saw when we a lower perspective, continued expansion summary, looking margin 'XX. versus From 'XX sales in you, base

Second came from was by majority at we'll discuss second the quarter representing XXXX. segments, The our further. $XXX.X as driven sales million, decline of quarter XXXX XX.X% sales the of fluctuation power in a and magnetic

XX.X% 'XX, largely QX driven increased and 'XX XX.X% in improvements margin Power segments. in were profitability QX from these gross by Connectivity and to Our our

Turning in a consumer to the last from QX second from in strength some Protection we basis a and a group at sales, note, second from our sales to X,XXX million a the products level. Power continued 'XX. Despite sales details of positive of The Solutions lower grew segment XX.X% QX representing sales accounting the were increase quarter, reflecting overall applications. due from sales XX.X% for $X.X quarter $XX.X On decline mainly networking decline in sales of of and XXXX power point the was product used improvement in QX for million, in posted the 'XX. rail gross 'XX, QX our over in a XX% saw margin products, which year. decline

therefore segment. be basis this group of pricing, viewed or normalized point view relates are in should half and either in versus as for point into completion margin 'XX are to margins cost containment the sustainable. estimate high nature gross initiatives procurement, items internal being to gross The gross by factored We to temporary margin QX approximately this be is related the power and and nonrecurring this viewing of level driven basis not of margin improvement as and balance in that of improvement the for QX a

facility for quarter of to this margin Connectivity XXXX. XX.X% applications the due gross to XX.X% as at QX was was represents achieved up within in quarter expansion 'XX. Turning the year-over-year was XXXX, Sales 'XX. came contract for per terms. unfavorable to implementation second in the to into along amounted continued factors renewals $X.X $XX million the channel, in this XXXX, favorable more growth respective of possible for despite where in QX The $XX.X minimum the distribution connectivity from these business XXXX, the applications for operational within for Each of of related consistent quarter peso. driver were 'XX. The segment. Connectivity's wage this divestiture sales into defense with totaled to which This sales air second of partially to levels million previously the and were QX margin margin with 'XX were improvement in was $X.X made 'XX. check group through balanced the X.X% commercial efficiencies from Solutions our by in million offset which June QX from FX in for sales QX group $XX.X around sales that were Sales million, main million The consolidations the contributed quarter QX These effect compared the 'XX into completed on and Group. went that impact of increases increase Mexico up

$XX.X expectations QX last our earnings QX to 'XX, as group related large million in Magnetic representing the discussed with networking 'XX. decrease XX.X% reduced quarter's level to shipments second into sales quarter line of The from inventory FX from for XXXX of the the posted quarter compared late favorable by largely million and fixed margin at as Solutions costs, XX.X% driven all expenses China and in facility call the in backlog in QX $X segments, June related lower XXXX. This second renminbi to of Chinese XX, primarily the a resulting our margin was overhead million product completed was versus 'XX. improvement consolidations $XXX XXXX. R&D QX through for of a XXXX they lower a this on Lastly, work in group hand. the was was customer This and sales generally gross At on with were across consistent 'XX, orders in 'XX. level consolidated level QX XX.X%

We quarters line generally with in expense. expect future QX to 'XX be the

administrative and salaries, up a fringe increase of offset QX total largely $XX.X lower were benefits, expenses general were from $XX.X of Within SG&A, sales. fees. or XX.X% million and as amortization in sales, legal by down selling, Our 'XX, million in an but expense percentage

in If the you fees 'XX. $X.X not 'XX these incurred to did QX we expenses litigation recur legal of in QX and related million recall, MPS

As in there contained run of view 'XX, level unusual note generally quarters items are indicative for no this is future QX the XXXX. SG&A of rate expense we anticipated within during of

continued materials own to over work Farouq we past have several with $XX.X We in activities the sheet of and Turning perspective, an capital turn million $X.X that an flows the million year-end. The of into expenditures quarters Farouq? From goods ended hand. I'll million. reflecting $XXX.X an We $XX.X now quarter for million we inventory areas first to primarily million of from to in operating XXXX cash QX, call inventory from of additional as items. increase over during levels from had year-end. and inventory months commentary. seen in cash our were experienced X continue and finished the through trend reduction generated balance the and securities, cash flow downward $X.X the lower on the raw

Thanks, Lynn.

year, As X quarter We calls, to downward a quarter. we a noted be enter and do in second shift expectations. in slight our anticipated our were and half last third results as first we our expect line earnings the XXXX with reset

to As earnings This sales release, million. we noted 'XX. $XXX sales to compares of quarters however, available that it of $XX of the as one been has million to in QX be us in as information QX ongoing of 'XX QX the and on range QX in of decline based going million to We and down million new have sales $XX bit, and million believe as to power remaining beginning not grow projected million are is be the in a magnetics contributing QX high as been main the QX this compared with factors is, is 'XX power QX through that approximately few networking these $XX drivers to are connectivity expected new now. There to compared level, distribution million to the factors for $XX will expect Many magnetics in related factors today, impact 'XX to $XXX our factor $XXX following to past 'XX. year-over-year destocking in a declines to correction. the 'XX quarter 'XX. At

restrictions China-based The Biden has our to second working applicable recently has quarter trade the beginning former of order to become been executive the it in of suppliers worth diligently administration. by replacement team One at given a the change. this time the is supplier of a onboard It unclear needed few thus impact work expect to of supplier quarters the impact and ahead. ultimate of subject

a on the conservative side. For guidance, 'XX to assuming be impact we're of purposes full QX our

partially $X offset as we anticipate expected Our million will be 'XX supported QX up QX bridging approximately sales by 'XX. of QX continued 'XX QX driver factors modest and of lower summer of expected discussed, of softness our be with and in networking, the $X to the anticipated improvement sales timing offset at by sequential sales parts to our approximately the in supplier is our military to million. These to suppliers the are 'XX previously is sales, million discussed shipments due were which to our by due compared manufacturing market, on usual QX former in out strength When to from be a segment anticipate Connectivity volume break amounted basis a rail due based Power $X in equal anticipated our magnetics the by European to 'XX to that main in QX primarily decline, the in down largely 'XX, our impacted quarter sales lower segment those by of ship at to QX region. We and and China-based expected in supplier, continued programs. Europe this of customers sites this

operational our initiatives. to Turning

manufacturing demand at management has to facilities sites. our for continued requirements, our cost other near/medium-term level magnetics globally. including levels these product, comprehensive continually non-China align structure a projects of new magnetic at segment, are cost To maximizing sites exploring efficiency highlight meet We're anticipated and within few future team areas process, initiatives ongoing efforts facility Our production in our also products. better its customer better with manufacturing to of our

addition, QX the QX Signal in efficiency from consolidations XXXX improvements in Connectivity 'XX. XXX Shifting facility U.K. to in U.S. In Transformer Solutions the this in we Dominican segment. efficiencies, to the in had and contributing at basis segment facility have to resulted Republic. 'XX The our the recent operational improved improvement completed point

control, about number something of is described of Dan? on to There here to these is other our and level from $X front, our strategy. restructuring continued. has location back to existing support XXXX. Dan. the to our we'll sites cost call of the Glenrock, prior a estimate. Shifting actively team is areas the report there's initial optimistic our activity initiatives Consistent operations the excess call the but Bel's turn related end schedule Anticipated recent within very the remain existing of growth for nothing M&A. manufacturing of with million in our last earnings heightened groups continue evaluating completion today, to The -- to those over be future. I'll within by over initiative savings are On we opportunities transition expected to influence in quarters, annual product Pennsylvania in now to

up you, the for Thank please? Farouq. Can we now open call questions,

Certainly.

be Capital Markets. The now question-and-answer first session. is Northland Brooks [Operator will question from the from We conducting Instructions] Bobby

last there specifically on So discussion the healthy call, of emerging was EV but within also amount a AI, and space. within opportunities,

be these also long you fast. from I are moving helpful it So within to like stuff cycles, about understand would is think that. but that any my color quite sales perspective, seems AI hear

sales So am could cycles I shorter? those right in thinking become that

exciting biggest do I opportunities Bobby. we as question. see be the Thanks, appreciate space AI obviously, we as Power will in well. of said world. -- that, as Yes. segment more our are We the We're previously, that seeing beneficiary the

talked of call is, have of been products, AI most the sophistication for it, previously we and our that about high things the complexity the of part. ready, level given they've One

So think that, as a using the of bit a as the the that's networking there result in about of channel. a preference some we is little product of destocking, to

inbounds our in. And year out as XXXX. new So on from and to go is we do on tend expect opportunities come where and we're or really those definitely play in, we coming seeing sequential into the the we heading the through what new focus AI customers growth

-- out is We a we're So a it takes some we're channel and it, optimistic but we're about real position a toehold. think take little of especially playing seeing a our thing, where as and the that. bit there, it clears while, will a

on the Bobby, side. I add can space just And

So revenue grow. there continues to

in we're $X expecting be picking space in lighter million looking then little year-to-date So for XXXX, revenue into our to an And back in still full On basis, it QX for million. $X.X 'XX, and applications QX. was year up $X.X QX at estimate a it's a million.

So still the place. for $X year million full on

you on And several then fourth with the stepping call, initiatives European guys conference force. growth kind of focused quarter sales back little along a sales revamped more, the listed

announcing call. So kind any we're learned? you growth-focused Curious several it, initiatives just those lessons hear, any color in talked them. after the any into on months to about of that fourth from conference results those early Or quarter

X that did Again, to positively. to when of I very the didn't early it beneficial. hit it with the them first get most very improvement. they compensation surprised they the targets, see bonus quarters, going in of though incentive But too think it's believe salespeople I'm because even the state we're they sales still their majority didn't that very receive find program And to the be

since I something came seeing are activity opportunities really activity, is seen new and So in sign. past. motivated good Europe a substantial more just lot this with think a that the have lot structure are with we Sabine we a level And quality more aboard, that the in they great

are bit in the seeing a challenging on as we say right? Europe, and as our could that, down looking U.S., early bright But double-click be some system, forward I So and all the maybe market, are to that will a optimistic. And think Bobby, to. Asia, what things X I regions; flush out well, spots little we're markets I signs of Dan's to calm think point,

And one me. then last for

So that you supplier. the on a on of Chinese good guys it trade amount color gave restriction

was could quarter one with guess that So wondering guidance. I the of on if kind we I double-click was thing third

this new that, is from that? $X did that to the the said you take? market initially you how when this that, cost -- a administration took view And the X should to when did So essentially, assume yes, you're see conservative so right supporting this -- order Biden in that, saying million -- quarter how mean in or right would made I'm any that just -- million quarter, assume margins of to supplier, on from that to sales be when going supplier million that a in supplier long am saying that. Does that -- And say color more that more? to end to $X was on that long I executive that's essentially supplier going and the consumer going into lower new found I guidance out high, I probably goes million was, like kind like for $X that $X to backing am to be, you

Yes.

-- settled bit not the So cycles, right? left once easy and inventory approach. shipped the no things, confusion little uplift re-quals be over, And take goes we it's little are early a was taking side really you right, lot to some right, allowed that see requalified. the a replacement the things know, aggressively. to might there. But will. get time may conservative of through these a little we as being in there of Generally, be And given identify -- and takes is as things bit going it things retested have working our And out. allowed, that we bit it's kind and take you orders, there pretty in side what's design over of as obviously, a QX, on so these you came of what's and mandate that. or not as some go of through timelines, In new we've where things different because So all a recertification the of in if shifting days,

dollar side. decent becomes you through suppliers of identified, in on spend everything that we're iteration think, the re-qual So customer fast of but question as have not yet, some going market how all maybe because we get amount. it to a a can that I going for understanding, be the there's And

we're bit restrictions quarter. that but in the that inbound no little And something pleasantly a of we can we just that's to going be So sales a we're let's then on here have trade to want we view want the take make maybe just to really said, for. Again, are serious, of saying, up to not kind sure surprised upside, things. we so sign of all

little is it a view. a So conservative bit of

on better that update shake terms a where have in we'll call think out. So will we October the and things in progress of

Theodore Litchfield from Hills The is from next question Research. O'Neill

segment, more could. if granularity, Power you the on Just a little

how some areas? that give talked terms So e-mobility, I AI, already can in blockchain segment would information but Power more -- about of in is we conversion, doing us those given about data center, expect power AI, you the

the on the good. We've ultimately, But talked market, XX% will. out we the that. all for some kind more kind the the be tend I the our And of previously whether hyperscalers kind on we are good builds But are of products headlines right? little and See, a there Theo, clear bit of really about, about you of influences -- think is or the various the of that's we whole Yes. data And more reasons. is roughly that same, we data, to of simply, right, it and the data news about bullish, it's anything we we're centers, growth around new may think is then is if these think -- in of hyperscalers, mean, that cycles ecosystem other way system. we really about of the avoidance also also XX%, in think of think a us. that upgrade and now, as transmission for it of right kind which days

growth just job years customer $XX million, And you -- us, understand, extremely look for that was aboard, and we margin so I million X all the were came ago. on $XX almost line substantial are a did we for a to Farouq improvement all be realize not it try Facebook And we since we is at margins really maybe data again, top centers, us. with end and the when but low. think But focus

on with So we that the are in markets. mind, focused really niche

large EV is are though market our EV big school even market, buses, equipment. very tractors, So niche in a

way we properly, big for testing look we ICs the support In going the we at customers after centers, but the one of area using not proposition the can engineering are into in centers. is them. world, who they're that So of that data our same our understand support can data Teslas equipment we who offer using the that really for

we can So are a again, in. profitable areas grow have in. it's goes any be that up, time to really And of areas we lot focused there's we again, electronics on that

Jim is & Needham The next Co. from question from Ricchiuti

I wonder talking moments a just you few if pricing could environment. about spend the

of look given weak you're trying looks sense could whatever Just the like. what sense as that more seeing But environment, normalized just any what demand I'm the gross environment, to to in bit a a get like margins demand from folks. of

shocking. to but hate phone, it will I say be the on this

market XX think this been we a for is I the this seen price pressure. very involved time I've haven't over that -- little first years, is and down in

asking is you still to decrease time. price difficult supply. think back everybody focus on a very push It's I when for orders same trying your the at

out, does think pricing focus this XX in at is then become do get the cut it hasn't market, down on that seen available. then I lead pressures. the months, inventory really any memory But time haven't and the there's overt a So we and been if my on again, price been first loose stretched increases all. the times pricing for It's management. And past

you'll have healthier up, And doing been facility pick of work cost of those that's volumes we've as obviously, around some that doing a been right, doing. right, lot we been environment, have work and in we pressures. kind why more the a the get Jim, of management

couple obviously, The different should of that, businesses other not to the we call been themselves expect it, from half products after think, yet. we're to we're there to in parts I little potential business, and years, is, but point, have our outcomes. better approaching lending going a do But thing Dan's the of new see in I perspective mindset say a and last,

revenues may for aerospace? demand military commercial aerospace market? are in have the you seeing I missed did it. What commercial you kind of provide and Lynn,

I did.

And 'XX military So air commercial was in was $XX $XX.X million. million. QX

it. I missed that, about Sorry

from me. question final a Just

in there, you've market. that think other and question are I Dan. you, out some for a -- or the shoots green there players hearing that But suggested maybe we're some and to from just alluded

think you to… As about how the recovery,

about I've about been the Jim. for months, XX recovery thinking

Fair I I'm experience does we what what cycle like, question, I guess is… look was as -- the different given guess asking enough. some in signs And recovery? that mean, I the see when your cycles, of

around, this going to is turn right? When

Yes.

Jim, to it's In all are And in some to inventory always I and orders? start then the they X When you see we down? We're day they -- back the you with of and X months, come constant Arrow, months, tell go hit going all guy going months are back a When all going a industry, it always our ordering. time. it's contact in sudden Avnet, and you X X see new always And months, keep be orders? in to months. asking, is to the major distributors. they X when

hearing little improvement I just I overall, be 'XX, more -- about you So areas to stretched in X.X bottom positive wait-and-see it's it years, course. is during this back you're thing. X of But the was wish anything, the could maybe to -- line. see never years. recession it of type I that is think But out a not I've like be seen lot it just aerospace, of

Hendi next question Gabelli The Funds. is Susanto from from

to follow-up I question. would Jim's like So

think And I go months? that. X of pushback another it I to from is my want interpretation. is that So

you any when they months. you if they a X But anybody, with mill of give always But It there, could line. X be ask could it I know know year. the answer they it. put in I -- I can No, in is It's come if is standard it pat the but don't if think know. up my credibility. they put It's kind That's a answer don't just and this just has don't months, the that the credence be line point. the checks any out this

do terms positives Dan, like further, feel markets? happen say, it happens, of… do where to I And, when products, let's is different see, you different more do among you that may And there's you Like feel if ask be mixed somewhat where more recovery do the negative? in end

I networking market than down down customers. our networking think in hit markets us really -- other more the the area, really any

then networking? how concentrated in And

Networking, networking comes. which to go a lot also. but It's customers of they out our distribution, distribution

it obviously can getting networking. be are our and biggest right, I on. both where we're those them -- And I X So are distribution think just of hit think markets,

under-shipping the end they are demand? then And

Can you little bit? that on a expand

distribution, the and are end networking there? or than under-shipping shipping your lower customers in So like demand

would I the that's not think case.

I demand. think they to will ship meet

No.

I think they demand. the to they're using meet have inventory still

So less. they until don't lot have don't their they to down get They orders inventory have to a place new sell inventory. over

right? will inventory we significantly. view -- pretty look what down have is And at, Hendi, levels, coming So we been inventory and levels our is

why a But more does it kind saying, patterns. we we've So bottomed few get view. little we back of do been the when that's rate regular feel quarters like we -- and that to feel it's last hold out and continue to

but inventory So to of they're not question. think tend on things -- we anybody we their focus the to customers is levels, that's if don't kind sending

about has freeing should internal Bel internal been for Fuse up inventories, I lowering further your much then And think we its Bel Fuse inventories? working How lowering capital. down think and

things. Yes. sales that to healthier environment, probably trying on influencing would with So so we right? and address to of something a of little quite -- like the a say I We're could a side that's focus But little influence. we're bit those little it's would be where tend more turns -- not to we're yet. things we we one bit that

in. bit pretty in it, we're a manage at we've that and which do little environment, to done job a a think I decent sales easier not more healthier

a and would we easier to that get better and in healthy be So to manage it trying like to maybe short, in think, to bit, better, little will environment. I a we're it be

in some Farouq, seeing any is you automotive improvement sequential And and what whether ask that industrial insight and China I then There current in you in want Dan trends IoT. then and are conversation into China? this. that to the have Like there's are

think good I level not it some one but business volume. pricing user I'd do say, sell or medium competition, frankly, generally, to that's customer higher quite in main the the more China, stuff be that's we just given And of right? type environment, our high volume things Remember, of the, base, tends

kind that those So spots, I choosy, not we're we of but and it's our would -- are of pick kind -- things we we're about. overthink our say but not picky

And QX, may I that number? I this, -- of miss in then the sales I for eMobility ask missed may

Sure.

QX So in were million. eMobility sales $X

$X expedite there assume correct? is no million. that Is And then I fee.

no expedite correct? was quarter, fee There this

Brooks. Bobby from is question next The

away. I just square back want to jump kind something on of and

broadly said you just you like and clearly. obviously, end X in guys at worst And Or make was the of I that networking consensus to release, terms was indicated guys end markets it of those distribution? dynamic I more that that mostly serve kind just want kind the Is in you the distribution the an biggest But May, guys was is the that on of are distribution? behind networking? us. industry of the press it that So understand in the of view guess I that indicated market through serve. do that conference -- sure kind

companies, overall, the I direct. is a of networking customer -- is our they say smaller you would for of our But most when industrial direct throw networking go distribution. portion No, good in networking. companies, business probably to XX% Yes. through then

about represents distribution Lynn? our sales, overall So XX% of

Yes.

it, reference once a Bobby, that think the focused the part And that call to maybe of distribution, -- conference conference really your a other was I was year. question, happens

about So the on that our distribution conference was side. comment specific

is from question Needham Jim next Ricchiuti Income. from The

assume R&D sense at the around OpEx, gross margins. assume to I are wonder quarter. a normalized more that uptick nice the little saw Farouq, as to think that lower thanks help on levels which moved about We fair Is you a for of a a in side? on could I probably maybe R&D SG&A revenues us with bit. and not are uptick little these any a these there. Should levels the we OpEx? way in bit the if guidance significant has

goes into million, power it mean pretty million call is -- more connectivity Remember, fair. the Yes, around I where the business. we that's think think kind $X $X that and of R&D -- side million, is. the I of $X roughly R&D

pay variability outside SG&A, some of that it as relates there some that to other commissions co-items. terms In in is some and we

tend world I kind of see we we that would we about SG&A to in. can that around looking XX%. think we we're to think as say So about ways the it just are influence

So of something the guide we at will, are or you we say. of we or should range on, if largely, focused towards order kind looking and that's the possible what's of But -- there. kind bound, in flattish

closing comments. questions to to There time. at turn Bernstein are the over would floor further no for this I back Dan like

you our Just to and joining you to we're much. thank for in looking October. very forward you Thank speaking call,

concludes This today's conference.

You at time. may participation. disconnect your lines this your you for Thank