BEL FUSE INC /NJ Q1 FY2025 earnings call

• Acquisition of Enercon is performing well, diversifying end markets and geography. - Continued margin expansion in Q1 2025 compared to Q1 2024. - SG&A expenses totaled $29.5 million, 19.4% of sales, increased due to inclusion of Enercon expenses. - Backlog of orders reached $395.7 million, up 4% from Dec 2024. - R&D expenses were $7.2 million, higher due to acquisition of Enercon.

Power Solutions and Protection: Sales in Q1 2025 were $83.1 million, a 37.9% increase from the same period last year. This growth was driven by aerospace and defense exposure, contributing $32.4 million. Consumer sales decreased due to a Chinese supplier ban, eMobility sales declined, and rail sales normalized. Gross margin was 42.6%, down 140 basis points from Q1 2024 due to nonrecurring items but favorably impacted by the US dollar vs Chinese renminbi. Connectivity Solutions: Sales were $50.7 million, a 6.5% decrease y-o-y. Commercial air sales declined 12%, while defense sales increased 13% and space sales rose 15%. Gross margin was 37.9%, up 180 basis points due to operational efficiencies and favorable foreign exchange, offset by Mexico minimum wage increases. Magnetic Solutions Group: Sales were $18.5 million, a 36.1% increase y-o-y. Gross margin improved to 24.7%, up 870 basis points due to higher sales volume, China facility consolidations, and favorable Chinese renminbi exchange rates. At consolidated level, total backlog was $395.7 million, up 4% from Dec 2024. Aerospace defense end market accounted for 38% of global sales. AI contributed $4.6 million, space $2.3 million, both with double-digit growth y-o-y.

• Q2 revenue guidance range $145 million to $155 million, based on underlying demand and tariff downside. - Moved some products from China to India, aiming to diversify manufacturing and sourcing to mitigate tariff impacts.

• Uncertainty from global tariffs, particularly China tariffs, impacting revenue outlook. - Q2 likely to be most impacted as customers hold back while trade deals are negotiated, potentially causing revenue deferral or pause. - Potential for revenue to be affected due to dynamic and changing trade environment.

Q: Bobby Brooks asked about product segment impact from tariffs.

A: Lynn Hutkin explained Connectivity is largely unimpacted as it mostly manufactures in US/UK; Power and Magnetic have ~60% not subject to US tariffs, with balance subject to tariffs.

Q: Bobby Brooks asked about Connectivity's 6.5% y-o-y decline.

A: Lynn Hutkin said decline was largely driven by commercial air production levels being down, with defense sales still strong.

Q: James Ricchiuti asked about enterprise business post-Enercon acquisition.

A: Farouq Tuweiq said enterprise business is robust, with synergies and funnel filling seen, expecting growth.

Q: Christopher Glynn asked about networking market impact.

A: Lynn Hutkin said Power had networking downward pressure but bookings increasing, Connectivity has less networking exposure.

Q: Greg Palm asked about moving manufacturing due to tariffs.

A: Dan Bernstein said India has operations, and they're focused on diversifying manufacturing there.

Q: Theodore O'Neill asked about new products and tariffs.

A: Lynn Hutkin said tariffs change operations, but focus remains on supporting customers and long design cycle.

Q: Hendi Susanto asked about tariff exposure and negotiation.

A: Farouq Tuweiq said exposure varies, and company aims to pass tariffs on to customers, with imports often handled by customers as importers of record.