Leadership Transition - Bel Fuse Inc. announced that Daniel Bernstein will step down as President and CEO after 24 years in the role, effective immediately following the 2025 Annual Meeting of Shareholders on May 27, 2025 [1][4] - Farouq Tuweiq has been appointed as the new President and CEO, effective on the same date, and will also join the Board of Directors [2][5] Company Growth and Performance - Under Daniel Bernstein's leadership since 2001, Bel completed 19 acquisitions and grew sales from less than $100 million to over $600 million, achieving record levels of profitability [3][5] - The company has seen a significant transformation in its product offerings and market reach, establishing a strong foundation for future growth [3] Leadership Remarks - Bernstein expressed pride in his tenure and gratitude towards the team, emphasizing the importance of transitioning to the next generation of leadership [4][6] - Tuweiq acknowledged the legacy of the company and the mentorship received from Bernstein, expressing confidence in continuing the momentum of success [6][7] Board of Directors - The Board of Directors has approved the expansion of its membership to ten directors, with Tuweiq being appointed as a director effective on May 27, 2025 [2]

Core Viewpoint - Bel Fuse Inc. is set to release preliminary financial results for the fourth quarter on February 18, 2025, with a conference call scheduled for February 19, 2025, at 8:30 a.m. ET [1] Company Overview - Bel Fuse Inc. designs, manufactures, and markets a wide range of products that power, protect, and connect electronic circuits, serving industries such as networking, telecommunications, computing, military, aerospace, medical, transportation, and broadcasting [2] - The company's product groups include Power Solutions and Protection, Connectivity Solutions, and Magnetic Solutions, with operations in facilities around the world [2] Conference Call Details - The earnings conference call will be accessible via phone and online, with a replay available for 30 days after the call [1]

Company Overview - Bel Fuse Inc. is a leading global manufacturer of products that power, protect, and connect electronic circuits [2] - The company designs, manufactures, and markets a broad array of products primarily used in various industries including networking, telecommunications, computing, military, aerospace, medical, transportation, and broadcasting [2] - Bel's product groups include Power Solutions and Protection, Connectivity Solutions, and Magnetic Solutions [2] Upcoming Event - Bel Fuse Inc. will participate in the 27th Annual Needham Growth Conference on January 17, 2025 [1] - The CFO Farouq Tuweiq and VP of Financial Reporting & Investor Relations Lynn Hutkin will conduct meetings throughout the day, with a presentation scheduled at 10:15 AM ET [1] - The investor presentation deck and webcast will be accessible via the investor relations section of the company's website [1]

Group 1 - Bel Fuse Inc. has acquired an 80% stake in Enercon Technologies for $320 million, with a total enterprise value of $400 million, and plans to purchase the remaining 20% by early 2027 based on future EBITDA performance [1][2] - The acquisition was funded using approximately $80 million in cash on hand and $240 million through incremental borrowings under the Company's revolving credit facility [1] - Enercon is a leading supplier of power conversion and networking solutions, with LTM Q3 2024 sales of $115 million and a gross profit margin of 47% [2][3] Group 2 - The acquisition allows Bel to expand its product portfolio in the aerospace and defense markets, creating potential cross-selling opportunities [3] - Bel's manufacturing footprint will extend into India and the U.S., enhancing its capabilities with a skilled engineering team based in Israel [3] - Enercon will operate independently under the Bel Power and Solutions segment, maintaining its focus on military and aerospace markets [3]

Financial Performance - Revenues for the first nine months of 2024 decreased by $114.9 million, or 23.0%, compared to the same period in 2023, primarily due to lower demand in the Power Solutions and Protection and Magnetic Solutions segments [111]. - Power Solutions and Protection revenue decreased by $26.2 million (35.0%) and $77.7 million (31.7%) for the three and nine months ended September 30, 2024, respectively, compared to the same periods in 2023 [117]. - Connectivity Solutions revenue increased by $3.9 million (7.6%) and $7.8 million (4.9%) during the three and nine months ended September 30, 2024, respectively, compared to the same periods in 2023 [119]. - Magnetic Solutions revenue declined by $12.8 million (40.0%) and $45.0 million (47.6%) for the three and nine months ended September 30, 2024, respectively, compared to the same periods in 2023 [120]. - Gross margin for Power Solutions and Protection decreased to 39.4% in Q3 2024 from 41.7% in Q3 2023, attributed to lower sales and unfavorable product mix [118]. Order Backlog - The backlog of orders as of September 30, 2024, was $287.4 million, a decrease of $85.7 million, or 23%, from December 31, 2023, with a 33% decrease in the Power Solutions and Protection backlog [112]. Costs and Expenses - Labor costs represented 7.8% of revenue during the first nine months of 2024, up from 6.5% in the same period of 2023, largely due to a 20% increase in the statutory minimum wage in Mexico [114]. - The company incurred $1.1 million and $1.8 million in restructuring costs during the third quarter and nine months ended September 30, 2024, respectively, related to initiatives in the Connectivity and Power segments [114]. - SG&A expenses increased to $26.7 million in Q3 2024 from $23.7 million in Q3 2023, primarily due to a $4.3 million increase in professional fees related to the acquisition of Enercon [125]. - R&D expenses remained steady at $5.4 million for Q3 2024, compared to $5.3 million in Q3 2023 [124]. Tax and Foreign Exchange - The effective tax rate will fluctuate based on geographic regions, with Asia having the lowest tax rates among the regions where the company operates [115]. - The effective tax rate increased to 27.8% for Q3 2024 from 18.2% in Q3 2023, primarily due to increased tax expense related to prior period accruals [130]. - Foreign exchange fluctuations resulted in a transactional foreign exchange loss of $1.3 million during the nine months ended September 30, 2024, with favorable impacts from the depreciation of the Chinese Renminbi against the U.S. dollar [115]. Cash and Liquidity - Cash and cash equivalents increased by $44.9 million during the nine months ended September 30, 2024, primarily due to net cash provided by operating activities of $65.7 million [135]. - The company expects to utilize its liquidity of $134.3 million for operating expenses, investments, and potential acquisitions in future periods [133]. - As of September 30, 2024, cash and cash equivalents represented approximately 41.0% of total assets, while held to maturity U.S. Treasury securities and accounts receivable accounted for 36.9% [137]. - The current ratio improved to 4.0 to 1 at September 30, 2024, compared to 3.4 to 1 at December 31, 2023 [137]. - $50.5 million (38%) of cash and cash equivalents was held by foreign subsidiaries as of September 30, 2024, with $11 million repatriated during the nine months ended September 30, 2024 [137]. Acquisition and Financing - The company entered into a definitive Share Purchase Agreement to acquire an 80% stake in Enercon Technologies for $320 million, with an enterprise value of $400 million, expected to close in Q4 2024 [110]. - The company expects to fund the acquisition of an 80% stake in Enercon with approximately $80 million in cash and $240 million in incremental borrowings, with potential earnout payments of $10 million for 2025-2026 [139]. - The unused credit available under the credit facility was $115.0 million as of September 30, 2024, which can be borrowed without violating the Leverage Ratio covenant [144]. - The company amended its Existing Credit Agreement in January 2023 to transition the reference rate from LIBOR to SOFR [140]. - The company entered into a Commitment Letter to increase the Maximum Revolving Amount under the Existing Credit Agreement by $150 million to a total of $325 million [141]. - The company remains in compliance with its debt covenants, including the Fixed Charge Coverage Ratio, as of September 30, 2024 [144]. - There have been no material changes in future cash requirements during the nine months ended September 30, 2024, aside from those related to the Enercon acquisition [138]. Market Risks - The company anticipates continued downward pressure on Power sales due to trade restrictions affecting a former supplier, which historically contributed $3 to $4 million per quarter in sales [114]. - The company uses foreign currency forward contracts and interest rate swap agreements to manage market risks associated with foreign currency exchange rates and interest rates [148].

Financial Performance - Net sales for Q3 2024 were $123.6 million, a decrease from $158.7 million in Q3 2023[1] - Net earnings fell to $8.1 million compared to $19.4 million in Q3 2023[1] - Adjusted EBITDA was $20.6 million, representing 16.7% of sales, down from $29.9 million or 18.8% of sales in Q3 2023[1] - Net sales for the three months ended September 30, 2024, were $123,638,000, a decrease of 22.1% compared to $158,682,000 for the same period in 2023[11] - Net earnings for the three months ended September 30, 2024, were $8,080,000, a decline of 58.5% from $19,448,000 in the same period of 2023[11] - Total net sales for Q3 2024 were $123.6 million, a decrease of 22.1% compared to $158.7 million in Q3 2023[19] - GAAP net earnings for Q3 2024 were $8.1 million, a decrease of 58.4% from $19.4 million in Q3 2023[19] Profitability Metrics - Gross profit margin increased to 36.1% from 35.0% in Q3 2023[1] - Adjusted EBITDA for Q3 2024 was $20.6 million, representing 16.7% of net sales, compared to $29.9 million or 18.8% in Q3 2023[19] - Power Solutions and Protection segment sales dropped by 35.0% year-over-year to $48.7 million, with a gross margin of 39.4%, down from 41.7%[19] - Connectivity Solutions segment reported a 7.6% increase in sales to $55.7 million, with a gross margin improvement to 36.6%[19] - Magnetic Solutions segment experienced a 40.0% decline in sales to $19.2 million, with a gross margin of 27.3%[19] Expenses and Costs - Selling, general and administrative expenses increased to $26,700,000, representing 21.6% of net sales, up from 14.9% in the prior year[11] - Research and development costs rose to $5,443,000 for the three months ended September 30, 2024, compared to $5,292,000 in the same period last year[11] - The company incurred restructuring charges of $1.1 million in Q3 2024, compared to $2.1 million in Q3 2023[21] Guidance and Future Outlook - Q4 2024 net sales guidance is projected between $117 million and $125 million, with gross margins expected to be approximately 34% to 36%[3] - The company is optimistic about sequential improvement in market conditions, which is expected to positively impact 2025[3] - The company plans to continue focusing on market expansion and new product development to drive future growth[19] Assets and Cash Flow - Total assets increased to $584,417,000 as of September 30, 2024, compared to $571,631,000 at the end of 2023[14] - Cash and cash equivalents rose to $134,266,000 as of September 30, 2024, up from $89,371,000 at the end of 2023[14] - Net cash provided by operating activities for the nine months ended September 30, 2024, was $65,720,000, compared to $81,425,000 in the same period of 2023[16] Tax and Earnings Per Share - The effective tax rate increased to 27.8% for the three months ended September 30, 2024, compared to 18.2% in the same period of 2023[11] - Earnings per share for Class A common shares decreased to $0.61 for the three months ended September 30, 2024, down from $1.46 in the same period last year[12] Market Trends and Developments - Positive trends in bookings were observed in September and October across all product segments, particularly in networking and industrial markets[3] - The acquisition of Enercon is expected to introduce new customers and markets to the Power segment upon closing[2] - Anticipated annual cost savings of approximately $1.5 million from the consolidation of fuse manufacturing in China[2] - Two senior associates were added to the corporate team to enhance sales and contracts management[2]

Core Insights - Bel Fuse Inc. reported preliminary financial results for Q3 2024, with net sales of $123.6 million, a decrease from $158.7 million in Q3 2023, but gross profit margin improved to 36.1% from 35.0% year-over-year [2][3][4] - The company anticipates Q4 2024 net sales between $117 million and $125 million, with gross margins expected to be approximately 34% to 36% [4][6] Financial Performance - Q3 2024 net earnings were $8.1 million, down from $19.4 million in Q3 2023, with adjusted EBITDA at $20.6 million (16.7% of sales), compared to $29.9 million (18.8% of sales) in the prior year [2][3][4] - The company repurchased 26,647 shares at a cost of $1.9 million during Q3 2024 [2] Operational Developments - Bel Fuse has signed a definitive purchase agreement for Enercon, expected to close in Q4 2024, which will enhance its Power segment by introducing new customers and markets [3][4] - The company is consolidating its fuse manufacturing operations in China, projected to save approximately $1.5 million annually once completed [3] Market Trends - Positive trends in bookings were observed in September and October across all product segments, particularly in networking and industrial markets [4] - The company expressed optimism about sequential improvements in market conditions, which are expected to positively impact 2025 [4] Product Segment Performance - In Q3 2024, Power Solutions and Protection sales decreased by 35% to $48.7 million, while Connectivity Solutions saw a 7.6% increase to $55.7 million, and Magnetic Solutions sales dropped by 40% to $19.2 million [2][15] - Year-to-date sales for 2024 show a 31.7% decline in Power Solutions and Protection, while Connectivity Solutions increased by 4.9% [15]

Acquisition Details - Bel Fuse Inc. has entered into a definitive agreement to acquire an 80% stake in Enercon Technologies for $320 million, with an enterprise value of $400 million[1]. - The transaction is expected to be completed by the end of 2024, subject to customary closing conditions[2]. - Bel plans to finance the acquisition through a combination of cash on hand and an expansion of its existing credit facility[4]. Financial Impact - The acquisition is expected to increase Bel's exposure to the aerospace and defense market from 17.5% to 31% of total revenue[2]. - The acquisition is anticipated to be accretive to Bel's GAAP EPS within one year post-close and to non-GAAP EPS on Day 1[2]. - Bel expects net leverage to be under 2.0x within one quarter from the close of the transaction[2]. - Approximately 30% of Bel's Power segment revenue and 37% of consolidated revenue will support the aerospace and defense markets post-acquisition[3]. Enercon Financial Performance - Enercon reported a gross margin of 46.0% and an Adjusted EBITDA margin of 32.5% for the last twelve months ending Q2 2024, surpassing Bel's historical margins[2]. - Enercon's last twelve months sales for Q2 2024 were $111 million, with a gross profit margin of 46%[5]. - GAAP net sales for the trailing 12 months ended June 30, 2024, were $559.987 million, with a forecast of $120 million for the full year 2024 Enercon only[16]. - GAAP net earnings for the trailing 12 months were $66.164 million, with a forecast of $30.927 million for the full year 2024 Enercon only[16]. - EBITDA for the trailing 12 months was $96.176 million, representing 17.2% of net sales, with an adjusted EBITDA of $105.750 million or 18.9% of net sales[16]. - The adjusted EBITDA for the forecasted full year 2024 Enercon is projected to be $38.489 million, or 32.1% of net sales[16]. Other Financial Considerations - The interest expense for the trailing 12 months was $1.809 million, while the provision for income taxes was $14.339 million[16]. - Restructuring charges amounted to $6.602 million, while other unusual items included a loss on liquidation of a foreign subsidiary of $2.724 million[16]. - The historical results for Enercon include interest expense related to debt held under Fortissimo ownership during the trailing twelve months[16]. - The forecast for full year 2024 assumes no debt held or interest expense incurred at the Enercon level[16]. - Historical results do not account for adjustments related to purchase accounting that will be made upon completion of the transaction[16]. Strategic Benefits - The acquisition will enhance Bel's product portfolio and diversify its customer base in the aerospace and defense sectors[1]. - The company emphasizes the use of non-GAAP financial measures to provide insights into financial trends and operational results[16].

Core Viewpoint - Bel Fuse Inc. has announced a definitive agreement to acquire an 80% stake in Enercon Technologies, Ltd. for $320 million, with an enterprise value of $400 million, aiming to enhance its presence in the aerospace and defense markets [1][2][3]. Transaction Highlights - The acquisition will increase Bel's exposure to the aerospace and defense market from 17.5% to 31% of total revenue based on LTM Q2 2024 [2]. - Enercon has a gross margin of 46.0% and an Adjusted EBITDA margin of 32.5% for LTM Q2 2024, which is higher than Bel's historical margins [2]. - The transaction is expected to be accretive to Bel's GAAP EPS within one year post-close and to non-GAAP EPS on Day 1 [2]. - Bel anticipates a net leverage of under 2.0x within one quarter from the close of the transaction [2]. - Enercon is recognized as a leading supplier of power conversion and networking solutions to the aerospace and defense sectors globally [2][3]. Strategic Implications - The acquisition will allow Bel to extend its product portfolio in the aerospace and defense markets, creating potential cross-selling opportunities [2]. - Bel's manufacturing footprint will expand into India and the U.S., with new capabilities and a skilled engineering team based in Israel [2]. - The acquisition is expected to be completed by the end of 2024, pending customary closing conditions and regulatory approvals [2]. Financial Aspects - Bel plans to finance the acquisition through a combination of cash on hand and an expansion of its existing credit facility [4]. - Enercon's LTM Q2 2024 sales were reported at $111 million, with a gross profit margin of 46% [7]. - The forecast for Enercon's standalone full year 2024 GAAP net sales is projected at $120 million [17].

| --- | --- | --- | --- | --- | --- | --- | --- | --- | |-------|------------------------------------------------------|-------------|-------|-------|-------|-------|-------|-------| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | The Bel Fuse Investment Thesis About This Article █ | BELFB | | | | | | | | | Analyst's rating at publication | BUY | | | | | | | | | | $47.29 | | | | | | | | | | 33.90% | | | | | | | | | | 34.54% | | | | | | | | | | 26.67% | ...