Bel Fuse (US:BELFB)2025-07-31 19:24Revenue Breakdown - For the six months ended June 30, 2025, 53% of the company's revenues were derived from Power Solutions and Protection, 34% from Connectivity Solutions, and 13% from Magnetic Solutions[116]. - Sales of Power Solutions and Protection products increased by $51.1 million (43.0%) during the first half of 2025 compared to the same period in 2024, driven by aerospace and defense applications[128]. - Connectivity Solutions products saw a revenue increase of $1.4 million (2.4%) in Q2 2025 compared to Q2 2024, primarily due to higher volumes in commercial aerospace applications[131]. - For the six months ended June 30, 2025, total Connectivity Solutions sales decreased by $2.2 million (1.9%), while commercial aerospace and defense applications grew by $3.4 million (11.4%) and $2.9 million (12.6%), respectively[132]. - Sales of Magnetic Solutions products increased by $10.4 million (34.1%) in the first half of 2025, driven by higher demand from networking customers[134]. Financial Performance - The company's backlog of orders amounted to $414 million at June 30, 2025, an increase of $32.6 million, or 9%, from December 31, 2024[119]. - Gross margins for 2025 improved due to a favorable product mix and operational efficiencies, despite higher wage rates in Mexico[133]. - Other income (expense), net totaled $10.2 million for the six months ended June 30, 2025, compared to $1.3 million for the same period in 2024, driven by foreign exchange gains[143]. Costs and Expenses - Labor costs represented 8.1% of revenue during the first six months of 2025, up from 7.9% for the same period in 2024[124]. - Minimum wage increases in various regions are expected to add approximately $2.0 million in annual labor costs, impacting profit margins negatively[123]. - R&D expenses rose to $15.3 million for the six months ended June 30, 2025, up from $11.2 million in the same period in 2024, primarily due to the inclusion of Enercon's R&D costs[138]. - SG&A expenses increased to $60.4 million for the six months ended June 30, 2025, compared to $49.1 million in the same period in 2024, largely due to Enercon's SG&A expenses[139]. - Interest expenses surged to $8.1 million for the six months ended June 30, 2025, up from $0.8 million in the same period in 2024, reflecting higher borrowings related to the Enercon acquisition[140]. Taxation - The effective tax rate for the six months ended June 30, 2025, was 21.5%, up from 19.8% in the same period in 2024, primarily due to changes in foreign taxes[146]. - The effective tax rate will fluctuate based on the geographic regions where pretax profits are earned, with Asia having the lowest tax rates[126]. Acquisitions and Investments - The company acquired an 80% stake in Enercon in November 2024, which is expected to contribute to sales in 2025[119]. - The company had $59.3 million in cash and cash equivalents at June 30, 2025, and expects to use this liquidity for various operational needs and potential acquisitions[147]. - The company had $150 million of available borrowings under its revolving credit facility at June 30, 2025, with no mandatory principal payments due during 2025[152]. Market Risks - The Company is exposed to market risks from foreign currency exchange rates, interest rates on long-term debt, and commodity price fluctuations[158]. - The Company uses foreign currency forward contracts to manage short-term exposure to operational cash flow fluctuations[158]. - To mitigate variable interest rate risks, the Company maintains two pay-fixed, receive-variable interest rate swap agreements[158]. - The Company actively monitors fluctuations in metal prices, including copper, zinc, tin, gold, and silver, which can significantly impact production costs[158]. - The Company believes it has adequate primary and secondary sources for its key materials despite potential volatility in metal prices[158]. - Strategies implemented to mitigate negative impacts from material cost increases include price adjustments and productivity improvements[158]. - There have been no material changes regarding market risk during the six months ended June 30, 2025[158]. - The Company’s primary objective for holding derivative financial instruments is to manage foreign currency exchange rate and interest rate risks[158]. - The Company enters into derivative contracts in the normal course of business to mitigate risks, not for speculative purposes[158]. - Further discussions on market risks can be found in the Company's Annual Report on Form 10-K for the year ended December 31, 2024[158].