Bel Fuse (US:BELFB)2025-11-04 17:32Revenue Breakdown - For the nine months ended September 30, 2025, 53% of revenues were derived from Power Solutions and Protection, 34% from Connectivity Solutions, and 13% from Magnetic Solutions [115]. - Sales of Power Solutions and Protection products increased by $45.7 million (93.9%) in Q3 2025 compared to Q3 2024, driven by aerospace and defense applications [123]. - Connectivity Solutions sales rose by $6.2 million (11.0%) in Q3 2025, primarily due to higher volumes in commercial aerospace applications, which grew by $6.3 million (50.5%) [124]. - Sales of Magnetic Solutions products increased by $3.5 million (18.0%) in Q3 2025, driven by higher demand from networking customers [127]. Order Backlog - The backlog of orders amounted to $415 million at September 30, 2025, an increase of $33 million, or 9%, from December 31, 2024 [118]. Labor Costs - Labor costs represented 7.8% of revenue during the first nine months of 2025, remaining flat compared to the same period in 2024 [121]. - Minimum wage increases in 2025 are expected to increase annual labor costs by $1.8 million, though these costs have been largely offset by revenue increases [121]. Taxation - The effective tax rate will fluctuate based on geographic regions, with Asia having the lowest tax rates among the regions where the company operates [121]. - The provision for income taxes increased to $5.4 million in Q3 2025 from $3.1 million in Q3 2024, with an effective tax rate of 19.5% [138]. Foreign Exchange and Tariffs - The company recognized a foreign exchange transactional gain of $11.6 million during the nine months ended September 30, 2025, mainly due to currency fluctuations [121]. - Approximately 75% of global sales are not currently subject to newly-enacted U.S. tariffs, with 25% estimated to be affected, primarily from the PRC and Israel [121]. Material and Production Costs - Material costs as a percentage of sales increased to 32.2% in Q3 2025 from 31.7% in Q3 2024, driven by higher sales of Power products [129]. - The Company utilizes metals such as copper, zinc, tin, gold, and silver in production, with price fluctuations potentially leading to higher production costs [148]. - The Company believes it has adequate primary and secondary sources for key materials despite potential volatility in metal prices [148]. - The Company actively monitors risks associated with commodity price fluctuations and anticipates increased material costs [148]. - Strategies implemented to mitigate negative impacts from price changes include price adjustments and productivity improvements [148]. Financial Performance - Total cost of sales decreased to 60.3% in Q3 2025 from 63.9% in Q3 2024, reflecting improved sales volumes [129]. - R&D expenses rose to $7.5 million in Q3 2025 from $5.4 million in Q3 2024, primarily due to Enercon's R&D costs [131]. - SG&A expenses increased to $32.8 million in Q3 2025 from $26.7 million in Q3 2024, largely driven by Enercon's SG&A expenses [132]. - Interest expenses surged to $3.6 million in Q3 2025 from $0.4 million in Q3 2024, reflecting higher borrowings related to the Enercon acquisition [133]. - Other income (expense), net improved to $1.1 million in Q3 2025 from a loss of $1.3 million in Q3 2024, driven by reduced foreign exchange losses [135]. Cash Flow and Liquidity - Cash and cash equivalents decreased by $10.5 million during the nine months ended September 30, 2025, primarily due to increased accounts receivable [140]. - The company had $175 million of available borrowings under its revolving credit facility as of September 30, 2025 [143]. - The current ratio improved to 3.1 to 1 at September 30, 2025, compared to 2.9 to 1 at December 31, 2024 [141]. Market Risks - The Company is exposed to market risk from foreign currency exchange rates, interest rates on long-term debt, and commodity price fluctuations [148]. - The Company uses foreign currency forward contracts to manage short-term exposure to operational cash flow fluctuations [148]. - To mitigate variable interest rate risks, the Company maintains two pay-fixed, receive-variable interest rate swap agreements [148]. - There have been no material changes regarding market risk during the nine months ended September 30, 2025 [148]. - 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 [148].