Bel Fuse (US:BELFA)2023-11-02 16:00Financial Performance - Total revenue for the three months ended September 30, 2023, was $158.682 million, with a gross profit of $55.465 million, resulting in a gross profit margin of 35.0%[92] - Power Solution and Protection sales rose by $38.9 million (18.9%) in the first nine months of 2023 compared to the same period in 2022[71] - eMobility product sales increased by $9.8 million (79.2%) in the first nine months of 2023 compared to the same period in 2022[71] - Sales of Connectivity Solutions products increased by $1.5 million (3.0%) and $19.9 million (14.2%) during the three and nine months ended September 30, 2023, respectively, driven by growth in commercial aerospace and military markets[103] - Sales of Magnetic Solutions products declined by $19.0 million (37.2%) and $44.0 million (31.8%) during the three and nine months ended September 30, 2023, primarily due to reduced demand from networking customers[118] Cash and Liquidity - Cash on hand increased to $100.2 million as of September 30, 2023, up from $70.3 million at December 31, 2022[66] - Cash and cash equivalents totaled $100.2 million as of September 30, 2023, with a current ratio of 3.1 to 1, indicating strong liquidity[108] - Cash and cash equivalents increased by $30.0 million during the nine months ended September 30, 2023[137] - The company repatriated $33.5 million from foreign subsidiaries during the nine months ended September 30, 2023, while analyzing global working capital and cash requirements[124] Costs and Expenses - SG&A expenses for the third quarter of 2023 were $23.7 million, up from $22.2 million in the same quarter of 2022[75] - Labor costs represented 6.5% of revenue during the first nine months of 2023, down from 8.4% in the same period of 2022, due to internal initiatives to mitigate wage increases[100] - Material costs as a percentage of total sales decreased to 40.5% in Q3 2023 from 46.1% in Q3 2022[73] - The company anticipates an increase in minimum wage in China to result in higher labor costs of approximately $0.5 million per year at affected facilities[100] - Inflationary pressures may lead to higher input costs, impacting future operating results[135] Borrowings and Interest - Outstanding borrowings under the revolving credit facility were $60 million as of September 30, 2023, down from $95 million at December 31, 2022[83] - The effective interest rate for outstanding borrowings was 2.47% as of September 30, 2023, down from 3.57% at December 31, 2022[139] - Interest expense incurred was $0.5 million for the three months ended September 30, 2023, compared to $0.9 million for the same period in 2022[139] - The company incurred $2.4 million of interest expense during each of the nine-month periods ended September 30, 2023, and 2022[139] - No outstanding borrowings were subject to a variable interest rate as of September 30, 2023[139] Operational Changes - The company completed the transition of operations from its Tempe, Arizona and Sudbury, UK facilities into other existing sites during the first half of 2023[69] - Accounts receivable decreased by $11.9 million during the nine months ended September 30, 2023, with days sales outstanding (DSO) improving to 55 days from 58 days at the end of 2022[110] - Inventory decreased by $29.3 million at September 30, 2023, with inventory turns improving to 2.9 from 2.6 at December 31, 2022[110] - The company has faced challenges in managing labor costs due to unpredictable demand and the need for continual recruitment and training[134] Taxation - The effective tax rate for Q3 2023 was 18.2%, down from 20.0% in Q3 2022[76] - The effective tax rate increased to 11.5% for the nine months ended September 30, 2023, compared to 7.1% in the same period of 2022, mainly due to a decrease in tax benefits from valuation allowances[122] Restructuring and Cost Savings - Restructuring initiatives are expected to yield annual cost savings of approximately $6.9 million, with $1.6 million anticipated in Q4 2024[69] Legal Matters - The company is evaluating options for appeal regarding a patent infringement lawsuit after a summary judgment of non-infringement was granted[133] Industry Overview - The company operates in one industry with three reportable segments: Connectivity Solutions, Power Solutions, and Protection, Magnetic Solutions[130]