Bel Fuse (BELFB) - 2024 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - In Q4 2024, sales reached $149.9 million, up from$140 million in Q4 2023. Full-year 2024 sales totaled $535 million, down from$640 million in 2023 [35] - Gross margin improved to 37.5% in Q4 2024 from 36.6% in Q4 2023, with a full-year increase of 410 basis points compared to 2023 [36] - Selling, general, and administrative (SG&A) expenses for Q4 2024 were $34.8 million, up 9.9$24.9 million in Q4 2023 [47] Business Line Data and Key Metrics Changes - Power solutions and protection products sales in Q4 2024 were $78.1 million, a 13.2$20.8 million [37] - Connectivity solutions group sales were $52.5 million in Q4 2024, a 4$220 million, up almost 5% from 2023 [40] - Magnetic solutions group sales declined by 6% from Q4 2023 to $19.2 million, resulting in full-year sales of$58.9 million compared to $115 million in 2023 [44] Market Data and Key Metrics Changes - The consumer end market continues to struggle, with expectations of persistent challenges through much of 2025 due to prior trade restrictions on a supplier in China [23] - Distribution, networking, and industrial markets are showing signs of recovery, with expectations for improvement in 2025 compared to 2024 [23] Company Strategy and Development Direction - The company is focused on future growth and improved cost controls, with successful facility consolidations leading to significant cost savings [9][12] - The acquisition of Enercon is expected to enhance the company's position in mission-critical components for harsh environments, with anticipated revenue growth from this segment [10][22] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism for 2025, citing favorable trends in AI, defense, and space as potential growth areas [21] - The company expects to see improvements in various markets, with magnetics anticipated to be the largest percentage grower [29] Other Important Information - The company closed the year with$69 million in cash and securities, down from $127 million at the end of 2023, primarily due to the Enercon acquisition [49] - The outstanding debt increased to$287.5 million, largely due to new borrowings related to the Enercon acquisition [50] Q&A Session Summary Question: Can you connect the dots from third-quarter orders momentum for PSP and Magnetics? - Management noted that Magnetics is seasonal, with Q2 and Q3 being the strongest quarters, while Power saw robust pull-ins due to anticipated tariffs [62] Question: What is the outlook for PSP in 2025? - Management indicated a flattish outlook for PSP, impacted by the Chinese supplier and pull-ins in Q4 2024 [66] Question: How much of the Q1 sales guide is attributable to Enercon? - Management stated that PSP would be down year-over-year in Q1 2025, with Enercon being additive to the overall sales [72] Question: What are the cross-selling opportunities with Enercon? - Management expects limited cross-selling opportunities in 2025 due to the slow-moving nature of the defense sector [74] Question: What is the impact of AI on revenue? - AI is expected to significantly benefit the power group, with an estimated $7 million in revenue from AI applications in 2024 [101] Question: What is the status of destocking at major distributors? - Management reported that a major distributor indicated they hit bottom in January, with expectations for improvement [103] Question: How are global tariffs impacting the business? - Approximately 12% to 13% of 2024 revenue was subject to tariffs, with ongoing efforts to manage costs and pass on increases to customers [130] Question: What is the M&A capacity post-Enercon acquisition? - Management remains open to selective M&A opportunities, focusing on quality and size [135]