Q4 2020 Bel Fuse Inc Earnings Call

Yeah.

[music].

Please standby.

Good day and welcome to the Bel Fuse, Inc. Fourth quarter 2000, and 'twenty results Conference call. Today's conference is being recorded at the it sounds like the turn of the comments over to Dan Bernstein, President and Chief Executive Officer. Please go ahead.

Thank you James I would like walk and everybody.

Fourth quarter year and financial results today.

Before I begin we hope you and your families stay safe during these difficult times.

On the call today is Craig Brosious, our vice President of Finance.

And Hudson and director of financial reporting and.

And I would like to introduce our new Chief Financial Officer for route to Lick the.

Came on board this week.

Working with BMW, the I'm, sorry of working with bank of Montreal and in the past we have developed a strong relationship with Fuji Dream, It's time for been overly impressed with his knowledge.

The industry work experience interpersonal skills and most importantly is the ability to solve problems and a timely manner.

And number one goal of lot fail at down simply for will be to increase Bell's overall value to our shareholders.

And I believe there's a substantial valuation GAAP between Dallas and shakeout of price and all the current breakup and so look as the broad mandate to work the team members from <unk>.

And the various pathways to increase topline growth margin improvement simplify our operations, while driving growth through M&A.

And searching for the first CFO and the company and she is true. He was the best candidate and we feel fortunate that he joined Bel draw for us.

His fresh perspective welcome aboard for Ruth.

Thank you Dan for the introduction there I'm very excited to be joining the Bel family and team.

Okay.

And then can you. Please go on for the Safe Harbor statement.

Alright. Thank you Dan Good morning, everybody people are the start I'd like to read the following the safe Harbor statement, except for historical information contained on the call. The matters discussed on this call such as statements regarding the potential of rebound of sales magnetic solutions business and overall product sales.

And people pay the impact of global cost reduction program on top of positioning for further margin expansion.

Anticipated cost savings, resulting from the closing on the sale of the switch of them facility and other restructuring actions.

Potential benefits of bells margins, resulting from the recovery of demand and belts and market.

The anticipated impact of the Rns connector acquisition and crude out of Dallas EBITDA.

The anticipated impact of the CEO of power acquisition, including the timing and closing thereof.

Factors that may.

And factors that may impact sales of organic growth for 'twenty and 'twenty, one including continuing the visibility.

Visibility of the break out of Covid and long lead times for semiconductors and certain components.

All forward looking statements as described the under the private Securities Litigation Reform Act of 1995 that involve risks and uncertainties actual results could differ materially from Dallas projection.

Among the factors that could cause actual results to differ materially from such statements are the market concerns facing our customers the continuing viability of sectors that rely on our products the <unk>.

Pact of public health crises, such as the governmental and social and economic effects of COVID-19.

The business and economic conditions.

A copy of the associated with integrating recently acquired companies.

Capacity and supply constraints or difficulties.

Product development and commercialization of our technological difficulty the red.

The inventory and trade environment risks.

The risks associated with foreign currency I'm.

Uncertainties associated with legal proceedings the mark.

Acceptance of the company's new products and competitive responses to the new products the <unk>.

The changes to U S trade and care of policy.

And the risk factors detailed from time to time and the company's SEC reports and light of the risks and uncertainties. There can be no assurance that any forward looking statement will in fact prove to be correct. We undertake no obligation to update or revise any forward looking statements.

We may also discuss non-GAAP results during the call and reconciliations of our GAAP results to non-GAAP results have been included and it's not released.

I'd now like to turn the call back to Dan for a general business update.

Thank you and first of all of them to provide an update of COVID-19, and how it impacted our facilities overall I'm pleased to report and all our manufacturing sites globally continue the operational for the majority of the fourth quarter. There were two facilities and news will be closed for about a week dream during the quarter and response.

And the infection, but we're still a live and service of our customers. During this time.

While the number of COVID-19 cases appeared to be moving and the right direction.

And vaccine and distributions now underway the situation still remains fluid. We continue to operate at Luxottica group of all preventative measures in place and ensuring ongoing compliance with local regulations to migrate all of this I would again like to acknowledge our production managers and manufacturing associates, who work day.

They are the difficult conditions.

Continued their continued dedication of the Bel and all customers and it's truly appreciate it.

Now turning to our results, we saw and proof of margins.

Relatively flat sales as compared to last year's fourth quarter, while there was a minimal change in overall sales dollars the composition of of ourselves and that's changed quite a bit since last year at for quarter.

Sales of they're not powered for solutions and protection group were up $16 2 million or $44 eight per cent for the fourth quarter of 'twenty of any P. R.

Our acquisition of some of you all in December 2019 contributed 11 million and incremental sales for the fourth quarter of 'twenty and 'twenty and this for instance run and a higher margin other areas where they don't.

The power segment that was strong as well.

Our products sold into the fast growing E mobility markets were up $2 5 million of 200 per cent increase from 2019 quota and fuse sales were up $1 3 million and increase of over 40% from last year's fourth quarter and these areas of growth were offset by the the elimination of low.

Margin products and in the script.

And then our connectivity solutions segment sales were down $6 8 million or 16, 6% and the fourth quarter of 'twenty and 'twenty.

First of the same quarter of 2019.

We continue to be and impacted.

The impact is going to the depressed commercial aerospace industry.

Sales were down $7 million or per cent for the last year for the last quarter.

And the connectivity segment was also impacted by the lower sales of product into premise wiring applications as the.

The new construction projects stalled in 'twenty and 'twenty through the Covid awesome.

We were able to shift our production lines to support our growing military backlog.

The which enabled us to capture 60 per cent increase for military sales, partially offset and the commercial decline.

The house within all of magnetic solutions business was down $8 4 million or $22 one per cent for the fourth quarter of 2019, as one of our largest OEM and customers and is poised for ordering as they work through their inventory on hand on.

And a positive note.

The other proteins of century bed and we should see the sales pick back up and the <unk>.

First quarter 2020 of them.

Overall margins have improved by 420 basis points and our trend and in the right direction. This can be attributed to a combination of product mix and discussed previously and.

The ongoing cost reduction program.

On the acquisition from the Disney over these past few months as we recently announced the purchase of two companies ours from connectors and yours.

The.

And I'll close with the acquisition of the RMS connectors and January which led us to expand our market share and in the commercial aerospace business.

And that will benefit us and the industry start to rebound and moving into 2021.

Also signed an agreement to acquire the old power.

She is based in India, the acquisition of yours for not only and spend our product portfolio and the low to mid range. The.

And importantly provide us the manufacturing capability of the outside of China.

Both of these acquisitions fit within our strategy of increased market share, while diversifying our product portfolio and geographic footprint.

The <unk> 'twenty 'twenty, one and you have seen some recovery and certain of our serve the markets. We would expect demand for military customers and mobility for me and the driver for sales throughout 2021, we Additionally, and she size of certain additional markets such as promise one rail commercial aerospace have potentially.

Cover throughout the year, it's the COVID-19 conditions improve.

And our competitive position remains strong as ever.

With the Covid situation still with us and uncertainty regarding some semiconductors and components that might be the choice for clients give us limit moving.

And the visibility into the future from them.

Meantime, the emergency room and focus on bottom line growth from integrating the announced acquisition of actively looking for other strategies and.

To better position and bell for the future.

And with that and I like to turn the call over to Greg for the financial what the right.

Thank you Dan.

And by product segment for the fourth quarter of 2020 were as follows.

Power solutions and protection sales were $52 $3 million up 44, eight per cent from last year's fourth quarter and.

Activity solution sales were $34 2 million the decline of 16, 6%.

And I get it solution sales were $29 $6 million down $22 one per cent from last year's fourth quarter.

Gross margin by product segment for the fourth quarter of 2020 was as follows.

Power solutions and protection of the gross margin of 27, 8% and the fourth quarter of 2020 up from 19, 7% and last year's fourth quarter.

Connectivity solutions gross margin was 24% down.

Down from 24, 5% and the 2019 and quarter and.

And my other solutions gross margin was 23, 3% up from $19 one per cent and last year's fourth quarter.

Yeah.

On a consolidated basis gross profit margin increased to 25, 3% and the fourth quarter of 2020 as compared with 21, 1% and the fourth quarter of 2019 the reason.

And the combination of factors.

Overhead and indirect labor costs were $1 million lower during the fourth quarter of 'twenty and 'twenty, primarily due to restructuring measures implemented during late 2019 and.

The reduction and the cost structure for our cinch connectivity solutions segment to align with current sales volumes within that segment.

A portion of the margin improvement and the fourth quarter of 2020 related to the elimination of certain low margin palette of products from our portfolio.

Research and development costs were $5 $7 million during the fourth quarter of 2020 of decline of $1 million from the fourth quarter of 2019, primarily due to restructuring efforts implemented during the water part of 2019.

Our selling general and.

And the administrative expenses were $19 6 million or 16, 8% of sales flat from the fourth quarter of 2019.

Lower travel expenses of $613000 and savings from other cost containment efforts fully offset the $1 $1 million of incremental SG&A expenses associated with the citywide business acquired in December of 2019.

On a go forward basis, we would expect SG&A to run between 19 and $20 million per quarter and the near term, we expect our T and the spend will continue to be lower than normal for at least the first half of 2021.

During the fourth quarter of 2020, we closed on the sale of our facility and Switzerland. This.

Transaction resulted in the gain of $1 $9 million, which is included in our fourth quarter results.

These factors resulted in income from operations of $5 $6 million and the fourth quarter of 'twenty and 'twenty as.

And that's compared to the loss from operations of $2 $9 million and the fourth quarter of 2019.

Other expense net was $395000 for the fourth quarter of 2000, and 'twenty as compared to $1 $7 million during the fourth quarter of 2019.

And increase and foreign exchange losses of 700000, and the fourth quarter of 2020.

And was offset by a larger gain on the company sort of investments, which are now included in this line item.

The expense from the fourth quarter of 2019, largely related to a $2 $1 million of walks on the liquidation of foreign subsidiaries.

Interest expense was $900000 and the fourth quarter of 2020.

Down from $1 $3 million from the same quarter last year as a result, and the <unk>.

Decreases and the LIBOR rate the company spread on its credit facility driven by EBITDA improvements and the <unk>.

Overall reduction of our outstanding debt balance.

We had a provision for income taxes of $774000 and the fourth quarter of 2020 compared to a provision of three of our $92000 during last year's fourth quarter.

Earnings per share for the class a common shares was earnings of 27 cents per share and the fourth quarter of 2020.

And that's compared with the loss of 50 cents per share and the fourth quarter of 2019.

Earnings per share for the class B common shares was earnings of 29 cents per share and the for.

Fourth quarter of 2020.

Compared with the loss of 52 cents per share and the fourth quarter of 2019.

While the non-GAAP basis, which excludes certain unusual and other nonrecurring items.

The P. S for class a shares with earnings of <unk> 18 per share and the fourth quarter of 2020.

Compared with the loss of <unk> 30 per share and the fourth quarter of 2019.

One of the non-GAAP basis EPS for class B shares was <unk> <unk>.

<unk> per share and the fourth quarter of 2000, and 'twenty as compared with the loss of <unk> 30 per share and the fourth quarter of 2019.

And now I'd like to go through some balance sheet and cash flow items.

Our cash and cash equivalents balance at December 31, 2020, with $84 $9 million and increase of $12 7 million.

From December 31 2019.

During 2020, we generated cash flows from operating expenses activities of $46 $1 million and.

And received $4 million and proceeds from the sale of property.

We made net payments of $28 $2 million towards our outstanding debt balance and used cash for capital expenditures of five.

The point 5 million dividend payments of $3 4 million net of interest payments of $4 1 billion.

Accounts receivable were $71 $4 million.

At December 31, 2020.

As compared with $76 $1 million at December 31, 2019.

Day sales outstanding decreased to 57 days at December 31, 'twenty and 'twenty as compared to 60 days at December 31 2019.

The decrease in our accounts receivable balance was largely due to lower sales in Asia, where payment terms tend to be the longest.

Inventories were $100 1 million at December 31, 2020 down $7 1 million from December 31, 2019 for.

The decline you've seen the raw materials due to reduce material intake and anticipation of slower fourth quarter.

Accounts payable were $39 $8 million at December 31, 2020 down for $4 million from its level at December 31, 2019 and.

The early due to lower purchases of raw materials during the fourth quarter of 12.

One of them.

Sales total outstanding debt balance was $115 $6 million as of December 31st 2020 net of deferred financing costs a.

The decrease of $28 1 million since the 2019 and year end balance.

This primarily reflects voluntary debt repayments of 28 million made during 2020.

Book value per share, which is calculated as stockholders' equity divided by our combined a and b classes of common stock outstanding was $15 <unk> per share.

Some of the 31 2020.

And that's compared to $13.69 per share for December 31, 2019.

And with that I'll turn the call back over to Dan and.

Thank you Craig at this time, James can we open up for the call for questions.

Thank you Mr Bernstein.

The ask a question please signal by pressing star one on your telephone keypad, if you're using a speaker phone. Please make sure. Your mute function is turned off July arsenal of tree shy of equipment.

And if you'd like to ask a question press star one at this time.

And we'll take our first question of day from Jim Ricchiuti with Needham and company.

Hi, good morning.

So what are the future.

Speak a little bit more of the or of this.

Connectors and.

Yes.

And.

Share with us and perhaps if you could just any details on.

Financial contribution of or just the impact that you would anticipate in 'twenty and 'twenty, one and thanks a lot.

Before I have craig's all over the the numbers with you, but just to give you insight to both of those companies are yours.

Again, we've been private labeling of product for over three years, we have a very strong relationship with them. We know the people and it was a market and sort of low medium and market, mostly and the medical area and industrial area with.

Which we felt we could grow with the price for the proper pricing structure and product portfolio. So.

So we didn't pass train them for many years, if the range of trusted and saying so.

And we remain very excited that you know again that we could put the scale of the gathering close on March 31st.

So and <unk>.

The deal.

And the key for also is that we are overly dependent with the manufacturing in China and.

And this gives us another area of the where he can have low cost manufacturing and the additions of that we do believe the envy of market should be a substantially stronger market for dollars and Charlie and the other acquisition of RMS.

And then century, whereas the bone and supplier for the 737 and connectors.

Boeing suggests the very strongly that the approved.

And source and that company was the.

Part of the mess.

And over the past 10 years.

We've contacted them every year and to see if they are in the interest of salaries because of the price pressure that we're feeling a lot of that.

Aerospace companies out there because of that medical sales were growing so fast.

It wasn't the strategic product line for them any longer so the daily.

And they allowed us the bias everywhere and we can.

Came up by 12 of the very strong deal almost close to the book value and the book value of these Oh.

A lot of automated high and equipment that you didn't have in the house.

So all of them besides the eliminating a good competitor.

And where to pick up some of the state of the on equipment and so we think that also is going to be a home around the acquisition.

And we do think it's going to become profitable once we move it and draw facility, which would take three or four months and months and throwing kicks both.

And it starts from ordering again, we think of it would be one of our most successful acquisitions and try to move all of the board of the financials and how you see both companies.

And then.

And.

Yeah of the.

Starting with with our and Beth you know, obviously, they play and that the commercial aerospace segments of their revenues had been depressed over the last the last 12 months.

For the cause and the manufacturing and also the.

And the aftermarket impacts so for.

For the coming for the coming 12 months the rig.

Kind of expecting in incremental.

Revenue growth.

The five to two $8 million.

Related to that and once we get back to a range.

Normal run rate and obviously that revenue would certainly oh.

The pick up.

And because we are removing the entire.

Production.

Facility into one of our existing facilities and no there's no incremental G&A.

And we'd be able to leverage or.

And our internal overhead structure and so we expect the.

Business could be.

Currently prepared the profitable.

On the one of the Eos acquisition day.

And they've been obviously impacted by Covid like rest of the world.

For the rest of the industry.

<unk> been running out of approximate.

$12 million revenue run rate over the past the seven eight months now.

So once they come on board and we expected.

The incremental revenue assuming assuming the March close would be.

Approximately $1 million or you kind of odd million for.

For 2021.

The margins there are are similar to R. R.

And our other power margins so.

So we accept that we expect that business to be to be accretive right.

The right out of the gate.

The scope of that for your answers the question, Jim It and it's been one.

And did that clarification, Craig and the margins all the more of the Bel power and that like.

C U E.

Yeah, that's correct the traditional Bel power margin right.

And thanks for that thanks for the color and Dan and I sound like the nice acquisition, so congrats and.

I Wonder if you could also.

And to the extent of you can elaborate a little bit more on the impact of some of the component supply chain issues of the business are you seeing any impact for US is just the case of monitoring the situation in terms of whether it gets worse and so I think.

Again, we're very fortunate because they do have the long term relationships with other semiconductor companies, we deal with and the component of people. We do deal with so again you know they can.

For US for example, and said Hey, if you want and if you.

The one support the share you have to sign up for a yearly non cancer for water.

And then that's the law.

And the deliveries and also I think we do a good job and soon.

And of the situation because of all of the relationships we have in the industry. So we tend to know about shortage of before the E com.

So again all of that.

Major problems that we don't have and we won't have any pricing pressure.

During this period and we have seen somewhat.

Price increases during the shortage Perry.

And I don't think of it will affect our deliberate and.

And by a factor of how we price.

Going forward and we have to increase price you were not doing the customers.

Got it.

And just last question for me just in general.

The level of activity, you're seeing across your markets it sounds like.

With the exception of obviously, the commercial aerospace and potentially the couple of situations, where the with one of your U.

Larger Oems.

So the.

The the level of business activity Youre seeing is picking up.

And comparing to last and when we're in the middle of Covid, and you had China and shut down and I think going over that bar, it's not too high and we are taking more and in terms of as you're entering the year versus Q4, I, obviously euro zone.

And I wish I wish I could I still think we just had such limited visibility I think the snow so much uncertainty.

Out there with Covid and how did the government kind of effect, you know policy and I still think of it.

So a little of it now.

A lot more positive than last year the overall.

However, I still think there's still it's still a substantial amount of uncertainty there.

People again and for this term of cautiously optimistic.

And I don't see anybody.

Opening up the Champagne and then how about that [laughter] Oh, that's fair enough. Thank you. Thank you for that and I'll jump back of the kids play for us.

Next we'll hear from Theodore O'neill with Litchfield Hills research.

Thanks very much.

Two questions for you first on the on the margins, which continue to show improvement and the last quarter. There was the 900000 of our Chinese subsidiary and there were there any one time items like that and this quarter.

And can you address it.

Sure Hi, Yeah, that's the thing.

And we could have a similar amounts in Q4 this year.

We have a unit to repair and parts of it that way.

805000, and the fourth quarter.

And and again this is and this may or may not continue into the next year.

We welcome.

Welcome to here.

Right.

My other question is about E. O S acquisition. So just from a branding perspective will you continue the private label and sell under the <unk> brand or would you look out to two of the adult.

And that is one of the big questions of where the babies.

Constantly.

And I'll show you how crazy at the situation we have.

The private label side of the Bell brand. The company, we acquired last year, she UI and private labels under U S product under their brand and then.

And just to add brands. So we have a couple of distributors that sell free of the same product the three different names of golf by yes.

So the margin it's the number one thing of our marketing group is working on is how do we brand how do we bring and he knows but how we brand value and so many different companies that we acquired over the past couple of years.

Okay. Thanks very much.

But out of here from Hendi <unk> of Centaur with Gabelli.

Good morning, Dan the car off crank and man.

Good morning, and good morning.

And just talk about the M&A pipeline now that you have far off and European.

All of that for me speak about our M&A pipeline for Ruth.

Yep thank debt.

Great to be with you here today so.

And coming from the industry there is a.

There is a day and.

The good amount of activity that we expect to occur.

Occur a little bit and more frequency and 2021, especially as the world and that sort of color from COVID-19, but so our expectation is due the seymour.

And I expect to have a robust pipeline and obviously the.

With the team at Bel here and now and the addition of myself would be trying to cultivate our own proprietary side of the house not too dissimilar to the couple of deals that got done here. So I would say it's in it's a it's definitely out there and.

And we just need to figure out where we went out and be spending time.

And going after them.

Thank you and I think it I think.

And with the value also for which our brands. Besides moving so many of our competitors for companies and the industrial market, which we will participate in a day.

And how we deal with the bank going forward.

And I agree with you know because we haven't borrowed money and the past the fifth.

The answer in terms of and so forth I think.

I think that's key for us it's great that we want to buy a company for the questions can we get the profit financing from our lenders and I think the truth of the board I think that's going to be a major benefit and he brings to the party of besides this acquisition knowledge.

Got it and how it's done I would like to read the safe.

Long lead times, the asking Congress of I don't know, whether you're talking about these are not.

And there's been talk about in Pennsylvania, and the channel and and temporary and not all Oems.

For the optimal in the debt for example.

Their work takes more and built and yoga and Hungary.

Do you see the same trends and.

Among our customers are investing are that that doesn't apply and your area.

Got.

I think again I think the initial concern you have when you have long lead times.

And if someone has to wait nine months for semiconductor and he's going to need.

A few of them for two months.

Are they kind of pushed back you know your deliveries.

For the last time and generally we never see that release and generally when they're all long lead times and we always.

And it's beneficial for the business because most of our customers are more concerned about deliveries and they are about pricing and then at some point, they're willing to pay the premium for the pricing. So we think.

And though.

Do you think it's of a beneficial again for all of US when we have long lead times and how we prepare ourselves properly for it and I think the stars the a person to improve because of always cap of flood minds open the product.

And because of the long term relationships, we have the amount of suppliers.

And again I feel it is lead times, we are somewhat confident that we can manage it properly.

And if we do face increased pricing.

Can you offset it with all the price into our customers.

Got it.

The addition of E S.

And then alright, and that's come back per.

And what should.

The our expectation for operating expense.

Right.

Well and Youre asking the expectation for for Opex.

And as DNA.

Yeah for for our of mouse, there should be very little.

Incremental opex.

Because we're basically bringing the manufacturing facility.

The facility into our own.

And we are not bringing you know of any incremental.

SG&A for the long with that.

On the on the U S piece.

And the Opex would be.

Probably the traditional about.

The 13 to 15 per cent of revenue.

Maybe the maybe some synergy there or we're not anticipating a significant and though.

And I'm quite sure what kind of that's almost the other DNA.

And I expect.

Yeah.

Let's see if that would be.

The revenue on an annualized basis over the fourth.

The 12 to 15 million so.

So I'd say no.

14, and 15 per cent of that.

Okay, and then I think for our pumping from Q1, and you will see some benefit and RMB and then of course, there's also.

Yeah.

Oh on the comparative basis, we should see you should see a positive comparison for the R&D.

Yes.

Okay. Thank you for you.

Asking about the consolidated business.

Yeah, the consolidated business, Yeah, I think I think months ago.

I think that's the cost and that SG&A run SBC and the timing of the packing Neely and.

Right. So for the consolidated business are we will see incremental cost savings and Q1 of about 1.3 million. The majority of that will be and the R&D I'm about.

750000, they needed to the Switzerland.

So those are and then the rest of will be split between SG&A and and Cox.

That's helpful. Thank you ma'am thank you.

[noise] and Cindy.

Well now hear from Steve Cole with mangrove.

Good morning, guys. Thanks for having the call.

A few quick questions.

The first off on magnox already about some of the.

One of the large OEM and just kind of sitting tight and I'll start and come back.

And then give a little bit more color and what else the top of them out of it because of the comfort that the order patterns were coming back are you seeing.

More strength outside of other baseband and baseband.

And then when using our backlog to make all of that debt.

Of that judgment call and the backlog has increased nicely and as of fourth quarter and the magnetic side of the business.

Okay and.

Turning them for the RMS person of somebody who talked about the power of the bump and incremental revenue. If we kind of go back and look of what a more normalized world will look like and the commercial aerospace from one of the expectation of where RMS could ultimately better for you look out longer and longer view. So if we don't want the listener book.

And what goes to again.

Yep.

And I think the key is you know where the where Boeing planes and they're gonna do you know who are the evening.

Before COVID-19 and before the 737.

The problems they were looking at 49 to 51.

The planes a month.

And that's and I think we have the 5000 connective per plane.

And so those are the substantial valid in the RMS versus the second source at Boeing and <unk>.

And the suppliers.

So again and now I think Craig the was it the Uh huh.

Hoping to get the 21 soon.

Sure.

Right Yeah, yeah. The activity is going to be expected to be a slower ramp up and their and their build schedule. So it's going to take a couple of years until they get back up to that you know because of that.

Run rate and up here.

We're anticipating earlier.

And so so again, if you look at all I think the points of losses, you know, we could have waited and.

Following the back to normal and saying 40 to 42 planes and we believe the by our math would probably be.

Maybe two to three times, what we paid for it today.

So we feel very fortunate and we did take the big risk for 737 doesn't come back.

And this is not the best acquisition, we've ever had but even the fact that we picked up the state of the art equipment that we needed anyway and our facilities.

You know really pleased again with the acquisition and it'll besides of growing the aftermarket and how the strengthens our relationship with some of our key aerospace distributors.

So for us just with the.

And again it took the eight years and I think nine years.

And from Southern Christmas cards, the President of the company before he finally responded and I.

What is kind of off clinically for my Christmas for Us.

And the society.

The way the correct again, it's probably the best way of investment thousands of ever made.

And of course dollars assistance costs.

And that's pretty good deal and it's probably $20 for the whole package. So from other from individuals and then relative.

And well maybe the walls are excited and we were able to complete the studio and a roughly the two month period from eight weeks and working closely with them and I think that's a good sign when we do deal with a lot of acquisitions of Covid going forward.

I don't think of as many companies out there so that they can claw.

Those of the deal and.

And that short of time for them.

And so that's true.

No our philosophy of and you say, we've done a lot of of divestitures with billion dollar companies and.

And if you look at it to the key U S F.

Some of the other companies we deal with I think the decided to go with the Bel fuse not because we pay the highest dollar it's because of ease of transaction and that would treat the costumers and the other associates. So I think we have yeah.

The computer recipes and some of our competitors, we have a really good track record.

You can do the deal with the DSA I can only do quickly and so that's that's kind of help to look a lot and his pursuit.

But the point for them.

I guess I'm sorry.

The one one quick.

Okay go ahead, I'm sorry I'm.

I'm, sorry, but I just wanted to quickly add that if you look back a couple of years pre COVID-19 and pre grounding of the arm.

And that business was running around 15 to 16 million of year and revenue.

And that compares to where the bar in 'twenty and 'twenty, which was around the $8 million. So just to give you some perspective from.

Of where they were and then.

And their profitability.

And then do you have the profitability.

Yes, so before all of this and and normal conditions and their EBITDA margin was around 20% of where it is right now and they've been running around 5%.

And maybe half of that brand when your interest.

As conditions improve.

I would think on the undeveloped without their overhead and the that they're building and so forth and we.

So some of it should be and a substantial improve those margins.

And I'm, just kind of seem like and off the wall of crushing and I'm sure you hear this from two but but the world. You know you talked about obviously T and here's Don for everybody and now.

But how do you when we look longer term in terms of how youre doing business and do you expect the structural change from <unk>.

For me and things like the sort of going for.

And in terms of how you're conducting their business or how do you view the variety of what I think were going through the revolution and.

And I think that's the.

And maybe I'm wrong, but I think the revolution would it take the maybe four or five years.

And I think the revolution that is going to take in the two months of sooner and then the roll off of sales people you know.

And people working from home and how can you call on the customer.

50% 60 per cent of the people are working from home going forward and I haven't.

And connect with each of people.

And that's why we made a major assets over the last three of four months to consolidate our sales force and start.

The stores, we had no sales person for each company and so we've got a sales person at sea Ray and sales person for Bel power solutions sales person for the signal transformer, possibly all corners of on the same customer.

And we can solve that.

Validated that the for people that cover the country and a day.

And to that.

Pushing or of digital sales group substantially to add people or so how do we connect to the engineer to Lincoln to Youtube through Twitter.

And really again, if you're dealing with young people as you know I don't think they like the phone calls and I don't think of it like to talk to people and they want the information quickly and I wanted to ask and they don't want the S and.

And so we clearly we understand that and hopefully we're moving quick enough to address the new engineers and for US. That's the key I mean, the week for us to be successful and we have to at the end of the work with engineers and.

And for them when they are designing the product.

And when you come in for the second supplier of thirds required and makes it extremely difficult and we come in when the engineers designing a product we can out of the guide them and assess.

And then to use our product and the proper way and then hoping you eliminate some of our competitors. So it's definitely and then.

The exciting times, and we live and and I definitely believe things are changing rapidly.

One last question that was kind of of your opening and that brought a warm.

And my heart. So you mentioned about pointing out the valuation disparity between them of some of the pieces and the current market price I guess, the obviously the purpose coming on and I guess, the best for them to do a throw at him right and the best task of how do we how do we narrow down and so obviously you've been successful to varying degrees and acquisitions is it.

As you've alluded to and running the company of personal money, but how do we narrowed and I'm still a little confused on how do we do that sort of how do you how do you get upstairs the price on the public probably okay for sure.

And we're doing all of your salary right now and explain how you got to do it.

[laughter], that's right for the right out of the great work for.

Yeah.

<unk> got to start somewhere and victory here. So when I was on the other side of the table looking at Bel and kind of thing kind of the same for emission that youre looking at.

I'd tell you develops and expectations and perspectives on the business and being slightly under the covers here and the other side.

I would echo.

Dan sentiment.

In other words peeling back the onion and I'd also say, though when the seat that I was sitting on the other side of the table.

And on the on the sell side.

Bel.

Represents a unique opportunity from a size reach and global.

Positioning and quite frankly with varying degrees of whether it'd be on the connectivity side of the power side and the magnetic side, so when I see what I am.

I'm looking at I see a great base for us to build upon and drive growth faster, both I would emphasize a center and the organically inorganically. So one of the benefits.

From my perspective, and bring a fresh set of eyes and asking questions for us to look at how Dallas is conducting business today and.

And where should we be and what do we want to do down the road. So to your question is well how do we bridge the gap I think the.

And there's there's the consistency and kind of performance and the way, we do business that we need to address.

So the.

I have a feeling again sitting in your shoes talking to investors and and I would say that Dan had alluded to it earlier, whether it be on the margin side. The way, we just do business of simplifying and positioning ourselves for longer term sustainable growth.

So it is a tough question, but I think we know the answers and and and we need to just figure out how to get.

Sounds good. Thank you very much not a bad answer for the free.

[laughter] I'll take it.

Right.

We have a follow up from Jim Ricchiuti with Needham and company.

Hi, Thanks, and just looking at the commercial aircrafts.

Market and the comparison to actually get much much of.

Easier for you with Q3 is that one of the business really started to come.

Come down sharply.

And so on the commercial aerospace I guess it was a.

Actually and the second quarter of 'twenty and 'twenty is on the part of the largest drop off.

So there will be some.

The incremental.

The pressure on Q1 sales related to that but then we should be and a more normalized type of some kind of Q2.

And thank you and and I am just looking at.

Current of your press release, I'd sort of make sure I'm not misinterpreting it you're talking about.

And the additional.

For <unk> 4 billion of of cost savings in 2021 and.

And I just wanted to make sure of that confusing that with some of the other saving you.

Highlighted this morning.

Right. So the for 4 million and that will be incremental and 'twenty 'twenty. One that is looking out for year 2020 costs.

Versus 'twenty 'twenty, one and so like of that two.

$2 million relates to the Switzerland and facility closure and <unk>.

We have about excuse.

Excuse me of millions of.

The cost savings realized in 2020 at the tail end of the year here and.

And the other 2 million both of you realized in 2021 other actions that we had gone through out the year, the Germany sales office closing of our North American sales from reorganization and we.

Had a couple of other.

Actions that were implemented in Q4.

And that isn't.

Moving some functions and.

The Asa Ah.

That will result, and another million dollars savings.

And then in 'twenty and 'twenty, one and so that that is more of a 24 million is incremental and I do have the the detail of it by quarter if that would be helpful.

Sure. Thank you.

Okay.

And so again and you've heard it needs of year over year incremental savings and so and coupon and its one 3 million versus the if youre looking at Q1 'twenty and.

Q2, it's almost one point for <unk>.

Q3, and it's 1.1.

And in Q4, it's about 600000.

And the range.

Tim just to add some more color on that you know, we're still believe and we still got a ways to go before falling off of cost savings program. One of the key things was the implementation of our new software and.

And instead of having many different.

Roy of systems, we've got it down and to choose once the Cinch group went for the Tao group. So we can look at the consolidated many functions because of all on one system now.

Sure you know of manufacturing footprint in China.

We have three operations of China that we have to look at consolidated and kind of either one and then the true.

True so we still think there's a good opportunity.

<unk>.

And to improve on our savings over the next year. The two years. So we still got a ways to go and we're still focused all of them.

Terrific. Thank you very much thank you.

Yeah.

As a reminder press star one if you have a question of Apache for a moment.

And that will conclude today's question and answer session and I will now turn the conference over to Mr. Bernstein for any additional or closing remarks.

Thank you James.

The joining our call today and well.

Looking forward to speaking to you in April kind of the day.

And we will conclude today's conference. Thank you for your participation you may now disconnect.

[noise].

Okay.

And.

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And.

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Yeah.

And.

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Yes.

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And then.

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Right.

Yes.

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Yeah.

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Good day and welcome to the Bel Fuse, Inc. Fourth quarter 2000, and 'twenty results Conference call. Today's conference is being recorded at the sounds like the turn of the comments over to Dan Bernstein, President and Chief Executive Officer. Please go ahead.

Thank you James I would like to welcome everybody to our fourth quarter year and financial results today before I did and we hope you and your families stay safe during these difficult times.

On the call today is Craig Brosious, our vice President of Finance Lynn Hopkins and director of financial reporting.

And I would like to introduce our new Chief Financial Officer for route to Rick who came on board this week.

We're working with BMW, the I'm, sorry of working with bank of Montreal and in the past we have developed a strong relationship with Farooq. During this time of a den overly impressed and there's no.

Each of our industry work experience interpersonal skills and most importantly is the ability to solve problems and a timely manner.

And as number one goal of locked out of town simply put will be to increase Bell's overall value to our shareholders. The.

And I believe there's a substantial valuation GAAP between dow's shakeout price and all of the current breakup value.

So look kind of a broad mandate to work the team members for example, the various pathways to increase topline growth margin improvement simplify our operations, while driving growth through M&A.

And when searching for a first CFO and the company is true. He was the best candidate and we feel fortunate and he joined Bel.

His fresh perspective, and welcome aboard for Ruth.

Thank you Dan for the introduction there I'm very excited to be joining the Bel family.

Okay.

And then can you. Please go ahead of the Safe Harbor statement.

Alright. Thank you Dan good morning, everybody before we start I'd like to read the following the Safe Harbor statement, except for historical information contained on the call. The matters discussed on the call such as statements regarding the potential of rebound of sales magnetic solutions business and overall product sales.

And take will pay the impact of global cost reduction program on the <unk> positioning for further margin expansion.

Anticipated cost savings, resulting from the closing on the sale of the switch of them facility and other restructuring actions.

Potential kind of takes about margins, resulting from the recovery of demand and sales and market.

The anticipated impact of the RMS connectors acquisition and crazy out and the pellets EBITDA.

The anticipated impact of the CEO of Palo acquisition, including the timing and closing thereof.

Factors that name.

And factors that may impact sales of organic growth for 'twenty, and 'twenty, one including continuing to visibility from.

And I think it's already outbreak of Covid and long lead times for semiconductor and certain components are all sounds like looking statements as described the under the private Securities Litigation Reform Act of 1995 that involve risks and uncertainties actual results could differ materially from Dallas projection.

Among the factors that could cause actual results to differ materially from such statements are the market concerns facing our customers the continuing viability of sectors that rely on our products the <unk>.

Fact of public health crises, such as the governmental and social and economic effects of COVID-19.

The business and economic conditions.

A copy of the associated with integrating recently acquired companies.

And what's happening and supply constraints or difficulties.

Development and commercialization or technological difficulties the break.

Inventory and trade environment.

Risks associated with foreign currency and <unk>.

Certainties associated with legal proceedings.

The market's acceptance of the company's new products and competitive responses to the the products.

The impact of changes to U S trade and tariff policy and the risk factors detailed from time to time and the company's equity and reports.

In light of the risks and uncertainties there can be no assurance that any forward looking statement will in fact prove to be correct. We undertake no obligation to update or revise any forward looking statements.

We may also discuss non-GAAP results during the call and reconciliations of our GAAP results and non-GAAP results have been included in that release.

I would now like to turn the call back to Dan for a general business update.

And thank you and first I want to provide and update on COVID-19, and how it impacted our facilities overall I'm pleased to report on all of our manufacturing sites globally continue the operational for the majority of the fourth quarter. There were two facilities that need and will be closed for about a week dream during the quarter and response to Covid.

But we're still a live in service of our customers during this time.

While the number of COVID-19 cases appear to be moving and the right direction and vaccine and distributions now underway the situation still remains for it.

We continue to operate it up as soon as all preventative measures in place and ensuring ongoing compliance with local regulations to migrate all of this I would again like to acknowledge our production managers and manufacturing associates, who work day to day under difficult conditions. The.

Continued growth continued dedication of the Bel and all customers is truly appreciated.

Now turning to our results we saw improve the margins on relatively flat sales of compared to last year's fourth quarter. While there was a minimal change in overall sales dollars and the composition of our sales that's changed quite a bit since last year of fourth quarter.

Sales of they're not powered for solutions and protection group were up $16 2 million or $44 eight per cent from the fourth quarter of 2019, our acquisition of C. U R. And December 2019 contributed 11 million and incremental sales for the fourth quarter of 'twenty and 'twenty.

And just for instance, right and of higher margin other areas within our power segment that was strong as well.

Our products sold into the fast growing the mobility market two of up to $5 million of 200 per cent increase from 2019 caught it and fuse sales were up $1 3 million and increase of over 40% from last year's fourth quarter and these areas of growth were offset by the the elimination of blue.

Low margin products in the script.

And then our connectivity solutions segment sales were down $6 8 million or 16, 6% and the fourth quarter of 'twenty and 'twenty versus the same quarter of 2019, we continue to be an impact.

Impacted because of the press commercial aerospace industry.

Sales were down $7 million or per cent for last year for the last quarter.

And the connectivity segment was also impacted by the lowest sales of product into premise wiring applications as the.

The new construction projects stalled in 'twenty and 'twenty due to Covid awesome.

<unk>.

And we were able to shift our production lines to support our growing military backlog.

The which enabled us to catch of 60% increase from military sales, partially offsetting the commercial decline.

The house living and our magnetic solutions business was down eight 4 million of $22 one per cent for the fourth quarter of 2019 and.

One of our largest Oems and customers and has paused ordering and they work through the inventory on hand on.

On a positive note.

Net bookings from century, bad and we should see the sales pick back up and the <unk>.

First quarter 2020 of them.

Overall margins have improved by 420 basis points and a trend and in the right direction. This can be attributed to a combination of product mix and discussed previously and.

Our ongoing cost reduction program.

On the acquisition from.

The division of each kind of Aspira bugs as we recently announced the purchase of two companies are sort of connectors and.

Yes.

I'll close it and the acquisition of the RMS connected and January which led us to expand our market share and in the commercial aerospace business.

And that will benefit us and the industry would start to rebound and maybe into 2021.

Also signed an agreement to acquire <unk> power, which is based in India. The acquisition of yours, and not only expand our product portfolio and the low to mid range. The.

And caught me provide us the manufacturing capability of.

Of outside of China.

Both of these acquisitions fit within our strategy of increased market share, while diversifying our product portfolio and geographic footprint.

And you think 'twenty 'twenty, one and you have seen some recovery and certain of our circle of markets. We would expect demand for military customers and the ability to me and the driver for sales throughout 2021, we Additionally, and she signs of certain additional markets such as promise one rail commercial aerospace have potentially.

Covered throughout the year and just COVID-19 conditions improve.

And our competitive position remains strong as ever.

With the Covid situation still with us and uncertainty regarding some semiconductors and components.

19 of choice for clients give us the limit.

Visibility into the future and the mean.

Meantime, the management team remains focused on bottom line growth from integrating the announced acquisition of actively looking at the other strategies have years to better position for the future and with that and I like to turn the call over to Craig for the financial what the right.

Thank you Dan.

Sales by product segment for the fourth quarter of 2020 were as follows.

Our solutions and protection sales were $52 $3 million up 44, eight per cent from last year's fourth quarter.

Connectivity solutions sales were $34 $2 million the decline of 16, 6%.

And I get it solution sales were $29 $6 million down $22 one per cent from last year's fourth quarter.

Gross margin by product segment for the fourth quarter of 'twenty and 'twenty was as follows.

Power solutions and protection of the gross margin of 27, 8% and the fourth quarter of 2020 up from 19, 7% and last year's fourth quarter.

Connectivity solutions gross margin was 24%.

Down from 24, 5% and the 2019 and quarter.

And my other solutions gross margin was 23, 3% up from $19 one per cent and last year's fourth quarter.

On a consolidated basis gross profit margin increased to 25, 3% and the fourth quarter of 2020 price compared with 21, 1% and the fourth quarter of 2019 the res.

The old of a combination of factors.

Overhead and indirect labor costs were $1 million lower during the fourth quarter of 2020, primarily due to restructuring measures implemented during late 2019 and.

And the reduction and the cost structure for our cinch connectivity solutions segment to align with current sales and volumes within that segment.

A portion of the margin improvement and the fourth quarter of 2020 related to the elimination of certain low margin palette of products from our portfolio.

Research and development costs were $5 $7 million during the fourth quarter of 2020 of decline of $1 million from the fourth quarter of 2019, primarily due to restructuring efforts implemented during the water for 2019.

Our selling general.

And the administrative expenses were $19 $6 million for 16, 8% of sales flat from the fourth quarter of 2019.

Lower travel expenses of $613000 and savings from other cost containment efforts fully offset the $1 $1 million of incremental SG&A expenses associated with the <unk> business acquired in December of 2019.

On a go forward basis, we would expect SG&A to run between 19 and $20 million per quarter and the near term because we expect our tea and the spend will continue to be lower than normal for at least the first half of 2021.

During the fourth quarter of 2020, we closed on the sale of our facility and Switzerland.

This transaction resulted in the gain of $1 $9 million, which is included in our fourth quarter results.

These factors resulted in income from operations of $5 $6 million and the fourth quarter of 2020.

And as compared to the loss from operations of $2 $9 million and the fourth quarter of 2019.

Other expense net was $395000 for the fourth quarter of 2000, and 'twenty as compared to $1 $7 million during the fourth quarter of 2019.

And increase and foreign exchange losses of 700000, and the fourth quarter of 2020.

It was offset by a larger gain on the company's sort of investments which are now included in this line item.

The expense from the fourth quarter of 2019, largely related to a $2 $1 million walks on the liquidation of foreign subsidiaries.

Interest expense was $900000 and the fourth quarter of 'twenty and 'twenty.

Down from $1 $3 million from the same quarter last year as a result, and the b.

Decreases and the LIBOR rate the company spread on its credit facility driven by EBITDA improvements and the overall reduction of our outstanding debt balance.

We had a provision for income taxes of $774000 and the fourth quarter of 2020 compared to a provision of three of our $92000 during last year's fourth quarter.

Earnings per share for the class a common shares was earnings of 27 per share and the fourth quarter of 2020.

And as compared with the loss of <unk> 50 per share and the fourth quarter of 2019.

Earnings per share for the class B common shares was earnings of 29 cents per share and the fourth quarter of 2020 compared with the loss of 52 cents per share and the fourth quarter of 2019.

While the non-GAAP basis, which excludes certain unusual and other nonrecurring items.

P S for class a shares with earnings of <unk> 18 per share and the fourth quarter of 2020.

Compared with the loss of <unk> 30 per share and the fourth quarter of 2019.

One of the non-GAAP basis EPS for class B shares was <unk> 20 per share and the fourth quarter of 2000, and 'twenty as compared with the loss of <unk> 30 per share and the fourth quarter of 2019.

And now I'd like to go through some balance sheet and cash flow items.

Our cash and cash equivalents balance at December 31, 2020.

$84 $9 million and increase of $12 7 million from.

From December 31 2019.

During 2020, we generated cash flows from operating expense activities of $46 $1 million.

And received $4 million and proceeds from the sale of property.

We made net payments of $28 $2 million towards our outstanding debt balance and used cash for capital expenditures of.

$5 5 million dividend payments of $3 4 million net of interest payments of $4 1 million.

Accounts receivable were $71 $4 million.

At December 31, 2020.

As compared with $76 $1 million at December 31, 2019.

Days sales outstanding decreased to 57 days at December 31, 'twenty and 'twenty as compared to 60 days at December 31 2019 the.

The decrease in accounts receivable balance was largely due to lower sales in Asia, where payment terms tend to be the longest.

Inventories were $100 $1 million of December 31, 2020 down $7 1 million from December 31, 2019.

The clock has seen the raw materials due to reduce material intake and anticipation of slower fourth quarter.

Accounts payable were $39 $8 million at December 31, 2020 down for $4 million from its level of December 31 2019.

Primarily due to lower purchases of raw materials during the fourth quarter for 'twenty and 'twenty.

Sales total outstanding debt balance was $115 $6 million as of December 31, 2020, net of deferred financing cost of debt.

Kris of $28 1 million since the 2019 and yearend balance.

This primarily reflects voluntary debt repayments of 28 million made during 2020.

Book value per share, which is calculated as stockholders' equity divided by our combined a and b.

The classes of common stock outstanding was $15.04 per share at December 31, 2020.

As compared to $13 of 69 cents per share of <unk>.

And with 31 2019.

And the fat I'll turn the call back over debt and.

Thank you Craig at this time, James can we open up for the call for questions.

Thank you Mr. Bernstein, if you'd like to ask a question. Please signal by pressing star one on your telephone keypad, if you're using a speaker phone. Please make sure. Your mute function is turned off July of Snow true chart equipment.

And if you'd like to ask the question Press Star one at this time.

And we'll take our first question of day from Jim Ricchiuti with Needham and company.

Hi, good morning.

I'm wondering if you could the.

Speak a little bit more of that Oh are of this.

The connectors and the Eos acquisition of.

Share with us.

Perhaps if you could just any details on the.

Financial contribution of a.

Just the impact that we would anticipate and 2021 and thanks a lot.

Before I have Craig to go over the numbers with you, but just to give you insight to both of those companies. Yes, again, we've been private labeling of product for over three years, we have a very strong relationship for them. We know the people. It was the market after the low medium.

Market, mostly and the medical area and industrial area.

And which we felt we could grow with the with the price and the proper pricing traction of the product portfolio.

So we've been pasturing them for many years, if the range of trucks of insane.

And so we're very excited that and again that we could put the scale of the gathering closed on March 31st.

So.

And that deal.

And the key for also is that we are overly dependent with manufacturing and China and Mr of just another area of the way it can have low cost manufacturing and the addition to that and we do believe the India market should be a substantially stronger market for dollars and controlling the other.

The acquisition of RMS.

When century, whereas the bone supplier for the 737 connectors.

Boeing suggest the very strongly that the approved.

Second source and that company was.

All of the mess.

And over the past 10 years.

And we've contacted them every year and to see if maybe the interest in selling the car.

As of the price pressure that we're feeling.

Aerospace companies out there because the medical sales were growing so fast and it.

It wasn't in the strategic product line for them any longer so Dale.

And they allowed us the bias anyway, and we came up by 12 of the very strong deal almost close to the book value and book value.

A lot of automated high and equipment that you didn't have in the house.

So all of them besides the eliminating a good competitor.

And where to pick up some of the state of the on equipment and so we think that also is going to be a homerun acquisition.

And we do think it's going to become profitable once we move it into our facility, which would take three or four months and once and flowing kicks volume and starts of ordering again, we think of it would be one of our most successful acquisitions are pegged to move all of the board of the financing how do you see growth companies.

The firearms.

And.

Yeah the.

Starting with with our and best obviously, they play and that the commercial aerospace segments of their the revenues have been depressed over the last the last 12 months.

The.

The cause and the manufacturing and and also the flow.

And the aftermarket impacts so you know for.

For the coming for the coming 12 months, you know, we're kind of expecting and incremental revenue.

And the 85 to two $8 million.

The weighted to that and once we get back to a normal run rate and obviously that revenue would go for certainly Oh.

The tick up.

And because we are moving that entire.

Production.

The facility into one of our existing facilities and no there's no incremental G&A.

And we can be able to leverage the ore.

And our internal overhead structure and so we expect the business could be.

Currently preparing profitable.

On the one of the iOS.

<unk> acquisition day.

They've been obviously impacted by Covid like rest of the.

For the rest of the industry the.

They've been running out of approximate.

The $12 million revenue run rate over the past the seven eight months now.

And so once they come onboard and we expect the you know.

And the incremental revenue and assuming excuse me and the March close would be approximately million.

And kind of odd million for.

For 2021.

The margins there are similar to our our other power margins so.

And so we accept that we expect that business to be a to be accretive.

Right out of the gate.

The co pay that for Ya entries question Jim.

And did a clarification, Craig and the margins all the more of the Bel pilot and the like C U E.

Yeah, that's correct the traditional Bel power margin for them.

And thanks for that thanks for the color and scan and it sound like the nice acquisition, so because of that Oh.

I Wonder if you could also.

To the extent of you can elaborate a little bit more.

And the impact of some of the component supply chain issues of the business are you seeing any impact for US is just the case of monitoring the situation and in terms of whether it gets worse and so I think.

And again, we're very fortunate because they do have the long term relationships with other semiconductor companies, we deal with and the component of people. We do deal with so again they came to US for example, and said Hey, if you want.

And if you want to support the share you have to sign up for a yearly non cancer colon.

And then you had sort of locked in and the deliveries and also I think we do a good job of staying ahead of the situation because of all of the relationships. We have in the industry. So we tend to know about shortage of before and they come and so again the one of the major problems that we don't have and we won't have any pricing pressure. During this period and we have seen some of them.

Price increases during the shortage period kind.

And I don't think of it will affect our deliberate.

Biotech and average price.

And going forward and we have to increase price you will not do on customers.

Got it.

And just last question for me just in general.

The level of activity, you're seeing across your markets it sounds like with the.

Exception of obviously, the commercial aerospace and and potentially a couple of situations, where the with one of the view.

The larger Oems and <unk> is it fair to say that the the level of business activity Youre seeing is picking up.

Well and comparing the last year when we were in the middle of Covid, and you had China and shut down.

I think going over that bar is not too high.

Thank you for in terms of deals.

And you're entering the year versus Q4, I, obviously of year over year variance of the.

The SKU I wish I wish I could I still think we just had such limited visibility I think the snow so much of uncertainty.

You know out there with Covid and how did the government is going to affect policy and I.

Still think of it.

It's still a little bit of la.

And more positive than last year the overall.

And still think Theres still and still a substantial amount of uncertainty.

And the people again and for this term of cautiously optimistic.

And I don't see anybody.

Opening up the Champagne and have out there.

[laughter].

That's fair enough. Thank you. Thank you for that and I'll jump back of the case for us.

Next we'll hear from Theodore O'neill with Litchfield Hills research.

Thanks very much.

Two questions for you first of all the.

Margins, which continue to show improvement in the last quarter, there was a $900000 Chinese subsidies and there were there any one time items like that and this quarter.

Craig oriented and the address it.

Sure Hi, Yeah, that's the.

The thing.

We did have a similar amounts in the Q4 of its here.

We have a unit to repair the types of things that are 835000, and the fourth quarter.

And and again this is and this may or may not continue into the next year.

We welcomed.

Welcome to here.

Right.

My other question is about E. O S acquisition. So just from a branding perspective will you continue the private label and sell under the <unk> brand or we will have to the to the adult.

And that is one of the big questions of where the babies.

Constantly and.

And I'll show you how crazy at the situation we have.

The private label E. L side of the Bell brand the company, we acquired last year, she UI and private labels and Gary.

The U S product under their brand and then he owes you just bad brands. So we have a couple of distributors.

Free of the screen project the three different names all built by yes.

So the margin it's the number one thing of our marketing group is working on is how do we brand how do we bring and he goes and how we brand value and so many different companies that we acquired over the past couple of years.

Okay. Thanks very much.

Well now hear from Hendi <unk> of Centaur with Gabelli.

Good morning, Dan and the car off price and land.

Good morning, and good morning.

Our debt tenders.

And let's talk about the M&A pipeline now that you have far off and European.

All of that for me speak about our M&A pipeline for Ruth.

You have to think that a great to be with you here today. So you know coming from the industry. There is a there is a.

And good amount of activity that we expect to occur.

Occur a little bit and more frequency in 'twenty and 'twenty, one, especially as the world. So I sort of called it up from Covid, but so our expectation is due the seymour.

And I expect to have a robust pipeline and onward.

For the.

With the team at Bel here and now and the addition of myself would be trying to cultivate our own proprietary side of the house not too dissimilar to the kind of deals that got done here. So I would say, it's it's a it's definitely out there and.

And we just need to figure out where we want to be spending time.

And going after it.

Thank you and I think the.

And with the value of also predicts a range. Besides moving so many of our competitors for companies and the industrial market, which we are anticipating I think how we deal with the banks going forward for a start.

The right now because we havent borrowed money and the past and the Pheno.

And in terms of and so forth I think.

I think that's key for us it's great that we want to buy a company, but the question is can we get the profit financing from our lenders and I think that Farooq. The board I think that's going to be a major benefit and he brings to the quality of besides this acquisition that launch.

Got it and how it's done I would like to read the fifth.

Long lead times, the asking Congress of I don't know, whether you talk about this or not.

And there's been talk about inventory and the channel and I believe that all of them I'm aware.

The optimal and the best for them.

The work force takes more and then growth and yoga and and beliefs.

Do you see the same trends and.

Among our customers are investing are that that doesn't apply in the area.

I think again, I think and yes, you can share and you have when you have long lead times.

And if someone has to wait nine months for semiconductor and Heath and I need.

The fuse and two months.

Are they kind of pushed back you know your deliveries for.

For the last night and day.

And we never see that release and generally when they're all long lead times and we always.

Well, it's beneficial for the business because most of our customers are more concerned about deliveries and then they are about pricing and at some point theyre willing to pay the premium for the pricing. So we think.

And though we.

Do you think it's a beneficial again for all of US when we have long lead times and how we prepare ourselves properly for it and I think starz the person to improve because of always kept of flood minds open the product and.

And because of the long term relationships, we have the amount of suppliers.

And again I feel really lead times, we are somewhat confident that we can manage it properly.

And if we do face increased pricing that we can offset it with all the price into our customers.

Got it and then.

The addition of E R M.

And then alright, and Thats come back per.

Sure.

The our expectation for operating income.

Right.

And of your you're asking the expectation for for Opex.

And like the SG&A.

Yeah for for our amounts there should be very little.

For metal Opex.

Because the basically bringing the manufacturing.

Facility into our own.

And we are not bringing you know of any incremental the.

SG&A for the long with that.

And maybe on the E O S piece.

And the Opex would be.

Probably traditional for about a.

13 to 15 per cent of revenue.

And they may be some synergy there or we're not anticipating a significant of though.

And of course can you share what kind of countless other opex and G&A.

And you should expect.

Uh huh.

Let's see if that would be.

The revenue on an annualized basis over the course.

For the 12 to 15 million so.

So I'd say no.

14, and 15 per cent of that.

Okay, and then I think for US starting from Q1, you will see some benefit and RMB and then from.

Of course, there's also.

On the comparative basis, we should see you should see a positive comparison for the army.

And do the math.

For us.

Okay. Thank you for are you asking about the consolidated business.

The consolidated business, Yeah, I think the I think it's months ago.

I think that's the kind of thing that SG&A around SBC and the times of the tracking the other and.

Right. So for the consolidated business, we hope the incremental cost savings and Q1 of about 1.3 million the majority of that will be and the R&D.

750000 related to the Switzerland.

All of those are and then the rest of will be split between SG&A and <unk> and Cogs.

That's helpful. Thank you ma'am thank you.

[noise] conservative.

We'll now hear from Steve Cole with mangrove.

Good morning, guys. Thanks for having the call.

A few quick questions.

The first off on magnetics and already about some of the.

One of the large OEM and so it's kind of sitting tight and I'll start and for <unk>.

Come back.

And then give them a little bit more color on what all of the proper amount of cause the comfort of the order patterns of our coming back are you seeing more.

More strength outside of other baseband and baseband.

And when using our backlog to make.

That judgment call and the <unk>.

Backlog has increased nicely in the fourth quarter of the magnetic side of the business.

Okay and.

Turning them for the RMS person of somebody who talked about the power of the bump and incremental revenue.

And I'd go back and look of what a more normalized world will look like in the commercial aerospace from what are the expectations of where our RMS could ultimately be it for you look out longer and longer view. So if we don't work for them.

The slower, but we looked out to you all again.

Yep.

So I think the key is you know where the where Boeing planes and they're gonna do you know who are the evening before COVID-19 and before the 737.

Problems they were looking at 49 to 51.

Planes a month.

And that's and I think we have the 5000 connected per plane.

And so those are the substantial valid and all of that source and second source at Boeing and prevent of suppliers.

So again and now I think Craig the let's say the Uh huh.

Hoping to get the 21 soon.

Sure.

Right Yeah, yeah. The activity is going to be expected to be a slower ramp up and their and their build schedule. So it's going to take a couple of years until they get back up to that and not.

Run rate and that we were.

We're anticipating earlier.

And so so again, if you look at all I think the point for us and as you know we could have waited zone.

Following the crack the normal saying 40 to 42 range, we believe the by our math would probably be.

Maybe two to three times, what we paid for it today.

So we feel very fortunate and we did take the big risk for 737 doesn't come back.

And this is not the best acquisition, we ever had but even the fact that we picked up the state of the art equipment that we needed anyway and our facilities.

And I'm really pleased again with the acquisition and it'll besides the borrowing the half the market and how it strengthens our relationship and some of our key aerospace distributors.

So for us and you just with the.

And again it took the eight years and I think nine years.

And from sending Christmas cards, the president of the company before he finally responded and I.

And what he's kind of uptake for me for my Christmas clock.

And just besides day.

By the way and correct again is probably the best of desperate thousands of ever made.

No the $40 of distance costs.

That's pretty good deal and that's probably the $20 for the whole package for them.

And out of them individually and then relative.

And well maybe the walls are excited and we were able to complete the scale and are roughly the two month period up from eight weeks and working closely with them and I think that's the good side of it we do deal with a lot of acquisitions, but some of it going forward.

I don't think of as many companies out there so that they can.

Those of the deal.

And that short of time for them.

And so that's true.

You know our philosophy of and you say, we've done a lot of divestitures would be the dollar companies and I can.

And if you look at it T T E of Satcom.

And some of the other companies we deal with I think the decided to go with Bel fuse not because we pay the highest dollar and it's because of ease of transaction and that would treat the costumers and the other associates.

So I think we have.

And I'm competing against the <unk> some of our competitors, we have a really good track record.

You can do the deal wouldnt be affected and we do quickly do and so that's that's kind of help to look a lot of his pursuit.

But the point and that's why I guess I'm sorry.

One quick.

Part of it Okay go ahead I'm sorry.

I'm sorry, but.

I just wanted to quickly add that.

If we look back a couple of years pre COVID-19 free grounding of the RMS business was running around $15 million to $16 million, a year and revenue and.

And that compares to where the bar in 2020 of which was around to eat and none of them. So just to give you some perspective.

Of where they were and.

And the profitability.

When do you have the profitability.

Yes, so before all of this and and normal condition. Their EBITDA margin was around 20% of where it is right now and they've been running around 5%.

And maybe half of that brand when where and how.

If conditions improve.

And I would think of our undervalued without their overhead and the that they're building and so forth.

And we switch of it should be and of substantially improve those margins.

And at least kind of seem like and off the of our crushing and I'm sure you hear this from two but but the world. You know you talked about obviously the team has done for everybody now.

But how do you.

And when we look longer term in terms of how youre doing business would you expect the structural change from Tami and things like the sort of going for.

And in terms of how you're conducting their business or how do you view that.

A variety of what I.

We're going through the Revolution.

I was interest and maybe I'm wrong, but I think the revolution.

Take the maybe four or five years.

And I think the revolution that is going to taking the two months of sooner and then the roll off of sales people.

You know and people working from home and how can you call and a customer that's the.

The 2%, 6% of the people are working from home and going forward and the hadn't.

Connect with its people and that's why you know we made a major assets over the last three of four months to consolidate our sales force and <unk>.

We had no sales person for each company and so we had a sales person at sea Ray and share.

And I was personally for Bel power solutions sales person for the signal transformer, possibly all corners of on the same customer.

And we can solve that we've consolidated that with the for people that cover the country. And addition to that we are pushing more of digital sales group substantially the add people or so how do we connect to the engineer to Lincoln through Youtube through Twitter.

And really.

And then if you're dealing with young people as you know I don't think they like and these phone calls and I don't think that they like to talk to people and they want the information quickly and I wanted to ask and they don't want the S and.

And so we clearly we understand that and the hope we were moving quick enough to address the new engineers and for US. That's the key I mean, the weak for us to be successful and we have to at the end of the work with the engineers before and when they designed the product the blue.

And I come in and as the second supplier of thirds required and it makes it extremely difficult, but we'd come in when the engineers designing the product we can help from the guide them and of.

The system to use our product and the proper way and that.

And you eliminate some of our competitors. So it's definitely I mean.

And times of where you live and and I definitely believe things are changing rapidly.

One last question that was kind of of your opening and that brought a warm.

Going to my heart. So you mentioned about pointing out the valuation the spirited betray them of some of the pieces and the current market price I guess, the obviously the purpose coming on and I guess, the best from the do a throw at him right and the best task of how do we how do we narrow down and so obviously you've done the successful to varying degrees and acquisitions is.

And as you've alluded to and running the company of personal money, but how do we narrowed and I'm still a little confused on how do we do that sort of how do you. How do you got up to the full price and the public public okay for sure.

And you think that approach with the owner.

The salary right now and explain how you got to do it.

[laughter] for the God of read out of Okay, what's the right.

Yeah.

[laughter] got to start somewhere on the day three here.

So when I was on the other side of the table looking at Bell and kind.

See kind of the same information that you are looking at.

And I would tell you develops and expectations and perspective, one of the business and being slightly under the covers here on the other side.

I would echo.

Dan sentiment.

In other words peeling back the onion.

I'd also say, though when the seat that I was sitting at the other side of the table.

And on the on the sell side.

Bel.

Presents a unique opportunity from a size reach and global.

Positioning and quite frankly with varying degrees of whether it be on the connectivity side of the power side and the magnetic side. So when I see when I'm looking and I feel great base and of course to to build upon and drive growth faster. Both I would emphasize a center and the organically inorganically for one of them.

The benefits.

From my perspective, and bringing a fresh set of eyes and asking the questions for us to look at how Dallas is conducting business today and.

Where should we be and what do we want to do down the road. So to your question is well how do we bridge the gap I think you know the.

There is there is there the consistency and kind of performance and the way, we do business that we would need to address.

So the.

And I have a feeling again sitting in your shoes talking to investors and and I would say that Dan had alluded to it earlier, whether it be on the margin side. The way, we just do business of simplifying and positioning ourselves for longer term sustainable growth.

So it is a tough question, but I think we know the answers and and and we need to just figure out how to get there.

Sounds good. Thank you very much not a bad answer for the free.

I'll take it.

Right.

We have a follow up from Jim Ricchiuti with Needham and company.

Hi, Thanks, and just looking at the commercial aircrafts.

And the comparison to actually get much much of.

Easier for you with Q3 was that one of the business really started to come.

Come down sharply.

And so on the commercial aerospace I guess it was a.

Actually and the second quarter of 'twenty, and 'twenty and timely part of the largest.

Drop off.

So there will be some.

The incremental price.

The pressure on Q1 sales related to that that then are we shipping and a more normalized type of some kind of Q2.

Thank you and and I.

Just looking at it.

Average of your press release and sort of make sure I'm not misinterpreting it you're talking about.

And additional.

For <unk> 4 billion of of cost savings in 2021 and.

I just wanted to make sure of that confusing that with some of the other saving you.

Highlighted this morning.

Right. So the floor of 44 million and that will be incremental in 'twenty and 'twenty, one and that is looking out for year 2020 cost.

Versus 'twenty 'twenty, one and so like of that too.

And $2 million relates to the Switzerland facility closure and we have about excuse me of million of cost savings realized in 2020 of them at the tail end of the year here and the other 2 million both of you realized in 2021.

The other actions that we had gone through out the year.

And the Germany sales office closing of our North American sales reorganization.

And we have a couple of other.

The actions that were implemented in Q4.

And that was moving some functions.

And the Asia that will results and another million dollars.

So the things in 'twenty and 'twenty, one so that that for 24 million is incremental and I do have the the detail of it by quarter if that would be helpful.

Sure.

Okay.

And so again neither of these of year over year incremental savings and so and coupon of one 3 million versus the care of looking at Q1 'twenty.

And Q2, it's almost one point for them.

And Q3, and it's 1.1 and then.

And Q4, it's about 600000.

And Jim just to add some more color on that you know, we're still believe and we still got a ways to go before we falling on the cost savings program. One of the key things was the implementation of new software.

And now instead of having many different ROI systems, we got it down and to choose one of the Cinch group of went for the Tao group. So we can look at you know consolidated many functions and because they're all on one system now.

And I'll show you all of manufacturing footprint in China.

We have three operations of China that we have to look at the consolidated down to either one and maybe true. So we still think there is.

Good opportunity.

And to improve on our savings over the next year. The two years. So we still got a ways to go and we're still focused all of them.

Terrific. Thank you very much thank you.

Yeah.

As a reminder press star one if you have a question, we'll pause for a moment.

And that will conclude today's question and answer session and I will now turn the conference over to Mr. Bernstein for any additional or closing remarks.

And thank you James.

The joining our call today and well.

And looking forward to speaking to you in April kind of the day.

And that will conclude today's conference. Thank you for your participation you may now disconnect.