Q4 2020 Bel Fuse Inc Earnings Call
Yeah.
[music].
Please standby.
Good day and welcome to the Bel Fuse, Inc. Fourth quarter 2020 results Conference call. Today's conference is being recorded at the it sounds like the turn 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.
The fourth quarter year end financial results today before I begin we hope you and your families stay safe during the day.
Michael Times.
On the call today is Craig Brosious, our vice President of Finance Lynn Hopkins on director of financial reporting.
And I would like to introduce our new Chief Financial Officer per route to Lick, who came on board this week.
We're working with the M. W. P.
We're working with bank of Montreal of in the past we have developed a strong relationship with Farooq. During this time of have been overly impressed with his knowledge of our industry work experience interpersonal skills and most importantly is the ability to solve problems in a timely manner.
His number one goal on fail at down simply put will be to increase Bell's overall value to our shareholders. The.
Luckily because of substantial valuation GAAP between dow's shake out price at all the current breakout pad. So Luke has a broad mandate to work the team members to examine the various pathways to increase topline growth margin improvement simplify our operations, while driving growth through M&A.
When searching for the first sample of the Companys seems true he was the best candidate and we feel fortunate that he joined Bel fuse.
Fresh perspective, welcome aboard Farooq.
Thank you Dan for the introduction there I'm very excited to be joining the Bel family.
Okay.
And then can you. Please go on to the Safe Harbor statement.
Alright. Thank you Dan good morning, everybody before the start I'd like to read the following the Safe Harbor statement.
Clip of historical information contained on the call the matters discussed on the call such as statements regarding the potential of rebound of Bel magnetic solutions business and overall product sales.
And people pay the impact of global cost reduction program on the walls positioning for further margin expansion.
Anticipated cost savings, resulting from the closing on the sale of the Switzerland facility and other restructuring actions.
Potential kind of takes about with margins, resulting from recovery of demand in those end markets.
The anticipated impact of the Rns connectors acquisition included on the balance EBITDA.
The anticipated impact of the El Paso acquisition, including the timing and closing thereof.
Factors that may.
And factors that may impact sales organic growth for 2020 bonds, including continuing the visibility.
On the 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 on the market concerns facing our customers the continuing viability of sectors that rely on our products the <unk>.
<unk> of public health crises, such as the governmental 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 commercialization or technological difficulties the red.
The inventory on trade environment.
Risks associated with foreign currency on.
Certainties associated with legal proceedings.
The market's acceptance of the company's new products and competitive responses to the new products.
The impact of changes to U S trade and tariff policies and the risk factors detailed from time to time in the company's SEC reports.
Eight 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.
May also discuss non-GAAP results during this call and reconciliations of our GAAP results to non-GAAP results have been included it's not released I would now like to turn the call back to Dan for a general business update.
Thank you and first of all I can provide an update on COVID-19, and how it impacted our facilities overall I'm pleased to report on all of our manufacturing sites globally.
The operational for the majority of the fourth quarter.
The two facilities that needed to be closed for about a week dream during the quarter in response to the infection, but we were still able to service of our customers. During this time.
On the number of COVID-19 cases appeared to be moving in the right direction and vaccine distributions now underway the situation still remains fairly weak.
Continue to operate at Luxottica group of all preventative measures in place and ensuring ongoing compliance with local regulations to migrate all of risk I would again like to acknowledge our production managers and manufacturing associates, who work day to day under difficult conditions the kantar.
The continued dedication of the Bel and all customers is truly appreciated.
Now turning to our results we saw improved margins on relatively flat sales as compared to last year's fourth quarter. While there was a minimal change in overall sales balance the composition of of all she has that changed quite a bit since the last year at fourth quarter.
Sales of their own pallets from solutions and protection group were up $16 2 million or $44 eight per cent from the fourth quarter of 2019. Our acquisition of share you are in December 2019 contributed 11 million incremental sales for the fourth quarter of 2020.
And just for instance run on our higher margin all the areas within the power segment that was strong as well.
Our products sold into the fast growing mobility markets were up $2 5 million of 200 per cent increase from 2019 correlate and fuse sales were up $1 3 million an increase of over 40% from last year's fourth quarter. These areas of growth were offset by the elimination of low.
Low margin products in the script.
But then on connectivity solutions segment sales were down $6 8 million or 16, 6% in the fourth quarter of 2020 versus the same quarter of 2019.
We continue to be an impact.
Impacted because of the depressed commercial aerospace industry, whereas the.
Sales were down $7 million or per cent from last year after the last quarter.
The connectivity segment was also impacted by the lower sales of product into premise wiring applications as the.
The new construction projects stalled in 2020 due the Covid awesome.
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We were able to shift our production lines to support our growing military backlog.
The which enabled us to capture 60 per cent increase from military sales, partially offsetting the commercial decline.
The house with it on magnetic solutions business was down $8 4 million or $22 one per se from the fourth quarter of 2019 of.
One of our largest OEM customers and us pause ordering as they work through the inventory on hand on.
On a positive note.
Net bookings from century, then we should see the sales pick back up from the first quarter 2021.
Overall margins have improved by 420 basis points and of trending in the right direction. This can be attributed to a combination of product mix of discussed previously and on.
Ongoing cost reduction program.
On the acquisition front, we have been busy over the last few months as we recently announced the purchase of two companies ours from connectors.
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I'll close of the acquisition of RMS connected in January which enabled us to expand our market share of the in the commercial aerospace business now.
That will benefit us on the industry would start to rebound later in the 2021.
Also signed an agreement to acquire yields of power.
Based on India, the acquisition of yours from not only expand our product portfolio in the low to mid range, but we're all of importantly provide us the manufacturing capabilities.
On the outside of China.
Both of these acquisitions fit within our strategy of increased market share, while diversifying our product portfolios and.
The geographic footprint.
<unk> 'twenty 'twenty, one you have seen some recovery in certain of our sort of end markets.
We would expect demand from military customers in the Eagle.
To me the driver for sales throughout 2021. The additionally, she sighs of certain additional markets such as promise one rail commercial out of Sweden have potential to recover throughout the year of COVID-19 conditions to improve.
Our competitive position remains strong as ever.
With the Covid situation still with us.
Certainty regarding some of semiconductors import components that might be the choice for clients give us limit moving.
The visibility into the future in the meantime, the emergency room and focus on bottom line growth from integrating the announced acquisition of actively working with are the strategies patent is.
The better positioned for the future.
And with that I'd like to turn the call over to Greg for the financial what the right.
Thank you Dan.
But on the product segment for the fourth quarter of 2020 were as follows.
Power solutions and protection sales were $52 $3 million of 44 eight per cent from last year's fourth quarter.
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 of protection had the gross margin of 27, 8% in the fourth quarter of 2020 up from 19, 7% in last year's fourth quarter.
Connectivity solutions gross margin was 24% down.
Down from 24, 5% in the 2019 at quarter end.
And my mother solutions gross margin was 23, 3% up from $19 one per cent in last year's fourth quarter.
Yeah.
On a consolidated basis gross profit margin increased to 25, 3% in the fourth quarter of 2020 price compared with $21 one per cent in the fourth quarter of 2019. The result of the 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 the reduction in the cost structure for our cinch connectivity solutions segment to align with current sales volumes within that segment.
The portion of the margin improvement in the fourth quarter of 2020 related to the elimination of certain low margin palette 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.
Net administrative expenses were $19 6 million or 16, 8% of sales flat from the fourth quarter of 2019.
Lower travel expenses of $613000 in 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 'twenty of 19.
On a go forward basis, we would expect SG&A to run between 19 and $20 million per quarter in the near term, we expect our G&A 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 in Switzerland, It's true.
Fans of action the 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 on the fourth quarter of 2020 as compared to the loss from operations of $2 $9 million in the fourth quarter of 2019.
Other expense net was 300 of $95000 for the fourth quarter of 2020 as compared to $1 $7 million during the fourth quarter of 2019.
The increase in foreign exchange losses of 700000 in the fourth quarter of 2020.
It was offset by a larger gain on the company's surf investments, which are now included in this line item.
The expense from the fourth quarter of 2019, largely related to $2 $1 million of walks on the liquidation of foreign subsidiaries.
Interest expense was $900000 in the fourth quarter of 2020.
Down from $1 $3 million from the same quarter last year as a result in the.
The decreases in the LIBOR rate the company spread on its credit facility driven by EBITDA improvements every day.
Overall reduction of our outstanding debt balance.
We had a provision for income taxes of $774000 in the fourth quarter of 2020 compared to a provision of free at our $92000 during last year's fourth quarter.
Earnings per share for the class a common shares was earnings of 27 per share in the fourth quarter of 2020.
As compared with the loss of 50 cents per share in the fourth quarter of 2019.
Earnings per share for the class B common shares was earnings of 29 per share in the fourth quarter of 2020.
Compared with the loss of 52 cents per share in the fourth quarter of 2019.
Yeah.
On a non-GAAP basis, which excludes certain unusual and other non recurring items.
EPS for class a shares with earnings of <unk> 18 per share in the fourth quarter of 2020.
That's compared with the loss of <unk> 30 per share in the fourth quarter of 2019.
On the non-GAAP basis EPS for class B shares was <unk> <unk>.
<unk> per share on the fourth quarter of 2020 as compared to the loss of <unk> 30 per share in 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, an increase of $12 7 million.
From December 31 2019.
During 2020, we generated cash flows from operating expense activities of $46 $1 million.
We received $4 million in proceeds from the sale of a 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.
Day sales outstanding decreased to 57 days at December 31, 2020, as compared to 60 days at December 31st 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.
Of the climate has seen the raw materials due to reduce material intake in anticipation of slower fourth quarter.
Accounts payable were $39 $8 million at December 31, 2020 down $4 4 million from its level at December 31, 2019 from.
The early due to lower purchases of raw materials during the fourth quarter of two of them.
One of them.
So the total outstanding debt balance was $115 $6 million as of December 31st 2020, net of deferred financing costs, a decrease of $28 1 million since the 2019 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 four per share at December 31, 2020.
That was compared to $13 of 69 cents per share.
The number 31 2019.
And with that I'll turn the call back over to Dan Dan.
Thank you Craig at this time, James can we open up of the call for questions.
Thank you Mr. Bernstein, if you'd like to ask the 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 true chart equipment.
Again, if you'd like to ask a question press star one at this time.
And we'll take our first question on the day from Jim Ricchiuti with Needham <unk> Company.
Hi, good morning.
So I'm wondering if you could the.
Speak a little bit more of the or of this.
Connectors in the.
Yes.
And.
Share with us, perhaps if you could just any details on.
The ers financial contribution of of.
So just the impact that we would anticipate in 2021 and thanks a lot.
Before I have Craig go over 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. It was a market that sort of low medium market, mostly in the medical area and industrial area on which.
Which we felt we could grow with the with the price with the proper pricing structure of product portfolio. So.
So we've been pasturing them for many years, if the range trucks of insane.
We're very very excited that you know again that we could put the fear of the gathering close on March 31st.
So.
The deal.
And the key for also is that we are overly dependent with the manufacturing in China.
This gives us another area, where we can have low cost manufacturing and the addition to that we do believe the envy of market should be a substantially stronger markets of Dallas and Detroit the other acquisition of RMS.
When century, whereas the bone supplier from the 737 connectors.
Boeing suggest the very strongly that the approved a second source and that company was the power.
All of the mess.
And over the past 10 years.
We've contacted them every year to see if they are of interest in selling the cause of the price pressure that we're feeling.
One of the aerospace companies out there because the medical sales were growing so fast.
Wasn't the strategic product line for them any longer so a.
They allowed us the bias every day.
Came up I feel with the very strong deal almost close to the book value and the book value is a lot of automated high end equipment that you didn't have in the house.
So all of them besides the eliminating a good competitor.
The picked up some of the state of the on equipment. So we think that also is going to be a home around the acquisition.
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 Boeing kicks volume. It starts of ordering again, we think of it would be one of all of our successful acquisitions are pegged to move all of the board of financing how do you sort of both companies.
Yeah.
On.
Yeah the.
Starting with with our on Bes, obviously, they play on that the commercial aerospace segments of their revenues had been depressed over the last the last 12 months.
With the.
The cause in the manufacturing and also the.
Of the aftermarket impacts so.
For the coming for the coming 12 months the rig.
Kind of expecting or the incremental revenue on maybe.
$5 million to $8 million.
Related to that and once we get back to a range.
Normal run rate and obviously that revenue would certainly of the trick.
Pick up.
And because we.
Moving the entire.
Production.
Facility into one of our existing facilities. So there's no incremental G&A.
And we'd be able to leverage the ore.
Our internal overhead structure and so we expect of the.
The business could be.
Fairly fairly profitable.
On the on the Eos acquisition day.
They've been.
The impacted by Covid like the rest of the like the.
The rest of the industry.
<unk> been running out of approximate.
The $12 million revenue run rate over the past the seven eight months now.
So once they come on board, we expect the you know.
From the incremental revenue, assuming assuming the March close would be approximately eight.
The $9 million for 2021.
The margins there are similar to our our other power margin so.
So we accept that we expect that business to be to be accretive.
The right out of the gate.
But hopefully that answers the question Jim.
One clarification, Craig at the margins of all of these laws about power on that like see you on.
Yeah, that's correct the traditional low power margin right.
Yeah. Thanks of that thanks for the color and standard it sound like the nice acquisition. So congrats on.
Wonder if you could also.
To the extent of you can elaborate a little bit more.
On the impact of some of the components supply chain issues on the business are you seeing any impact of is just the case of monitoring the situation in terms of whether it gets worse I think.
Again, we're very fortunate because they do have the long term relationships with all of semiconductor companies, we deal with and the component people. We do deal with so again they came to US for example, and said Hey, if you want.
You know if you want to support the share you have to sign up for a yearly non cancer of water.
And then sort of locked in the deliveries also I think we do a good job in staying ahead of the situation because of all of the relationships. We have in the industry. So we tend to know about shortage of the cordless. They come so again the all of the major problems that we don't have we won't have any pricing pressure on during this period, we have seen some.
Price of increases during the shortage Perry.
I don't think of it will effect of our deliberate.
The effect of having price.
Going forward would you react to increase price you were not too on customers.
Got it.
And just last question from me just in general.
The level of activity, you're seeing across your markets it sounds like.
With the exception, obviously of commercial aerospace and potentially the couple of situations, where the with one of the.
The larger Oems is it fair to say that the the level of business activity, we're seeing is picking up.
Well and comparing the last year when we're in the middle of co badge and you had China is shut down.
I think going over that bar, it's not too hard.
I'll take the born in terms of as you're entering the year versus Q4, I, obviously year over year on tariffs.
Most of the Skus I wish I wish I could I still think we just had such limited visibility I think the snow so much uncertainty.
You know out there with Covid, how did the government kind of effect you know policy.
And I still think of it.
So a little bit of.
A lot more positive than last year on overall.
I still think there is still.
Two of a substantial amount of uncertainty there.
Again, the previous term of cautiously optimistic.
But I don't see anybody.
Opening up the champagne gain out of about that [laughter] Oh, that's fair enough. Thank you. Thank you for that I'll jump back of the kitchen.
Yes.
Next we'll hear from Theodore O'neill with Litchfield Hills research.
Thanks very much on two questions for you first on the on the margins, which continue to show improvement.
The last quarter. There was the 900000 of our Chinese subsidiary and there were there any one time items like that in this quarter.
Craig the rent can you address it.
Sure.
Brian.
The good to have a similar amounts in the Q4 of its here are we able to repair the types of things right.
835000 in the fourth quarter.
And again this is and this may or may not continue into the next year.
The lead right.
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 in the fell under the <unk> brand or would you look at tier two the adult.
[laughter] I that is one of the big questions of where the babies.
Constantly.
And show you how crazy at the situation we have.
The private label side of the Bell brand. The company. We acquired last year. So you are on private labels under U S product under their brand and then yours eases that brands. So we have a couple of distributors.
Free of the screen project the three different names all built by us.
So.
The margin it's the number one thing on marketing group is working on is how do we grant how do we bring in the us, but how we brand down there's so many different companies that we acquired over the past couple of years.
Okay. Thanks very much.
Moving out here from Hendi <unk> of central with Gabelli.
Good morning, Dan the car off crank on land.
Good morning, good morning.
I can talk about the M&A pipeline now that you have far off in European.
All of that for me speak about our M&A pipeline for Ruth.
Yeah, I think that great to be with you here today.
You know coming from the industry there is a.
There is a day.
The good amount of activity that we expect to.
Occur a little bit more frequency in 2021, especially as the world starts sort of color from COVID-19, but so our expectation is due the seymour.
And I expect to have a robust pipeline.
The fleet the.
With the team at Bel here and now and the addition of myself, we'll be trying to cultivate our own proprietary side of the house not too dissimilar to the kind of deal that goes on here. So I would say, it's it's a it's definitely out there.
We just need to figure out where we want to be spending time on.
And going after them.
Thank you and I think that you know I think.
With the value of also per week brings besides the only so many of our competitors of companies of the industrial market, which we participate in.
How do we deal with the banks going forward, whereas the store.
Part of it now because we havent borrowed money in the past is 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, but the question is can we get the profit of financing from our lenders and I think the Truecar Board I think that's going to be a major benefit that he brings to the part of the besides the acquisition knowledge.
Got it how it's done I would like to read the fifth.
Long lead times, the asking Congress of I don't know, whether you're talking about the unlock.
There's been talk about inventories in the channel and.
I believe that all of them I'm aware that of the mall and therefore bandwidth.
That would take more of an unbroken yoga and beliefs.
Do you see the same trends.
Among our customers on our desk or that doesn't apply in your area.
I think again I think the initial concern you have when you have long lead times.
Someone has to wait nine months for semiconductor and he's going to need.
The use of two months.
Are they kind of pushback you know your deliveries for the <unk>.
Last item the generally we never see that no release of generally when they're all long lead times of we always.
Bill it's beneficial to the business because most of our customers are more concerned about delivery then they are about pricing and then at some point, they're willing to pay the premium for pricing. So we think even though we.
We do 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 the stars the a person to improve because of always kept on flood minds open the product.
And because of the long term relationships, we have the non suppliers.
So again I feel it is lead times, we are somewhat confident that we can manage it properly.
And if we do face increased pricing that we can.
Can offset it with all of price into our customers.
Got it.
And in terms of E L F and the connector.
What is true.
Our expectation for operating excellence.
Right.
The hendi, you're asking the expectation for for Opex.
The DNA.
Yeah for for our of mouse, there should be very little.
Incremental opex.
Because the basically bringing the manufacturing facility.
Facility into our own.
And we are not bringing you know of any incremental.
SG&A of along with that.
On the on the E O S piece.
The Opex would be no profit.
Probably the traditional of about 13 to 15 per cent of revenue.
Made the maybe some synergy there or we're not anticipating a significant amount.
I'm not quite sure what kind of a ton of down there.
The X factor.
Uh huh.
Let's see if that would be.
The revenue on an annualized basis over the let's say $12 million to $15 million. So so I'd say no.
14, 15 per cent of that.
Okay, and then I think for pumping from Q1, you will see some benefit in RMB and then of course, there's also.
Yeah.
On the comparative basis, we should see you should see a positive comparison for the R&D and all of.
Assets.
Okay. I think you kind of are you asking about the consolidated business.
The consolidated business debt I think the up I think a month ago.
I think that's the cost on that SG&A may run at between the time, given the price of mailing on.
Alright, those are the kind of dollar.
The data business, we will see incremental cost savings in Q1 of about 1.3 million. The majority of that will be in the R&D I'm about 750000 related to the Switzerland of those are and then the rest of will be split between SG&A and income.
Fox.
That's helpful. Thank you ma'am thank you.
[noise] conservative.
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 on already about some of them.
One of the large Oems just kind of sort of tighten all starting to come back.
Can you give a little bit more color on on what else the top of them out of it because of the comfort that the order patterns are coming back are you seeing.
More strength outside of the baseband and baseband.
We're using our backlog to make on that.
That judgment call and the <unk>.
Backlog has increased nicely in the fourth quarter of the magnetic side of the business.
Uh huh.
Turning back to the RMS person of somebody who talked about the power of the bump on incremental revenues.
I'd go back and look of what a more normalized world will look like on the commercial aerospace on one of the expectation of where RMS could ultimately be if you look out longer of a longer view. So if we don't want the.
The slower, but we know what goes on again.
Yep.
So I think the key is you know where the where Boeing planes are going to do.
The well before Covid 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 connections per plane.
So those are the substantial valid in the RMS versus the second source of bone and chicken suppliers.
So again and now I think Craig the was it the.
Hoping to get the 'twenty one soon right.
Right Yeah, Yeah. The activity is gonna be expected to be a slower ramp up in their build schedule. So it's going to take a couple of years until they get back up to that.
Run rate that we were anticipating earlier.
So again, if you look at all I think the points of US as you know we could have weighted though.
The only look back to normal same 42 43 planes, we believe the buy on mass would probably be.
Maybe two to three times, what we paid for it today.
So we feel very fortunate we did take the big risk.
137 doesn't come back.
This is not the best acquisition, we've ever had but even the fact that we picked up the state of the on equipment that we needed anyway in our facilities.
You know really pleased again with the acquisition of BC.
Sides of Boeing the aftermarket and how the strengthens our relationship with some of our key aerospace distributors.
So for US, it's just where the again it typically eight years I think the idea.
From sending Christmas cards, the president of the company. The 45, you responded and I thought it was kind of thinking from a Christmas card.
And just the size of it.
By the way the correct again, it's probably the best of investment options of ever made.
The $40 of assistance costs.
That's pretty good deal on it probably $20 for the whole package, so from either of them individually.
Hello, maybe the walls of exciting we were able to complete the studio and a roughly the two month period.
Eight weeks, but working closely with them and I think that's a good side of it we do deal with a lot of acquisitions of Covid going forward.
Think of as many companies out there so that they can close the deal and that sort of time frame.
So it adds to the.
No.
When you say you know we've done a lot of divestitures would go with all the companies.
I think if you look at it T T U S south on us.
Some of the other companies we deal with I think the decided to go with Bel fuse not because we pay the highest volume.
Cause of ease of transaction that we treat the costumers.
Associates.
I think we have.
The computer that's the B some of our competitors, we have a really good track record.
We can do the deal gonna do affect the only do quickly going on so that's that's kind of help to look a lot.
Pursuit.
But the point.
That's why I guess I'm sorry.
One one right now.
Part of it.
Go ahead I'm sorry.
Sorry, Mike I, just wanted to quickly add that if you look back a couple of years free.
The Covid free grounding of the RMS business was running around 15 to 16 million of year in revenue.
And that compares to where they were on 2020, which was around the $8 million. So just to give you some perspectives on.
Of where they were and they do have very popular.
Possibility.
When do you have the profitability.
Yes, so before all of this and in normal condition. Their EBITDA margin was around 20 per cent.
Right now they've been running around 5%.
Maybe half of that brand when the interest rates might have conditions improve.
I would think on our undervalued without their overhead and the that they're building and so forth.
So some of it should be end of substantial improve those margins.
And I'm, just kind of seemed like an off the wall of crushing on I'm sure you hear this from two but but the world. You know you talked about obviously 10 years gone for everybody.
Now the.
How do you one of the.
It look longer term in terms of how youre doing business would you expect of structural change from.
Tell me on things like the kind of going forward.
And in terms of how you're conducting their business or how do you view the hybrid.
Well I think we're I think we're going through the revolution.
And I was in the system and maybe I'm wrong, but I think the revolution.
Take the maybe four or five years.
But I think the revolution that is going to taking the two months of sooner I mean, the roll off of salespeople.
On people working from home how can you call on a customer of 50% 60 per cent of the people are working from home going forward and how do you 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.
We had no sales person for each company. So we had a sales person at sea Ray.
House person per Bel power solutions sales person for the signal transformer, possibly all corners of on the same customer.
We can solve that the consolidated that into four people that cover the country. In addition to that we are.
Cushing or of digital sales group substantially to add people on so how do we connect to the engineer to Lincoln through Youtube through Twitter.
And really you know again, if you're dealing with young people as you know I don't think they like some of these phone calls and I don't think of as they like to talk to people and they want the information quickly they want as fast and they don't want the S. M.
And so we clearly we understand that in the hope we were moving quick enough to address the new engineers and for US. That's the key I mean, the week for us to be the successful we have to be able to work with engineers.
Four of them when they are designing the product.
If we don't come in as the second supplier of thirds required it makes it extremely difficult, but we come in when the engineers designing a product we can out of the guide them in the.
Just want to use our product from the proper range that hoping to eliminate some of our competitors. So it's definitely.
The exciting times of with him and I definitely believe things are changing rapidly.
One last question that was kind of your opening of that brought a warm.
To my heart. So you mentioned about pointing out the valuation the spirited betray them with some of the pieces of the current market price I guess, the obviously the purpose coming on I guess, the best from a do a throw him right on the best the task of how do we how do we narrow of them. So obviously you've been successful to varying degrees on acquisitions is it.
As you've alluded to on running the company of personally, but how do we narrowed the I'm still a little confused on how do we do that sort of how do you. How do you got us the price on the public part of it okay.
That approach would go on or just salary right now of explain how you got to do it.
[laughter] for the God of right out of the day, what's the right yeah.
<unk> got to start somewhere on the victory here. So when I was on the other side of the table looking at Bel.
It kind of thing kind of the same information that you are looking at.
I'd tell you develop certain expectations on perspective on 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 on the other side of the table.
On the on the sell side.
Bel.
The unique opportunity from a size reach and global positioning.
Positioning quite frankly with varying degrees of whether it be on the connectivity side of the power side of the magnetic side. So when I see when I'm looking at I see a great base force to to build upon and driving growth faster, both I would emphasize in the or.
Organically inorganically, so one of the benefits.
From my perspective is bringing a fresh set of eyes and asking questions for us to look at how Dallas is conducting business today.
Where should we be 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's there's the consistency and kind of performance and the way, we do business that we need to address.
So yes, we can.
I have a feeling again sitting in your shoes talking to investors and I would say that Dan had alluded to it earlier, whether it'd 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 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 <unk> company.
Hi, Thanks, just looking at the commercial aircrafts.
Market the <unk>.
Parents of to actually get much much of.
Easier to use 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.
Actually on the second quarter of 2020, and some of you thought the largest drop off.
So there will be some.
The incremental.
Pressure on on Q1 sales related to that that then we should be on a more normalized type of some kind of Q2.
Thank you and I am just looking at kind.
Coverage of your press release, I'd sort of make sure I'm not misinterpreting it you're talking about.
An additional.
$4 4 billion of of cost savings in 2021.
Just wanted to make sure of that confusing that with some of the of the saving you.
Highlighted this morning.
Right, Sir the floor of 24 million that will be incremental in 'twenty 'twenty. One that is looking at full year of 2020 caught on.
Versus 'twenty 'twenty, one so like of that two.
The $2 million relates to the Switzerland facility closure of they have about excuse me of million of.
The 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 2000 Twenty's on.
The other actions that we had gone through out the year.
On 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.
Instead of that with moving some functions.
In the Asia Ah that more results and another $1 million.
Savings in terms of 'twenty, one so that that the four 4 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 on us on coupon, it's $1 3 million vs that youre looking at Q1 'twenty on.
Q2 was almost 1.4.
In Q3, it's 1.1.
In Q4, it's about 600000.
And Jim just to add some more color on that you know we're still believe that we still got a ways to go before we're firing on all of cost savings program. One of the key things was the implementation of new software.
And now instead of having many different ROI of systems, we got it down to choose once the cinch group of went to the Bel group. So we can look at you know consolidate many functions because of all on one system now.
I'll show you on the manufacturing footprint in China.
We have three operations of China that we have to look at the consolidated down to either one and then true. So we still think there's.
Good opportunity.
To improve on our savings over the next year. The two years, we've still got a ways to go and we're still focused on.
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 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 we're looking forward to speaking to you in April of a good day.
That will conclude today's conference. Thank you for your participation you may now disconnect.
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Yeah.
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