Q2 2024 Bel Fuse Inc Earnings Call
Operator: Good morning, and welcome to the Bell Fuse second quarter 2024 earnings call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. Should anyone require operator assistance during the conference, please press star 0 on your telephone keypad. As a reminder, this call is being recorded. I would now like to turn the call over to Jean-Marie Young of Three Part Advisors. Please go ahead, Jean.
Sure.
Speaker Change: Good morning, and welcome to the Bel fuse second quarter 'twenty 'twenty four earnings call. At this time, all participants are in a listen only mode.
A brief question and answer session will follow the formal presentation should anyone require operator assistance during the conference. Please press star zero on your telephone keypad.
Speaker Change: As a reminder, this call is being recorded.
Speaker Change: I would now like to turn the call over to Jean Marie Young with three part advisors. Please go ahead Jean.
Jean-Marie Young: Thank you and good morning everyone. Before we begin, I'd like to remind everyone that during today's conference call, we will make statements relating to our business that will be considered forward-looking statements under federal securities laws, such as statements regarding the company's expected operating and financial performance for future periods, including guidance for future periods in 2024. These statements are based on the company's current expectations and reflect the company's views only as of today and should not be considered representative of the company's views as of any subsequent date. The company disclaims any obligation to update any forward-looking statements or outlooks.
Speaker Change: Thank you and good morning, everyone before we begin I'd like to remind everyone that during today's conference call. We will make statements relating to our business that will be considered forward looking statements under federal securities laws.
Speaker Change: It'd be.
Speaker Change: Such as statements regarding the company's expected operating and financial performance for future periods, including guidance for future periods. In 2024. These statements are based on the company's current expectations and reflect the company's views only as of today and should not be considered representative of the company's views as of any subsequent date the company just wait and see.
Jean-Marie Young: Actual results for future periods may differ materially from those projected by these forward-looking statements due to a number of risks, uncertainties, and other factors. These material risks are summarized in the press release that we issued after the market closed yesterday. Additional information about the material risks and other important factors that could potentially impact our financial performance and cause actual results to differ materially from our expectations is discussed in our filings with the Securities and Exchange Commission, including our most recent annual report on Form 10-K for the fiscal year ended December 31, 2023, and our quarterly reports and other documents that we have filed or may file with the SEC from time to time.
Speaker Change: Any obligation to update any forward looking statements or outlook actual results for future periods may differ materially from those projected by these forward looking statements due to a number of risks uncertainties and other factors.
Speaker Change: These material risks are summarized in the press release that we issued after market close yesterday additional information about the material risks and other important factors that could potentially impact our financial performance and cause actual results to differ materially from our expectations as discussed in our filings with the Securities and Exchange Commission.
Speaker Change: Including our most recent annual report on Form 10-K for the fiscal year ended December 31st 2023.
Speaker Change: Quarterly reports and other documents that we have filed or may file with the SEC from time to time.
Jean-Marie Young: We may also discuss non-GAAP results during this call, and reconciliations of our GAAP results to non-GAAP results have been included in our press release. Our press release and our SEC filings are all available in the IR section of our website.
Speaker Change: And also discuss non-GAAP results during this call and reconciliations of our GAAP results to non-GAAP results have been included in our sector.
Speaker Change: Our press release and our SEC filings are all available at the IR section of our website.
Jean-Marie Young: Joining me on the call today is Dan Bernstein, President and CEO, Farouk Tawik, CFO, and Lynne Hutkin, Vice President of Financial Reporting and Investor Relations. With that, I'd like to turn the call over to Dan.
Dan Bernstein: Joining me on the call today is Dan Bernstein, President and CEO creep Cubic's, CFO and Linda Hudson, Vice President of financial reporting and Investor Relations with that I'd like to turn the call over to Dan Dan. Thank you Jean Good morning, and thank you for joining our second quarter 'twenty 'twenty four earnings call.
Dan Bernstein: Thank you, Gene. Good morning, and thank you for joining our second quarter 2024 earnings call. Overall, we were pleased with our second quarter results. The collective work of the global team over the past year has resulted in improved margins, even in a challenging top-line environment. Our sales came in at $133 million, achieving the higher end of the forecast range we provided on last year's quarter earnings call. And in relating earnings, and press releases about gross margins, well, Global Bar Forecast Range.
Speaker Change: All we were pleased with our second quarter results.
Speaker Change: The collective work of the global team over the past year has resulted in improved margins even in a challenging topline environment. Our sales came in at 133 million achieving the high end of the forecast range. We provided on that share a corridor or any school and then relating earning press releases with gross margins well.
Speaker Change: Well my boss for Kansas forecast range, each of our product groups trended as expected with modest sequential growth in connectivity and magnetics from quarter, one 'twenty four being offset in part by 1.7 million reduction in Paris. We are proud of the excellent results achieved by the team.
Dan Bernstein: Each of our product groups trended as expected, with modest essential growth in connectivity and magnetics from quarter 1-24 being offset in part by $1.7 million reductions in power savings. We are proud of the excellent results achieved by the team. On the management side, earlier this month, we welcomed Steve Dawson onto the executive team as the new president of Power Solutions and Protection. Our power group is going through a pivotal transition with AI and e-mobility as long-term growth drivers.
Speaker Change: On the management side, probably later this month, we welcome Steve Dawson onto the executive team as the new President of power solutions protection. Our power group is going through a pivotal transition with AI and E mobility as long term growth drivers.
Dan Bernstein: And we are excited to have Steva at their helm as these new markets are locked with new opportunities. We would like to thank Dennis for his almost four decades of dedication to Bell and for helping achieve the success we have today. His commitment and friendship have been displayed and deeply valued by all of us at Bell, and we wish him the best in his retirement. To provide an update on our previously announced $25 million stock buy program, we have continued to make open market purchases of both classes of stock.
Speaker Change: And we are excited to have Steve at the helm as these new markets unlocked with new opportunities, we would like to thank Dennis for his almost four decades of dedication to bell.
Speaker Change: [laughter] and helping achieve the six we have today.
Speaker Change: His commitment and friendships I've been display deeply valued by all of us at and wish him the best in his retirement.
Speaker Change: As an update on our previous announced $25 million stock buyback program. We have continued to make open market purchases of both class a stock as of June 30 of 'twenty 'twenty four a program too.
Dan Bernstein: As of June 30, 2024, our program to date has purchased a total of $14.2 million, representing 20,600, Lastly, we're pleased for our Class IH stock to be added to the Russell 2000 Index in late June. This is a testament to the overall growth of the company and our recent RIR efforts, which aided in the Class IH stock meeting the eligibility requirements for inclusion in this index for the first time in Bell's history. And with that, I would now like to turn it over to Lynn. Okay? Thank you, David.
Speaker Change: To date purchased a total of $14 $2 million representing.
Speaker Change: 20600 shares of class, a and common stock of 21 214900, she has a cat class B common stock.
Speaker Change: Lastly, we're pleased for our class a stock to be added to the Russell 2000 index in late June. This is a testament to the overall growth of the company and our recent IR efforts, which aided in the class of stock meeting the eligibility requirements for inclusion in this index, but it hurts. The first time in Dallas history, and with that I would now like to turn it over to Atlanta.
Atlanta: Thank you Dan from a financial perspective in summary, we saw continued margin expansion on a lower sales base when looking at Q2 24 versus Q2 23.
Lynne Hutkin: Thank you, Dan. From a financial perspective and summary, we saw continued margin expansion on a lower sales base when looking at Q2'24 versus Q2'23. Second quarter 2024 sales came in at $133.2 million, representing a 21.1% decline from the second quarter of 2023. The majority of the sales fluctuation was driven by our power and magnetic segments, as we'll discuss further. Our gross margin increased to 40.1% in Q2-24 from 32.9% in Q2-23, and these profitability improvements were largely driven by our power and connectivity sectors.
Atlanta: Second quarter 2024 sales came in at $133 2 million, representing a 21, 1% decline from the second quarter of 2023.
Atlanta: The majority of the sales fluctuation was driven by our power and magnetic segments as I'll discuss further.
Atlanta: Our gross margin increased to 41% in Q2 'twenty four from 32, 9% in Q2, 'twenty three and these profitability improvements were largely driven by our power and connectivity segment.
Lynne Hutkin: Turning to some details at the product group level, power solutions and protection sales for the second quarter 2024 were $58.6 million, representing a 32.8% decline from Q2 last year. The decline in sales was mainly due to lower sales for power products used in networking and consumer applications.
Atlanta: Turning to some details of the product group level.
Atlanta: Power solutions and protection sales for the second quarter of 2024 for $58 6 million representing a 32.8.
Atlanta: The 8% decline from Q2 last year the decline in sales was mainly due to lower sales of our power products used in networking and consumer applications.
Lynne Hutkin: On a positive note, we saw continued strength in sales of our rail products, which grew over 40% from Q2-23, accounting for a $3.2 million increase in sales from Q2-23. Despite the overall decline in sales, the segment posted a gross margin of 45.7% in the second quarter, reflecting a 1,000 basis point improvement from Q2-23. We are viewing the Q2 gross margin level for this group to be high and estimate approximately half of this basis point improvement and power margins as being driven by the completion of internal initiatives related to procurement, pricing, and cost containment and is therefore viewed as sustainable.
Atlanta: On a positive note. We saw continued strength in sales of our rail products, which grew over 40% from Q2 twenty-three accounting for $3 2 million increase in sales from Q2 'twenty three.
Atlanta: Despite the overall decline in sales the segment posted a gross margin of 45, 7% in the second quarter, reflecting a 1000 basis point improvement from Q2 'twenty three.
Speaker Change: We are viewing the Q2 gross margin level for this group to be high and estimate approximately half of that basis point improvement in power margins are being driven by the completion of internal initiatives related to procurement pricing and cost containment and is therefore for you it is sustainable.
Lynne Hutkin: The balance of the basis point improvement in gross margin versus Q2-23 relates to items that are either non-recurring or temporary in nature and should not be factored into a normalized view of gross margin for this segment. Turning to our connectivity solutions group, sales for Q2-24 came in at 57.8 million, up 5.4% from Q2-23. The main growth driver within connectivity was within the distribution channel, where sales were up $2.5 million as compared to Q2-23. Sales into commercial air applications amounted to $15.4 million for the quarter, and sales into defense applications totaled $12 million for Q2-24.
Speaker Change: The balance of the basis point improvement in gross margin versus Q2, 'twenty three relates to items that are either nonrecurring or temporary in nature and should not be factored into a normalized view of gross margin for the segment.
Speaker Change: Turning to our connectivity solutions group sales for Q2 'twenty four came in at 57.8 million up five 4% from Q2 'twenty three.
Speaker Change: Main growth driver within connectivity, what's within the distribution channel, where sales were up $2 5 million as compared to Q2 'twenty three.
Speaker Change: Sales into commercial air applications amounted to $15 4 million for the quarter.
Speaker Change: Sales into defense applications totaled $12 million for Q2 24.
Lynne Hutkin: Each of these levels was consistent with the respective sales from Q2-23. The year-over-year increase in sales for this group was despite the divestiture of Connectivity's check business in June 2023, which previously contributed around $1.5 million per quarter to this segment. The gross margin for this group was 38.9% for the second quarter of 2024, which represents continued improvement from the 37.4% in the second quarter of 2023. This margin expansion was made possible due to the operational efficiencies achieved through facility consolidations that were completed in 2023, along with the implementation of contract renewals on more balanced terms. These favorable margin factors were partially offset by minimum wage increases in Mexico that went into effect in Q1, 2024 and the unfavorable impact of FX related to the peso.
Speaker Change: Each of these levels were consistent with their respective sales from Q2 'twenty three.
Speaker Change: The year over year increase in sales for this group was despite the divestiture of connectivity is check business in June 2023, which previously contributed around 1.5 million per quarter to this segment.
Speaker Change: Gross margin for this group was 38, 9% for the second quarter of 'twenty 'twenty, four which represents continued improvement from the 37, 4% in the second quarter of 2023.
Speaker Change: This margin expansion was made possible due to the operational efficiencies achieved through facility consolidations that were completed in 2023, along with implementation of contract renewals on more balanced terms.
Speaker Change: These favorable margin factors were partially offset by minimum wage increases in Mexico that went into effect in Q1, 24, and the unfavorable impact of FX related to the peso.
Lynne Hutkin: Lastly, our Magnetic Solutions Group posted sales of $16.8 million in Q2-24, representing a 37.3% decrease from Q2-23. This reduced sales level was generally in line with the expectations discussed on last quarter's earnings call and largely related to lower shipments to a large networking customer as they work through inventory on hand. The gross margin for this group was 26.4% in the second quarter of 2024 as compared to 24.6% in the second quarter of 2023.
Speaker Change: Lastly, our magnetic solutions group posted sales of $16 8 million and <unk>.
Speaker Change: Q2, 24, representing a 37, 3% decrease from Q2 'twenty three.
Speaker Change: This reduced sales level was generally in line with the expectations discussed on last quarter's earnings call and largely related to lower shipments into a large networking customer as they work through inventory on hand.
Speaker Change: The gross margin for this group was 26, 4% for the second quarter of 2024 as compared to 24, 6% in the second quarter of 2023.
Lynne Hutkin: This improvement in margin was primarily driven by lower fixed overhead costs resulting from the facility consolidations in China, completed in late 2023, and favorable effects related to the Chinese tariff versus Q2-23. At the consolidated level across all product segments, our backlog of orders was $304 million at June 30, 2024. R&D expenses were $6 million in Q2-24, a level consistent with Q2-23. We expect future quarters to generally be in line with the Q2-24 expense. Selling general and administrative expenses were $24.1 million, or 18.1% of sales, down from $25.1 million in Q2-23, but up as a percentage of total sales.
Speaker Change: This improvement in margin was primarily driven by lower fixed overhead costs, resulting from the facility consolidations in China completed in late 2023.
Speaker Change: And favorable FX related to the Chinese renminbi versus Q2 'twenty three.
Speaker Change: At the consolidated level across all product segments to our backlog of orders was 304 million at June 32024.
Speaker Change: R&D expenses were $6 million in Q2, 'twenty for a level consistent with Q2 'twenty three.
Speaker Change: We expect future quarters to generally be in line with the Q2 'twenty four expense.
Speaker Change: Our selling general and administrative expenses were $24 1 million or 18, 1% of sales down from $25 1 million in Q2, 'twenty, three but up as a percentage of total sales.
Lynne Hutkin: Within SG&A, an increase in salaries, fringe benefits, and amortization expense was largely offset by lower legal fees. If you recall, we incurred $1.2 million in legal fees related to the NPS litigation in Q2-23, and these expenses did not recur in Q2-24. As there are no unusual items of note contained within SG&A during Q2-24, we view this level of expense as generally indicative of the anticipated run rate for future quarters in
Speaker Change: Within SG&A and increase in salaries fringe benefits and amortization expense were largely offset by lower legal fees. If you recall, we incurred $1 2 million of legal fees related to the M. P. S litigation in Q2, 'twenty three and these expenses did not recur in Q2 24.
Speaker Change: As there are no unusual items of note contained within SG&A during Q2 24.
Speaker Change: View this level at level of expense is generally indicative of the anticipated run rate for future quarters in 2024.
Lynne Hutkin: Turning to balance sheet and cash flow items, we ended the quarter with $143.8 million in cash and securities, an increase of $16.9 million from year end. We generated $38.3 million in cash flows from operating activities during the first six months of 2024 and had capital expenditures of $4.3 million. From an inventory perspective, the downward trend that we experienced over the past several quarters has continued into Q2, reflecting an $8.6 million reduction from year-end. The lower inventory levels were primarily seen in the areas of raw materials and finished goods as we continued to work through our own inventory on hand.
Speaker Change: Turning to balance sheet and cash flow items, we ended the quarter with $143 8 million in cash and securities.
Speaker Change: An increase of $16 9 billion from year end.
Speaker Change: We generated $38 3 million in cash flows from operating activities. During the first six months of 'twenty 'twenty, four and had capital expenditures of $4 3 million.
Speaker Change: From an inventory perspective, the downward trend that we experienced over the past several quarters has continued into Q2, reflecting an $8 6 million dollar reduction from year end.
Speaker Change: The lower inventory levels were primarily seen in the areas of raw materials and finished goods as we continue to work through our own inventory on hand.
Farouk Tawik: I'll now turn the call over to Farouk for additional commentary.
Speaker Change: I'll now turn the call over to Farooq for additional commentary Byrd. Thanks Lynn.
Farouk Tawik: Thanks, Lynn. As noted in our last two earnings calls, we anticipated 2024 to be a reset year, and our second quarter and first half results were in line with our expectations. We do expect a slight downward shift as we enter the third quarter. As noted in our earnings release, based on information available as of today, we expect Q3'24 sales to be in the range of 118 to 126 million. This compares to sales of $159 million in Q3'22.
Farooq: Noted on our last two earnings calls, we anticipate 2020 for it to be a reset year and our second quarter and first half results were in line with our expectations. We do expect a slight downward shift as we enter the third quarter as noted in our earnings release based on information available as of today, We expect Q3 24 sales to be in the range.
Speaker Change: You have 118 to 126 million. This compares to sales of $159 million in Q3 'twenty three.
Farouk Tawik: We believe the following factors are the main drivers of Q3-24 sales as compared to Q3-23. At a high level, connectivity is projected to grow a bit, power is expected to be down approximately $20-25 million, with the remaining $10-15 million decline related to magnetics as it has been going through that correction. Many of the factors contributing to these year-over-year declines in power and magnetics in Q3-24 compared to Q3-23 are not new, as destocking, networking, and distribution have been ongoing factors for the past few quarters now.
Speaker Change: We believe the following factors are the main drivers of Q3 24 sales as compared to Q3 'twenty three at a high level connectivity is projected to grow at that powers. It expect it to be down approximately $20 million to $25 million with the remaining 10 to 15 million decline related to the kinetics as it has been going through that correction.
Speaker Change: Many of the factors contributing to these year over year declines in power and Magnetics in Q3 24 compared to Q3 'twenty three are not new.
Speaker Change: Destocking in networking and distribution had been ongoing factors for the past few quarters now.
Farouk Tawik: There is, however, one new factor this quarter that will impact us beginning in Q3-24. One of our China-based former suppliers has recently become subject to trade restrictions applicable to it beginning in the second quarter by executive order of the Biden administration.
Speaker Change: There is however, one new factor this quarter that will impact us beginning in Q3 'twenty four one of our China based former suppliers has recently become subject to trade restrictions applicable to it beginning in the second quarter by executive order of the by the administration.
Farouk Tawik: The team has been diligently working to onboard a replacement supplier and thus expects a few quarters worth of impact given the work needed ahead. It is unclear at this time of the ultimate impact of this supplier change, but for purposes of our Q3-24 guidance, we're assuming the full impact to be on the conservative side. Our sales in Q3-23 that were supported by this supplier amounted to $4 million. These factors are expected to be partially offset by continued strength in our rail and market, which we anticipate will be up by approximately $2 million as compared to Q3-23.
Speaker Change: The team has been diligently working to onboard a replacement supplier and thus expect a few quarters worth of impact given the work needed to head.
Speaker Change: It is unclear at this time of the ultimate impact of the supplier change, but for purposes of our Q3 24 guidance, we're assuming a full impact to be on the conservative side. Our sales in Q3 23 that were supported by this supplier amounted to $4 million.
Speaker Change: These factors are expected to be partially offset by continued strength of our rail and market, which we anticipate will be up by approximately $2 million as compared to Q3 'twenty three.
Farouk Tawik: When bridging Q2-24 sales to anticipated Q3-24 sales, our power segment is the main driver of the decline, with Q3 sales expected to be down by approximately $9 million, due in equal parts to the previously discussed softness in networking, sales impacted by our former supplier, the China-based supplier discussed, and lower volume of shipments out of Europe due to the usual European summer break at our manufacturing sites and at those of our customers based in the region.
Speaker Change: When bridging Q2 24 sales to anticipated Q3, 24 sales our power segment is the main driver of the decline with Q3 sales is expected to be down by approximately $9 million due in equal parts to the previously discussed softness in networking sales impacted by our former supplier.
Speaker Change: Trying to be suppliers discussed and lower volume of shipments out of Europe due to the usual European summer break at our manufacturing sites and those of our customers based in the region.
Farouk Tawik: We anticipate modest continued improvements in magnetics in Q3-24 on a sequential basis from Q2-24, and this is expected to largely offset a lower shift quarter anticipated in our connectivity segment due to primarily the timing of military programs. Turning to our operational initiatives, our team has continued its efforts in maximizing efficiency levels at our manufacturing sites globally. To highlight a few initiatives within our Magnetics segment, comprehensive product process and facility cost management projects are ongoing at our new manufacturing facilities to better align our Magnetics cost structure with anticipated levels of near-slash-medium-term future demand for these products.
Speaker Change: We anticipate modest continued improvement in magnetics in Q3 24 on a sequential basis from Q2 24, and this is expected to largely offset the lower ship quarter anticipated in our connectivity segment due to primarily to the timing of military programs.
Speaker Change: Turning to our operational initiatives. Our team has continued its efforts in maximizing efficiency level at our manufacturing sites globally to highlight if you initiatives within our magnetic segment.
Speaker Change: Ziv product process and facility cost management projects are ongoing that are new manufacturing facilities to better align our magnetics cost structure with anticipated levels of New York Slash medium term future demand for these products. We're also continually exploring other areas of production to better meet customer requirements, including non China sites.
Farouk Tawik: We're also continually exploring other areas of production to better meet customer requirements, including non-China cycles. In addition, we have recently made efficiency improvements at our signal transformer facility in the Dominican Republic. Shifting to the connectivity solutions segment, the facility consolidations completed in the U.S. and U.K. in 2023 have resulted in improved operational efficiencies, contributing to the 150 basis point improvement in this segment from Q2'23 to Q2'24. On the restructuring front, the recent initiative to transition manufacturing operations from our Glen Rock, Pennsylvania location to other existing sites is on schedule for completion by the end of 2024. Anticipated annual cost savings related to this initiative are expected to be in excess of the initial $1 million estimate.
Speaker Change: In addition, we had recent efficiency improvements at of our signal transformer facility in the Dominican Republic.
Speaker Change: Shifting to the connectivity solutions segment the facility consolidations completed in the U S and UK in 2023 have resulted in improved operational efficiencies contributed to the 150 basis point improvement in this segment from Q2 'twenty three to Q2 'twenty for.
Speaker Change: On the restructuring front the recent initiative to transition manufacturing operations from our Glen Rock, Pennsylvania location to other existing sites is on schedule for completion by the end of 2020 for anticipated annual cost savings related to these initiatives are expected to be in excess of the initial 1 million estimates.
Farouk Tawik: Shifting over to M&A, the heightened level of activity described in our last earnings call has continued. There is nothing to report here today, but the team is actively evaluating a number of opportunities within our existing product groups in support of our growth strategy. Consistent with prior quarters, we'll continue to influence those areas within our control, and we remain very optimistic about Bell's future. I'll now turn the call back over to Dan. Dan? Thank you, Farouk. Can we open up the call now for questions, please?
Speaker Change: Shifting over to M&A the heightened level of activity described on our last earnings call has continued.
Speaker Change: There are some things theres nothing to report here today, but the team is actively valley a number of opportunities within our existing product groups in support of our growth strategy.
Speaker Change: Distant with prior quarters, we will continue to influence those areas within our control and we remain very optimistic about <unk> future.
Dan Bernstein: I'll now turn the call back over to Dan Dan.
Dan: Thank you Farooq can we open up the call now for questions. Please.
Operator: Certainly. We will now be conducting the question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key.
Dan: Certainly we will now be conducting the question and answer session. If you would like to ask a question. Please press star one on your telephone keypad.
Speaker Change: A confirmation tone will indicate your line is in the question queue. You May press star two if he would like to remove your question from the queue.
Speaker Change: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys, one moment. Please poll for questions.
Operator: One moment, please, while we pull for questions. The first question is from Bobby Brooks from Northland Capital Markets. Please go ahead.
Speaker Change: The first question is from Bobby Brooks from Northland Capital markets. Please go ahead.
Bobby Brooks: Hey, good morning guys. On the last call, there was a healthy amount of discussion on the merging opportunities, specifically within AI, but also within, you know, EV and space. So, you know, any color you think would be helpful to hear about that, you know. I understand that these are long sales cycles, but also, from my perspective, it seems like stuff within AI is moving quite fast. So, am I right to think that those sales cycles could become shorter? Thank you.
Bobby Brooks: Hey, good morning, guys.
Speaker Change: So you know last call there was a healthy amount of discussion on the emerging opportunities.
Speaker Change: Specifically within AI, but also within you know EV in space.
Speaker Change: Do you know any color you think would be helpful to hear about that you know I understand that these are long sales cycles, but also from my perspective, it seems like stuff with an AI is moving quite fast so am I right.
Speaker Change: I right in thinking that those sales cycles could become shorter thank you.
Dan Bernstein: Yeah, thanks a lot. I appreciate the question. As we said previously, our power segment will be the biggest beneficiary of the AI world. We can see that. Obviously, we are seeing more exciting opportunities in that space as well. One of the things that we have talked about previously is, given the high level of complexity and sophistication of our products, they've been AI-ready, call it that, for the most part. As a result of that, as we think about networking and destocking, there is a little bit of a preference to using some of the product that's in the channel.
Speaker Change: Yeah. Thanks, a lot I appreciate the question, where we're as we said previously our power segment will be the biggest beneficiary of the AI world.
Speaker Change: We do see that obviously as you know where we are seeing more exciting opportunities in that space as well one of the things that we have talked about previously is given the high level of complexity and sophistication of our products.
Speaker Change: They've been AI ready to call. It for the most part so as a result of that as we think about the networking destocking.
Dan Bernstein: There's a little bit of a preference to using some of the product that's in the channel and so we tend to focus on really what is the new inbounds, whether new opportunities coming in and we're seeing those come in.
Dan Bernstein: We tend to focus on what are the new inbounds, what are the new opportunities coming in, and we're seeing those come in. We do expect sequential growth from our AI customers on play as we go out through the year and definitely heading into 2025. We're optimistic about it, and we're seeing it. We think it is a real thing, but it will take a while, especially as the channel clears out a little bit and where we're playing and positioned there takes a toll.
Speaker Change: We do expect sequential growth from our AI customers on play.
Speaker Change: As we go out through the year and definitely heading into 2025, so we're optimistic about it.
Speaker Change: And we're seeing that we think of it as a real thing, but it will take a while especially as the channel clears out a little bit.
Speaker Change: And some of our where we're playing in position there takes a toehold.
Dan Bernstein: And, Bobby, I can just add on the space side. So revenue there continues to grow. So in Q2-24, our revenue from space applications was $2.3 million. On a year-to-date basis, it's $4.3 million. And we're still looking at $7 million for an estimate for full year 2024, expecting it to be a little lighter in Q3 and then picking back up in Q4. So $7 million for the full year.
Speaker Change: And Bobby I can just add on the space side.
Bobby Brooks: So revenue there continues to grow so in Q2 24, our revenue into space applications was $2 3 million.
Dan Bernstein: And then, you know, kind of stepping back a little more, on the fourth quarter conference calls, you guys listed, you know, several growth-focused sales initiatives, along with, you know, the revamped European sales force. So we're several months into those after announcing them. Curious to hear any early results from them, any lessons learned, or just any color on kind of those growth-focused initiatives that you talked about in the fourth quarter.
Dan Bernstein: Again, I think it's too early to state when we're going to see improvement, but I'm very surprised by the sales incentive program. Most of the salespeople did receive it very positively. And even though in the first two quarters, the majority of them didn't get the compensation bonus because they didn't hit their targets, they still believe that they found it to be very beneficial. So I think just having that motivated with this new structure is a really good sign. And with the activity level in Europe, since Sabine came on board, we are seeing a lot more activity, a lot more quotations, and substantially greater opportunities than we have seen in the past.
Speaker Change: And even though in the first two quarters, a majority of them didnt get the compensation bonus because they didn't hit their targets they still believe that.
Speaker Change: To be very beneficial so I think just having that motivated with this new structure is a really good sign and with the activity level in Europe. Since the Sabine came aboard we are seeing a lot more activity a lot more quality and substantial greater opportunities than we have seen in the past and maybe if you double click on that Bobby as well.
Dan Bernstein: And maybe to double-click on that, Bobby, as well, of all our three regions, U.S., Asia, and Europe, I could say we are seeing some bright spots in a challenging market, right? So as the markets calm down a little bit and things flush out of the system, I think that will be what we're looking forward to. But to Dan's point, I think early signs are optimistic.
Bobby Brooks: Of our three regions U S Asia and.
Bobby Brooks: In Europe, I would say.
Bobby Brooks: We are seeing some bright spots in a challenging market right. So as the markets come down a little bit and things push out of the system I think that will be.
Speaker Change: What we're looking forward to but.
Bobby Brooks: <unk> point I think early signs are.
Bobby Brooks: Our optimistic.
Bobby Brooks: Got it. And then last one for me.
Speaker Change: Got it and then last one for me. So you guys gave a little.
Bobby Brooks: A good amount of color on.
Farouk Tawik: So, you know, you guys gave a little good amount of color on the trade restriction on that Chinese supplier. So I guess one thing that I was kind of wondering if we could double-click on was with the third quarter guidance. So you said that that supplier initially was supporting three to four million in sales into the consumer end market and that the guidance, you know, took a conservative view on that.
Bobby Brooks: The trade restriction on that Chinese were supplier. So I guess, one thing that I was kind of wondering if we could double click on was.
Bobby Brooks: With the third quarter guidance. So you said that that supplier initially was supporting $3 million to $4 million in sales into the consumer end market and that the guidance.
Bobby Brooks: Took a conservative view on that does that mean that.
Farouk Tawik: Does that mean that essentially you're backing out saying that that four million that you would see in a quarter from this supplier, essentially saying like that four million goes to zero in this quarter? Any more color on that and just when did it, so from when the Biden administration made that executive order to when you found the new supplier, like how long did that take? And is this new supplier going to be, I'm going to, is it my right to assume that? Am I right to say that's probably going to be lower margins, or should I say cost more?
Farouk Tawik: Yeah, so we are taking a conservative approach generally obviously we tend to take these things pretty pretty aggressively in q2 the the the Mandate came out and in the early days. There was a little bit of confusion What's allowed what's not allowed and working through all that and where we've settled in on Is is really no new orders, right? So there might be some things left in the inventory side or being shipped over that that may be a little bit You know, you see some uplift there, but you know given our design cycles as you know, it's not as easy as Shifting things over right because a lot of these things have to go get retested and requalified So once you identify the replacement side of things, right, it's going to take a little bit of time as it goes through the re-quals and re-certification, and that takes different timelines, if you will.
Farouk Tawik: So as we're going through all that iteration of understanding that we have suppliers identified, I think for, you know, maybe not everything yet, but a decent amount, it becomes a question of how fast you can get that in the market, recall, because there's gonna be some dollars spent on the customer side. So we said, let's just kind of take a view of saying We're going to have really no sales of that here in the quarter, and then maybe we can be pleasantly surprised a little bit to the upside, but that's not something we want to sign up for.
Speaker Change: So theres going be some dollar spend on a customer site. So we said, let's just kind of take a view of saying.
Speaker Change: We're going to have really no sales of that here in the quarter.
Speaker Change: And then maybe we can be pleasantly surprised a little bit to the upside, but that's not something we want to sign up for again trade restrictions are serious so we just want to make sure that that were.
Farouk Tawik: Again, trade restrictions are serious, so we just want to make sure that we're within bounds on all things. So it is a little bit of a conservative view. We'll have a better update on that in the October call in terms of progress and where we think things will shake out. Fair enough.
Speaker Change: Inbounds on all things. So it is a little bit of a conservative view. So we will have a better update on that in the October call in terms of progress and where we think things will shake out.
Bobby Brooks: Fair enough; I like that approach. Thank you guys for taking my call.
Speaker Change: Fair enough.
Speaker Change: Like that approach. Thank you guys for <unk>.
Speaker Change: My call.
Bobby Brooks: Thanks, Bobby.
Operator: The next question is from Theodore O'Neill from Litchfield Hills Research. Please go ahead.
Bobby Brooks: The next question is from Theodore O'neill from Litchfield Hills Research. Please go ahead.
Theodore O'Neill: Thanks very much. Just on the power segment, a little more granularity if you could. So I would expect that given that we have already talked about AI, but in terms of AI, e-mobility, data center, and blockchain power conversion, can you give us some more information about how the power segment is doing in those areas?
Theodore O'Neill: Thanks very much.
Theodore O'Neill: On the power segment, a little more granularity if you could so I.
Speaker Change: I would expect that given we just already talked about AI, but in terms of AI E mobility data center blockchain power conversion.
Speaker Change: Give us some more information about how the power segment is doing in those in those areas.
Dan Bernstein: Yeah, I would say it's kind of, really kind of more of the same, right? The way we tend to think about it is really more simply. Theo, anything that influences growth in data centers, whether it be new builds or upgrade cycles, is good for us. And then we also may also think about, as we think about data transmission and the whole ecosystem around data, we think that's good. We've talked about previously, you know, our avoidance of hyperscalers, which are kind of all the news and the headlines these days for various reasons.
Speaker Change: Yes, I'd say, it's kind of really kind of the more and more of the same.
Speaker Change: Right.
Speaker Change: We tend to think about it is really more simply.
Speaker Change: Anything that influences growth in data centers, whether it be new builds or upgrade cycles.
Speaker Change: It's good for US and then we also May also think about as we think about data transmission and the whole ecosystem around data, we think thats good.
Speaker Change: We've talked about previously our avoidance of the.
Dan Bernstein: And we, you know, think the hyperscalers are roughly 50% of that market, and we're on the other 50%, if you will. But ultimately, we are, you know, we're bullish, right, on that. But right now, there is a little bit of a clear-out of some of the products in the system.
Dan Bernstein: But, you know, but we are, again, just so you understand, you know, when we look at data centers, we did a substantial job with Facebook maybe five years ago, and it was, you know, almost a $12, $15 million customer. But the margins were extremely low, and I think, you know, since Farouk came aboard, we really try to focus on margin improvement and realize that, you know, top line growth is not the end all and be all for it.
Dan Bernstein: So with that in mind, we really are focused on the niche markets. So even though EV is a very big market, our niche market for EV is school buses, tractors, large equipment. So not going after the testers of the world, but really, you know, who can we support properly?
Dan Bernstein: Who can understand the engineering proposition we offer them? And the same way we look at data centers; we support one of our big customers in that area with the testing equipment that they're using for the ICs that they're using in data centers. So again, any time electronics goes up, there's a lot of areas that we can grow in. And again, we really are focused on areas that we have to be profitable. Okay, thanks for listening.
Theodore O'Neill: Okay, thanks very much.
Operator: The next question is from Jim Ricutti from Needham & Co. Please go ahead.
Jim Ricutti: Hi, thanks. Good morning. I wonder if you could spend a few moments just talking about the pricing environment, just given the weak demand environment, trying to get a better sense of what the gross margins could look like in a more normalized demand environment, whatever that looks like, but just any sense as to what you're seeing from folks.
Speaker Change: Environment, just given the weak demand environment.
Speaker Change: Trying to get a better sense of what the gross margins could look like in a more normalized demand environment, whatever that looks like but just any any sense as to what you're what you're seeing from folks.
Dan Bernstein: I hate to say this on the phone, but to be shocking, I think this is the first time in a down market that we haven't seen very little price pressure. I think everybody is still trying to focus on supply. It's very difficult when you push back your orders and ask for a price decrease at the same time. So I think for the past 18 months, the focus hasn't been on pricing at all; it's really been on inventory management.
Speaker Change: Yeah, I hate to say this on the phone, but it would be shocking I think this is I've been involved for over 40 years and this is the first time in a down market that we haven't seen it very little price pressure.
Speaker Change: I think everybody is still China focused on supply.
Speaker Change: It's very difficult when you push back yard is asking for a price decrease at the same time. So I think the past 18 months the focus hasn't been on pricing at all it's really been on inventory management.
Dan Bernstein: And then, if it does cut loose and the lead times do get stretched out, then pricing increases will become available. But again, this is the first time in my memory that there is a down market, and we have
Speaker Change: And then if it does cut loose and the lead times to get stretched out than then.
Speaker Change: And then pricing increases become available but again. This is the first time in my memory that Theres, a down market and we haven't seen any of them.
Speaker Change: Price pressures.
Farouk Tawik: Remember, Jim, as volumes pick up, right, in a more healthy environment, you'll get some of those pressures. And that's kind of why we've been doing a lot of the work we have been doing around cost management and the facility work that we have been doing. The other thing I should say is, I think from a mindset perspective and approaching new products and the businesses we're going after, the last couple of half years have been lending themselves to a little better potential outcomes. But, you know, to Dan's point, we do expect to see that, obviously, in different parts of our business, but we're not there yet.
Speaker Change: Okay.
Speaker Change: Right.
Speaker Change: Obviously as volumes pick up right.
Speaker Change: More healthier environment, you'll get some of those pressures.
Speaker Change: And that's kind of why we've been doing a lot of the work we have been doing around cost management and the facility work that we have been doing the other thing I should say is I think from a mindset perspective, and approaching new products and the businesses that we're going after the last call. It couple of half years have been lending themselves to a little.
Speaker Change: Potential outcomes, but to Dan's point.
Dan: We do expect to see that obviously in different parts of our business.
Dan: But we're not we're not there yet.
Lynne Hutkin: Okay, helpful. What kind of demand are you seeing in the military and commercial airspace market? I may have missed it. Lynn, did you provide revenues for commercial airspace?
Speaker Change: Okay.
Speaker Change: Helpful.
Speaker Change: Kind of demand are you seeing in the military and commercial aerospace market.
Lynne Hutkin: I did. So, in Q2-20, for commercial air, it was $15.4 million, and for military with $12 million.
Jim Ricutti: Got it. Thank you. Thank you. Sorry about that. Final question from me. I think you've alluded to or suggested that there are some green shoots out there, and we're hearing that from some other players in the market.
Jim Ricutti: And maybe that's a question for you, Dan.
Jim Ricutti: I've been thinking about...
Dan Bernstein: I guess that was the question, given your experience in different cycles. Yeah, what does this cycle look like when we see some signs of recovery? Yeah, I guess what I'm asking. We're just going to turn around, right? Yeah. You know, Jim, I tell it all the time, in our industry, it's always six months. Oh, it's six months, and you go back to the guy, it's six months.
Dan Bernstein: You know, we're in constant contact with Arrow, AdNet, all the major distributors. And we keep asking them, you know, when's inventory going to be down? When are you going to see new orders? And they always come back six months, six months, and then all of a sudden it hits them in a day, and they start ordering.
Dan Bernstein: But, you know, you're not hearing anything, you see little areas of improvement like aerospace, of course, but overall, just, I think it's back to that wait and see type of thing. I wish I could be a lot more positive is the bottom line. Yeah. No, fair enough. Thank you.
Operator: The next question is from Hindi Susanto from Gabelli Funds. Please go ahead.
Hendi <unk>: The next question is from Hendi <unk> from Gabelli funds. Please go ahead.
Hindi Susanto: Good morning, Dan, Farouk, and Lynn. Good morning.
Speaker Change: Good morning, Dan photo Hamlin.
Speaker Change: Good morning.
Dan Bernstein: Yes, so I would like to follow up Jim's question. So is it another pushback after six months? I think that is my interpretation, and I want to confirm that. No, I think that's just a standard answer they give when they don't know. It could be two months. It could be a year. But if you ask anybody, they'll come up with a patent answer like, six months. But I don't know if it has any credibility. That's my point. It's just a line they put out there, but I don't know if you can put any credence in it.
Speaker Change: Yeah, So I would like to follow up on Jim's question. So is it another pushback of six months I think that is my interpretation and Hum.
Speaker Change: I want to go I think.
Speaker Change: This is the standard answer they get when they don't know it could be two months it could be a year, but if you ask anybody they all come up with a Pat answer six months, but I don't know if it has any credibility. That's my point is just.
Speaker Change: The checks in the mail kind of line. It just you don't just.
Speaker Change: It was just a line they put out there, but I don't know if you can put any credence in it.
Speaker Change: And then if I may.
Dan Bernstein: As further, when the recovery happens, do you happen to be somewhat mixed among different products, different end markets, like do you see, uh, let's say like, where do you feel it is more negative and where do you feel it is more positive in terms of... I think the down markets really hit us in networking, more than any other area of our networking. And how concentrated are we in networking?
Speaker Change: US further when the recovery happens do you happen to be somewhat mix among the different.
Speaker Change: Different end markets like do you see let's say like.
Speaker Change: Where do you feel it is more negative and where do you feel it's more positives.
Speaker Change:
Speaker Change: I think the down market. There is really the down market has really hit us in networking.
Speaker Change: More than any other area of our networking customers.
Speaker Change: And then how concentrated are in networking.
Dan Bernstein: Networking, which is where a lot of our distribution comes from, you know, it's distribution, but they go out to networking customers also.
Speaker Change: Networking, which a lot of our distribution comes its distribution, but they go out to networking customers also.
Speaker Change: Yes.
Dan Bernstein: So I think those are obviously our two biggest markets, right? Distribution and networking, and I think both of them are where we're getting hit on.
Speaker Change: I think those are obviously, our two biggest markets right distribution networking and I think both of them are where were getting hit on.
Dan Bernstein: And then, are they underpaying the handyman?
Speaker Change: And then are they under shipping the end demand.
Hindi Susanto: Can you expand on that a little bit?
Speaker Change: Can you expand on that a little bit I think.
Speaker Change: So I'll ask.
Hindi Susanto: So I In networking and distribution, your customers are your customers... under shipping or shipping like lower than the end demand there.
Speaker Change: In networking and distribution are your customers.
Speaker Change: Under shipping or a ship shipping like lower than the end demand there.
Dan Bernstein: I would not think that's the case. I think they'll ship to meet demand.
Speaker Change: I would not think thats. The case I think they will ship to meet demand no I think I think they are still using the inventory they have to meet demand. So they don't have to so over inventory. They don't have to place new orders into the get the inventory down and a lot less than what we will look at Andy is inventory levels right. So we can.
Dan Bernstein: No, I think they're still using the inventory they have to meet demand. They're so overstock, they don't have to place new orders until they get their inventory down a lot less.
Farouk Tawik: And what we look at, Andy, is inventory levels, right? And our view is that inventory levels have been coming down pretty significantly. So we do feel, and that's why in the last couple of quarters we've been saying, you know, we feel like it's bottomed out, and we continue to hold that view. But when does it get back to a little more regular rate pattern? So we tend to focus on inventory levels, but we don't think anybody's, you know, they're not sending things to their customers, if that's another question.
Andy: And our view is the inventory levels have been coming down pretty significantly.
Andy: So we do feel and that's why the last couple of quarters have been saying.
Speaker Change: Feel like it's bottomed out and we continue to hold that view.
Speaker Change: But when does it get back to a little more Reg.
Speaker Change: Irregular patterns. So we tend to focus on inventory levels, but we don't think anybody's, they're not sending things that our customers. If that's come out of question.
Farouk Tawik: And for your internal inventories, I think Belfuse has been lowering them and freeing up working capital. How much further should we think about Belfuse lowering its internal inventories?
Speaker Change: And then for your internal inventories I think Bel fuse has been lowering down and they're freeing up working capital.
Speaker Change: How much for sure.
Speaker Change: Should we think about Bellevue slow ring its internal in front of us.
Farouk Tawik: Yeah, I would say, you know, we could probably address that a little bit more with a little healthier sales environment, right? So, you know, it's one of those things that, you know, we tend to focus a little bit on the terms side of things.
Speaker Change: Yeah, I would say.
Speaker Change: We could probably address that a little bit more with a little healthier.
Speaker Change: Sales environment right.
Speaker Change: So it's one of the things that we're we tend to focus a little bit on the term side of things.
Farouk Tawik: We're not quite where we would like to be yet, you know, so that's something we're influencing and trying to influence. I think we've done a pretty decent job at it. It would be a little bit easier to manage and do that in a more healthy sales environment, which we're not in. So, maybe, in short, we would like it to be better, and we're trying to get there better. And it would be a little bit, I think, easier to manage in a healthy environment.
Speaker Change: We're not quite where we'd like to be yet.
Speaker Change: Uh huh.
Speaker Change: So thats something were floating and try and influence I think we've done a pretty decent job at it.
Speaker Change: Little bit easier to manage and do that in a more healthier sales environment, which we're not in.
Speaker Change: So maybe in short we would like it to be better.
Speaker Change: We're trying to get to that better than it would be a little bit I think easier to manage in a healthy environment.
Hindi Susanto: And then, Dan and Farouk, I want to ask whether you have any insight into this. There is some conversation that there is... Sequential Improvement in China, um...
Dennis Photocall: And then Dennis Photocall I went to us whether you have any insight into this.
Dennis Photocall: There is some.
Dennis Photocall: Conversation that there is.
Dennis Photocall: Sequential improvement in China.
Dennis Photocall: In.
Speaker Change: Automotive and industrial and Iot.
Speaker Change: Like what are the trends that you are seeing in China.
Speaker Change: But remember we do sell some stuff in China, but generally that's not are our main customer base right.
Farouk Tawik: I remember we do sell some stuff in China, but generally, that's not our main customer base, right? And I think that's one of the, quite frankly, good things, given just the pricing environment, the high level of Asian competition that tends to be higher volume type business or medium volume. So it's not kind of our... We pick our spots, we're picky and choosy, but I would say those are not the kind of things that we overthink about.
Speaker Change: And I think thats one of them that they actually.
Speaker Change: Quite frankly, good things given just the pricing environment, the higher level or is your competition.
Speaker Change: That tends to be more higher volume type business or medium volume. So it's not kind of are we pick our spots, we're picky and choosy.
Speaker Change: But we're but I would say those are not kind of things that we over think about.
Dennis Photocall: Okay.
Hindi Susanto: And then I may miss this, the sales of immobility in Q2. May I ask for that number? Sure.
Speaker Change: And then I missed I may missed this the sales of <unk> in Q2.
Speaker Change: May I ask for that number.
Farouk Tawik: Sure, so e-mobility sales in Q2 were...
Speaker Change: Sure. So E mobility sales in Q2 were $4 million.
Dennis Photocall: 4 million.
Speaker Change: And then I assume there is no expedite fee is that correct. There was no expedite T. This corner correct. Okay.
Speaker Change: Okay. Thank you so much.
Operator: Thank you for your call. We appreciate it.
Speaker Change: Thank you for your call and we appreciate it.
Operator: The next question is from Bobby Brooks.
Speaker Change: The next question is from Bobby Brooks. Please go ahead.
Bobby Brooks: Hey guys, I just want to jump back in and kind of square something away. So in the press release, you guys said at an industry conference in May that the consensus view was that the worst was behind us. Is that in terms of kind of just distribution, or is that more broadly distribution and networking? And I guess, obviously, those are kind of the two biggest end markets that you guys serve. You guys mostly serve the networking and market through distribution. I just want to kind of make sure I understand that dynamic.
Bobby Brooks: Hey, guys I, just wanted to jump back on and kind of square something away. So in the press release, you guys said.
Bobby Brooks: Hum at an industry conference in May you know it was indicated that the consensus view that it was indicated that the worst was behind US is that in terms of kind of just on the distribution or is that more broadly distribution and networking and I guess like obviously those are kind of two of the biggest end market.
Speaker Change: Are you guys serve but do you guys, mostly serve the networking end market through distribution I, just want to kind of make sure I understand that dynamic.
Dan Bernstein: Yeah, no, most of our business, a good portion of our network business is direct. I would say probably 75% is direct to the customer for network. But overall, when you throw in smaller networking companies, industrial companies, then they go through distribution. So overall, distribution represents about 30% of our sales, Lynn? Yes.
Speaker Change: Most of our.
Speaker Change: A good portion of our distribute networking business is direct I would say probably 75% is direct to the customer for networking, but overall when you throw in smaller.
Speaker Change: Networking companies industrial companies.
Speaker Change: Then they then they go through distribution.
Speaker Change: So overall distribution represents about 30% of our sales line yes.
Dan Bernstein: And I think maybe to the other part of your question, Bobbie, the conference reference was really a distribution, call it, focused conference that happens once a year. So that specific comment about a conference was on the distribution side.
Speaker Change: And I think maybe the other part of your question Bobby.
Speaker Change: The conference reference was really that was a distribution call it focused.
Bobby Brooks: Conference that happens once a year.
Bobby Brooks: So that that specific comment about our conference was on the distribution side.
Bobby Brooks: Okay, awesome. Thank you guys. I'll return to the queue.
Bobby Brooks: Okay Awesome. Thank you guys I'll return to the queue.
Operator: The next question is from Jim Ricutti from Needham and Co. Please go ahead.
Bobby Brooks: The next question is from Jim Ricchiuti from Needham <unk> Co. Please go ahead Sir.
Bobby Brooks: Sure.
Jim Ricutti: Thanks for the guidance on gross margins. I wonder if you could maybe help us a little bit with the OPEX, which has moved around a little bit.
Jim Ricchiuti: Thanks for the guidance on gross margins I Wonder if you could maybe help us a little bit with what.
Jim Ricchiuti: With the Opex, which has moved around a little bit we saw a nice uptick in R&D in the quarter should we assume that these R&D levels are more normalized in <unk>.
Farouk Tawik: You saw a nice uptick in R&D in the quarter. Should we assume that these R&D levels are more normalized? Any sense as to, on the SG&A side, I assume at these lower levels of revenues, probably not a significant uptick there. Is that a fair way to think about OPEC? Yeah, I think that that's pretty good.
Speaker Change: Any sense as to.
Speaker Change: On the SG&A side I assume at these lower levels of revenues probably not.
Speaker Change: A significant uptick there is that a fair way to think about opex.
Farouk Tawik: Yeah, I think that's pretty fair. I mean, roughly around, you know, the call that six million, five, six million R&D is kind of where we think it is. Remember, more R&D goes into the power and connectivity side of the business. In terms of SG&A, there is some variability in that, as it relates to some outside commissions that we pay and some other co-items. So we tend to think about it around age 25.
Speaker Change: Yeah, I think that's pretty fair I mean the.
Speaker Change: Roughly around the call of <unk> 6 million $5 6 million R&D is kind of where we think it is remember more R&D goes into power and connectivity side of the business.
Speaker Change: Terms of SG&A there is some.
Speaker Change: Variability in that as it relates to some outside commissions that we pay and some other items.
Speaker Change: So we tend to think about it around 25 I would say we are looking to see ways that we can influence as G&A.
Farouk Tawik: I would say we are looking to see ways that we can influence SG&A, as we just kind of think about the world that we're in. So that's something that we are focused on, if you will, and looking at what's in the art of the possible there. But largely, we kind of guide towards flattish or range bound.
Speaker Change: <unk>.
Speaker Change: As we just kind of think about the world that we're in so so thats something we are focused on if you will.
Speaker Change: And looking at what is the what's in the art of the possible there, but largely we would kind of guide towards.
Speaker Change: Flattish or kind of a range bound we should say.
Speaker Change: Okay. Thank you.
Speaker Change: Yes.
Operator: There are no further questions at this time. I would like to turn the floor back over to Dan Bernstein for closing comments.
Speaker Change: There are no further questions at this time I would like to turn the floor back over to Dan Bernstein for closing comments.
Dan Bernstein: I just want to thank you for joining our call, and we're looking forward to speaking to you in October. Thank you very much. This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.
Dan Bernstein: Thank you for joining our call and we're looking forward to speaking to you in October Thank you very much.
Operator: This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.
Speaker Change: This concludes today's conference you may disconnect your lines at this time. Thank you for your participation.
Operator: [inaudible].............
Speaker Change: Okay.
Speaker Change: Yeah.
Speaker Change: Yeah.
Speaker Change: Yeah.
Speaker Change: Yeah.
Speaker Change: Okay.
Speaker Change:
Speaker Change: [music].
Speaker Change: Hum.
Speaker Change: Hmm.
Speaker Change: [music].
Speaker Change: Hum.
Speaker Change: Hum.
Speaker Change: Hum.
Speaker Change: Hum.
Speaker Change: [music].
Speaker Change: Uh huh.
Speaker Change: [music].
Speaker Change: Hum.
Speaker Change: Hmm.
Speaker Change: [music].
Speaker Change: Yeah.
Speaker Change: Uh huh.
Speaker Change: [music].