Q3 2024 Bel Fuse Inc Earnings Call
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Speaker Change: Beef question and answer session will follow the formal presentation. If anyone should require operator assistance. During the conference. Please press star zero on your telephone keypad. As a reminder, this conference is being recorded I would now like to turn the call over to Jean Marie Young with third Party Advisors. Please go ahead Ms. Jean.
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 center in federal Securities laws, such as statements regarding the company's expected operating and financial performance for future periods, including guidance.
Daniel Bernstein: Anubhav is a seasoned proven supply chain and procurement leader with a heavy history of securing efficiencies and cost-saving outcomes for multi-billion dollar companies, including CommScope, Motorola Mobility, and Google. He's been tasked with developing and implementing a procurement strategy, cultivating robust vendor relations, negotiating contracts, and championing cost-effective, sustainable procurement practice on a global basis. We are very much looking forward to the contribution that each Uma and Anubhav will bring to develop future positions in the company for long-term success. Now I'd like to turn it over to Lynn.
Speaker Change: 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 kind of proceeds as of any subsequent date.
Speaker Change: The company disclaims any obligation to update any forward looking statements or outlook actual results for future periods may differ materially from those projected forward.
Speaker Change: We're 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 market close yesterday additional information about the material risks and other important factors that could potentially impact our financial performance and the actual results to differ materially from.
Lynn Hutkin: Thank you, Dan. From a financial perspective, in summary, we saw continued margin expansion on a lower sales base when looking at Q3 2024 versus Q3 2023. Q3 2024 sales came in at $123.6 million, representing a 22.1% decline from Q3 2023. The sales fluctuation was driven by our Power Solutions and Protection and Magnetic Solutions segments, as we will discuss further, partially offset by growth in Connectivity Solutions sales versus Q3 last year. Our gross margin increased to 36.1% in Q3 2024 from 35% in Q3 2023. These profitability improvements were largely driven by our Magnetic Solutions and Connectivity Solutions segments. Turning to some details at the product group level, Power Solutions and Protection sales for the quarter were $48.7 million, representing a 35% decline from Q3 last year. The decline in sales was mainly due to lower sales of our power products used in networking and consumer applications.
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Speaker Change: Good morning, and welcome to Bel fuse third 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. If anyone should require operator assistance. During the conference. Please press star zero on the telephone queue.
Speaker Change: Our expectation is discussed in our filings with Securities and Exchange Commission.
Speaker Change: 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. We may also discuss non-GAAP results. During this call and reconciliations of our GAAP results to non-GAAP results.
Speaker Change: As a reminder, this conference is being recorded I would now like to turn the call over to Jean Marie.
Speaker Change: Have been included in our press release.
Speaker Change: Third Party advisors. Please go ahead Ms Qi.
Press release, and our SEC filings are all available at the IR section of the website.
Speaker Change: With me today on the call is Dan Bernstein, President and CEO.
Speaker Change: <unk> CFO and Mike <unk>, Vice President of financial reporting and Investor relations with that I'd like to turn the call over to Dan Dan Yes.
Dan: Yes, Thank you Jim and we appreciate everyone joining our call. This morning.
We are pleased.
Dan: Third quarter sales and gross margins each landed above the midpoint of our guidance had anticipated our connectivity segment.
Lynn Hutkin: On a positive note, we saw continued strength in sales of our rail products, which grew over 40% from Q3 2023, accounting for a $2.6 million increase in sales from Q3 2023. This segment posted a gross margin of 39.4% in Q3 2024 as compared to 41.7% in Q3 2023. Turning to our Connectivity Solutions group, sales for Q3 2024 came in at $55.7 million, up 7.6% from Q3 2023. The main growth driver within connectivity was within the distribution channel, where sales were up $1.2 million as compared to Q3 2023. Sales into commercial air applications totaled $12.5 million for Q3 2024, an increase of $1.2 million, or 10.3%, from Q3 2023. Military sales amounted to $11.6 million for the quarter, a level consistent with Q3 2023.
Speaker Change: <unk> had strong quarter, driven by robust sales into aerospace defense and space applications and our magnetic segment experienced incremental growth on a sequential basis from Q2 24, which is good to see the power segment sales were within our expectations for the quarter given the previously discussed seasonality in Europe.
Speaker Change: And during August and the impact from trade restrictions on one of our former suppliers in China.
Speaker Change: The only new factor, which impacted revenue. Okay connectivity segment was a strike at one of our aerospace customers, which slowed the value of shipments late in the third quarter.
Speaker Change: During the third quarter, we have made two key additions to our corporate team. That's what we continue to add high impact individuals and the new creative New row pegged out has joined US as global head of sales and marketing and antibody coffee is shown as go ahead of corporate contracts.
Speaker Change: <unk> was most recently the president of global sales at par now.
Speaker Change: We are distributed in the electronic industry Rad as long term Ku Korea, OLED proven track record of growth.
Speaker Change: And our FTC filings are all available at the IR section of the website.
Jean Marie: With me today on the call is Dan Bernstein, President and CEO.
Speaker Change: When you say up through a variety of areas, including the turnaround on performing regions entering new geographic markets.
Lynn Hutkin: The gross margin for this group was 36.6% for Q3 2024, which represents continued improvement from the 35.8% gross margin in Q3 2023. 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 and a favorable impact of FX related to the peso versus Q3 2023. These favorable margin factors were partially offset by minimum wage increases in Mexico that went into effect in Q1 2024. Lastly, our Magnetic Solutions group posted sales of $19.2 million in Q3 2024, representing a 40% decrease from Q3 2023. This reduced sales level was generally in line with expectations discussed on last quarter's earnings call and largely related to lower shipments into a large networking customer as they continue to work through inventory on hand.
Jean Marie: <unk> CFO and Wayne Hudson, Vice President of financial reporting and Investor Relations with that I'd like to turn the call over to Dan Dan Yes.
Speaker Change: <unk> approach to product technology, and identifying and executing cross selling opportunities.
Dan: Yes, Thank you Jim and we appreciate everyone joining our call. This morning.
Speaker Change: He will be responsible for creating executing strategies to drive growth beyond the current trends identifying areas for improvement challenging existing processes and implementing innovative solutions to optimize.
Dan: We are pleased that our.
Dan: Third quarter sales and gross margins each landed above the midpoint of our guidance has anticipated our connectivity segment had strong quarter driven by robust sales into aerospace defense and space applications and our magnetic segment experienced incremental growth on a sequential basis from Q2 24.
Speaker Change: Sales performance antibody is a season improving supply chain and procurement.
Speaker Change: With a heavy history of securing efficiencies and towards saving outcomes, but multibillion dollar companies, including Commscope, Motorola mobility and Google.
Dan: Which is good to see the power segment sales were within our expectations for the quarter.
Speaker Change: <unk> been tasked with developing and implementing a procurement strategy cooperating robust vendors agents negotiating context and champion cost effective sustainable program packages on a global basis.
Dan: Given the previously discussed seasonality in Europe, and during August and impacts from trade restrictions on one of our former suppliers in China.
Dan: The only new factor, which impacted revenue.
Dan: Activity segment.
Speaker Change: We are very much looking forward to the contribution that each EBIT ended above will bring develop future position. The company for long term success now I'd like to turn it over to Matt.
Dan: Does this strike at one of our aerospace customers, which slowed the value of shipments late in the third quarter.
Dan: During the third quarter, we have made two key additions to the corporate team as we continue to add high impact individuals and the new creative New row Houma pays out has joined US as global head of sales and marketing and antibody coffee is shown as go ahead of corporate contracts.
Matt: Thank you Dan from a financial perspective in summary, we saw continued margin expansion on a lower sales base. So I'm looking at Q3 24 versus Q3 23.
Lynn Hutkin: The gross margin for this group was 27.3% in Q3 2024 as compared to 22% in Q3 2023. This improvement in margin was primarily driven by lower fixed overhead costs resulting from the facility consolidations in China completed in late 2023, partially offset by unfavorable FX related to the Chinese renminbi versus Q3 '23. R&D expenses were $5.4 million in Q3 '24, a level consistent with Q3 '23. We expect future quarters to be generally in line with Q3 '24 expense. Our selling, general, and administrative expenses were $26.7 million as compared to $23.8 million in Q3 '23. Excluding the $4.2 million of legal and other costs related to the Enercon acquisition, our SG&A expenses were lower by $1.3 million as compared to Q3 '23, primarily due to lower variable expenses such as commissions and incentive compensation.
Matt: Third quarter 2024 sales came in at $123 6 million, representing a 22, 1% decline from the third quarter of 2023.
Dan: Who was most recently the president of global sales have fallen out.
Dan: Premier distributor in the electronic industry Rad as long term can you Korea OLED proven track record.
Matt: Sales fluctuation was driven by our power magnetics segments.
Dan: Growing sales through a variety of avenues, including the turnaround on performing regions entering new geographic markets pursuing a tailored approach to product technology, and identifying and executing cross selling opportunities.
Matt: As we will discuss further partially offset by growth in connectivity sales versus Q3 last year.
Matt: Our gross margin increased to 36, 1% in Q3 24 from 35% in Q3 23 earnings profitability improvements were largely driven by our magnetics and connectivity segment.
Dan: Can we be responsible for creating executing strategies to drive growth beyond the current trends identifying areas for improvement challenging existing processes and implementing innovative solutions to optimize.
Matt: Turning to some details at the product group level power solutions and protection sales for the quarter.
Matt: Were $48 7 million, representing a 35% decline from Q3 last year.
Matt: The decline in sales was mainly due to lower sales of our power products used in networking and consumer applications.
Matt: On a positive note. We saw continued strength in sales of our rail products, which grew over 40% from Q3 23 accounting for a $2 6 million dollar increase in sales from Q3 23.
Lynn Hutkin: Our effective tax rate for Q3 2024 was 27.8%, up significantly from the 18.2% of Q3 2023. There was a one-time item contained in the Q3 tax provision in the amount of $1.3 million. Excluding this item, the company's effective tax rate would've been 15.7% in Q3 2024. Turning to balance sheet and cash flow items, we ended the quarter with $163.8 million in cash and securities, an increase of $36.9 million from year-end. We generated $65.7 million in cash flows from operating activities during the first nine months of 2024 and had CapEx of $7.9 million. From an inventory perspective, the downward trend that we experienced over the past several quarters has continued into Q3, reflecting a $12.3 million reduction from year-end.
Matt: The segment posted a gross margin of 39, 4% in the third quarter of 2024.
Matt: Parents of 41, 7% in the third quarter of 2023.
Matt: Turning to our connectivity solutions group sales for Q3 24 came in at $55 7 million up seven 6% from Q3 23.
Matt: Main growth driver within connectivity within the distribution channel, where sales were up $1 2 million as compared to Q3 dollars 23.
Matt: Sales into commercial air applications totaled $12 5 million for Q3, 24, an increase of $1 2 million or 10, 3% from Q3 23.
Matt: Military sales amounted to $11 6 million for the quarter.
Matt: Consistent with Q3 dollars 23.
Lynn Hutkin: 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. I'll now turn the call over to Farouq for additional commentary.
Matt: The gross margin for this group was 36, 6% for the third quarter of 2024, which represents continued improvement from the 35, 8% gross margin in the third quarter of 2023.
Farouq Tuweiq: Thank you, Lynn. We are rounding the corner here on inventory in the channel and starting to see some green shoots of recovery, the team has been laser focused on executing on operational improvements as we have been doing for the last few years. During Q3, we initiated a consolidation of our fuse manufacturing operations. Currently, our fuses are manufactured at a separate site in China and will be transitioned to other existing sites as a means of further reducing our operational footprint and adding efficiencies to our overhead costs. The fuse initiative is expected to result in a restructuring cost of approximately $4.2 million, of which $200,000 was incurred in Q3, $2.1 million is expected to be recorded in Q4 2024, with the balance of $1.9 million expected to be incurred in 2025.
Matt: This margin expansion was made possible due to the operational efficiencies achieved through facility consolidations that were completed in 2023.
With implementation of contract renewals on more balanced terms and a favorable impact of FX related to the peso versus Q3 of 23.
Matt: These favorable margin factors were partially offset by minimum wage increases in Mexico that went into effect in Q1 24.
Dan: In the third quarter of 2024 as compared to 41, 7% in the third quarter of 2023.
Matt: Lastly, our magnetic solutions group posted sales of $19 2 million in Q3, 24, representing a 40% decrease from Q3 23.
Dan: Turning to our connectivity solutions group sales for Q3 'twenty former came in at $55 7 million up seven 6% from Q3 'twenty three and.
Matt: This reduced sales level was generally in line with expectations discussed on last quarter's earnings call and largely related to lower shipments and to a large networking customer as they continue to work through inventory on hand.
Dan: The main growth driver within connectivity was within the distribution channel where sales were up $1 2 million as compared to Q3 'twenty three.
Farouq Tuweiq: This project is scheduled for completion by the end of Q1 2025 and is expected to result in annualized cost savings of $1.5 million once complete. The previously announced restructuring project at our Glen Rock, Pennsylvania facility is progressing as planned, with scheduled completion by the end of 2024, with cumulative expected annualized cost savings of $2.5 million. We've been benefiting from approximately $1.5 million of the Glen Rock cost savings throughout 2024 and expect $1 million to be incremental in 2025. Turning to M&A, as announced in mid-September, BEL has agreed to acquire 80% of Enercon Technologies, with a path to acquire the remaining 20% by early 2027. With 100% of their sales within aerospace and defense end markets, the addition of Enercon accelerates our strategy of moving further to critical applications with nice sole source positions.
Matt: The gross margin for this group was 27, 3% in the third quarter of 2024 as compared to 22% in the third quarter of 2023.
Dan: Sales into commercial air applications totaled $12 5 million for Q3, 24, an increase of $1 2 million or 10, 3% from Q3 23.
Matt: This improvement in margin was primarily driven by lower fixed overhead costs, resulting from the facility consolidations in China completed in late 2023, partially offset by unfavorable FX related to the Chinese renminbi versus Q3 23.
Dan: Military sales amounted to $11 6 million for the quarter a level consistent with Q3 dollars 23.
Dan: The gross margin for this group was 36, 6% for the third quarter of 2024, which represents continued improvement from the 35, 8% gross margin in the third quarter of 2023.
Matt: R&D expenses were $5 4 million in Q3, 24, a level consistent with Q3 23.
Matt: We expect future quarters to be generally in line with Q3 2004 expense.
Dan: This margin expansion was made possible due to the operational efficiencies achieved through facility consolidation that.
Matt: Our selling general and administrative expenses were $26 7 million as compared to $23 8 million in Q3 23.
Dan: Were completed in 2023.
Dan: With implementation of contract renewals on more balanced terms and a favorable impact of FX related to the peso versus Q3 of 23.
Matt: Excluding the $4 2 million of legal and other costs related to the <unk> acquisition, our SG&A expenses were lower by $1 3 million as compared to Q3, 'twenty three primarily due to lower variable expenses, such as commissions and incentive compensation.
Farouq Tuweiq: This creates more cohesion across our product segments and introduces exciting cross-selling opportunities. We've been working very closely with the Enercon management team since signing and are very much looking forward to collaborating with them to define our new go-to-market strategies for our combined businesses, supporting the aerospace and defense end markets across the regions in which we collectively serve. The transaction is expected to close during Q4 of this year. We look forward to sharing additional details as we work through our post-close integration process. Looking ahead to Q4, we're anticipating base Bel to be largely in line with Q3 2024 levels, as there are some offsetting factors at play. The range noted in our earnings release of $117 to 125 is inclusive of some rebounds in rail sales and slight recovery in networking and distribution across the business.
Dan: These favorable margin factors were partially offset by minimum wage increases in Mexico that went into effect in Q1 24.
Dan: Lastly, our magnetic solutions group posted sales of $19 2 million in Q3, 24, representing a 40% decrease from Q3 23.
Matt: Our effective tax rate for the third quarter of <unk> 24 was 27, 8% up significantly from the 18, 2% of Q3 23.
This reduced sales level was generally in line with expectations discussed on last quarter's earnings call and largely related to lower shipments to enter a large networking customer as they continue to work through inventory on hand.
Matt: There was a onetime item contained in the third quarter tax provision in the amount of $1 3 million.
Matt: Excluding these items the company's effective tax rate would have been 15, 7% in the third quarter of 2024.
Matt: Turning to balance sheet and cash flow items, we ended the quarter with $163 8 million in cash and securities an increase of $36 9 million from year end.
Farouq Tuweiq: This is offset by our normal seasonal slowdown in Q4 each year, given the Golden Week holiday in China in October and other holiday closures in the US and Europe later in the quarter. We were pleased that we did start to see an uptick in bookings during Q3. To provide some context around what we saw, within our power segment, Q3 '24 bookings were double what they were in Q2 '24, representing their highest booking level since Q3 '23. Within our magnetic segment, Q3 '24 was their highest bookings quarter since Q4 of 2022. Given our standard lead times, this increase in bookings will largely translate into higher sales going into 2025. Looking at 2025, we've kicked off our planning for the coming year and are looking forward to it. We're early in this process against the backdrop of a few moving pieces.
Matt: We generated $65 7 million in cash flows from operating activities. During the first nine months of 2024 and had capital expenditures of $7 9 million.
Matt: From an inventory perspective, the downward trend that we experienced over the past several quarters has continued into Q3, reflecting a $12 3 million dollar reduction from year end.
Matt: 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.
Matt: I'll now turn the call over to Farooq for additional commentary.
Farooq: Thank you Lynn as we're rounding the corner here on inventory in the channel starting to see some green shoots of recovery. The team has been laser focused on executing on operational improvements as we have been doing for the last few years.
Farooq: During the third quarter, we initiated the consolidation of our fuse manufacturing operations.
Farouq Tuweiq: The overall message for next year is expectation of year-over-year growth across all three segments. Our power segment is forecasting growth to be driven by our beyond networking, e-mobility, and distribution, and growth within AI-specific applications. Our connectivity segment is projecting growth to largely be driven by the same factors as 2024, including defense applications and a growing space end market, along with distribution and networking. We think magnetics will have the largest percentage growth based on current forecasted demand from our network and distribution customers. There are a number of factors and variables within each segment that can change these projections, but this is what we see today. It is this new view of 2025 upon which we'll be assessing our SG&A spend and making needed adjustments to align our fixed costs with these anticipated sales levels.
Farooq: Currently our fuses are manufactured at a separate site in China and will be transitioned to other existing sites as a means of further reducing our operational footprint and adding efficiencies to our overhead costs.
Farooq: The fuse initiative is expected to result in a restructuring cost of approximately $4 2 million of which 200000 was incurred in the third quarter $2 1 million is expected to be recorded in the fourth quarter of 2024 with the balance of $1 9 million expected to be incurred in 2025.
Farooq: This project is scheduled for completion by the end of Q1 dollars 25 and is expected to result in annualized cost savings of $1 5 million once complete the.
Farooq: The previously announced restructuring projects are Glen Rock, Pennsylvania facility is progressing as planned with scheduled completion by the end of 2024.
Farouq Tuweiq: As a reminder, this commentary is only related to BEL's base business and does not include incremental sales related to the Enercon acquisition, which is expected, as noted, to close in Q4 of this year. Shifting over to capital allocation, as previously discussed, we'll be taking on new debt of $240 million in connection with the acquisition of Enercon, and the interest on that debt will be approximately 6.5%. This will bring our total outstanding debt to $300 million, with a blended interest rate of approximately 5.7%. In addition to our regularly dividends and continued investment in the business through CapEx, our next immediate priority from a capital allocation in the near term will be on debt paydown to deleverage and avoid interest expense. We'll continue to assess our capital priorities as we have done on an ongoing basis.
Farooq: With cumulative expected annualized savings cost savings of $2 5 million, we've been benefiting from approximately $1 5 million of the Glen rock cost savings throughout 2024, and expect $1 million to be incremental in 2025.
Dan: If raw material and finished goods as we continue to work through our own inventory on hand.
Dan: I'll now turn the call over to Farooq for additional commentary.
Farooq: Turning to M&A and as announced in mid September Bill has agreed to acquire 80% of Entercom technologies with a path to acquire the remaining 20% by early 2020.
Farooq: Thank you Lynn as we're rounding the corner here on inventory in the channel starting to see some green shoots of recovery. The team has been laser focused on executing on operational improvements as we have been doing for the last few years during the third quarter, we initiated the consolidation of our fuse manufacturing operations.
Farooq: It was a 100% of their sales within aerospace and defense end markets. The addition of Entercom accelerates our strategy of moving further to critical applications with so nice sole source position.
Farooq: This creates more cohesion across our product segments and introduces exciting cross selling opportunities.
Farooq: Currently our fuses are manufactured at a separate site in China and it will be transitioned to other existing sites as a means of further reducing our operational footprint and adding efficiencies to our overhead costs.
Farooq: We've been working very closely with Entercom management team since signing and are very much looking forward to collaborating with them to define our new go to market strategies for our combined businesses supporting the aerospace and defense end markets across the region in which we collectively serve the transaction is expected to close during the fourth quarter of this year.
Farooq: <unk> initiative is expected to result in a restructuring cost of approximately $4 2 million.
Farouq Tuweiq: Overall, we are pleased with the progress we have made in strengthening BEL's base business over the past four years and are excited about the road ahead with Enercon and the new members of our corporate team. We feel this is a pivotal moment for BEL as it marks the transition from our self-help phase to a new growth phase of BEL's journey, I could not be more excited to embark on this next chapter. With that, I'll turn the call back over to Dan.
Farooq: Which 200000 was incurred in the third quarter $2 1 million is expected to be recorded in the fourth quarter of 2024 with the balance of $1 9 million expected to be incurred in 2025.
Farooq: And we look forward to sharing additional details as we work through our post close integration process.
Farooq: Looking ahead to the fourth quarter, we're anticipating base built to be largely in line with Q3 'twenty four levels.
Farooq: This project is scheduled for completion by the end of Q1 dollars 25 and is expected to result in annualized cost savings of $1 5 million once complete.
Daniel Bernstein: Thank you, Farouq. At this point, we'd like to open up the call for questions.
Farooq: There are some offsetting factors at play the range noted in our earnings release of 117 to 125 is inclusive of some rebound in real sales and slight recovery networking distribution across the business. This is offset by our normal seasonal slowdown in Q4, each year given the Golden week holiday in China in October.
Operator: Thank you. We will now be conducting a question and answer session. The first question comes from the line of Bobby Brooks with Northland Capital Markets. Please go ahead.
Farooq: Our previously announced restructuring project at our blend rock, Pennsylvania facility is progressing as planned with scheduled completion by the end of 2024.
Farooq: With cumulative with expected annualized savings cost savings of $2 5 million, we've been benefiting from approximately $1 5 million of the Glen rock cost savings throughout 2024, and expect $1 million to be incremental in 2025.
Farooq: <unk> and other holiday closures in the U S and Europe later in the quarter.
Farooq: We are we were pleased that we did start to see an uptick in bookings during the third quarter.
Farooq: Turning to M&A and as announced in mid September Bill has agreed to acquire 80% of Entercom technologies with a path to acquire the remaining 20% by early 2027.
Farooq: Provide some context around what we saw within our power segment Q3 dollars 24 bookings were double what they were in Q2 24.
Bobby Brooks: Hey, guys. Good morning. Thank you for taking my question. With the Power Solutions and Protection, obviously, it was a pretty notable step down sequentially, and you guys touched on it a little bit. I know you had the supplier that you lost because of the recently enacted trade restrictions, but that was only for $3 to 4 million of business per quarter, and we were down more like $10 million. Could you just discuss a little bit more what drove that sequential step down and maybe compare that with what the factors you're seeing as why you see year-over-year growth in 2025?
Farooq: Presenting their highest level since Q3 2003.
Farooq: With 100% of their sales within aerospace and defense end market. The addition of Entercom accelerates our strategy of moving further to critical applications with saw nice sole source position.
Farooq: Within our Magnetics segment Q3 dollars 24 was their highest bookings quarter since Q4 of 2022.
Farooq: Given our standard lead times this increase in bookings largely translate into higher sales going into 2025.
Farooq: This creates more cohesion across our product segments and introduces exciting cross selling opportunities within.
Farooq: Looking at 2025, we've kicked off our planning for the coming year and are looking forward to us.
Farooq: We're early in the process against the backdrop of a few moving pieces.
Farooq: The overall message for next year is expectation of year over year growth across all three segments.
Our power segment is forecasting growth to be driven by a rebound in networking E mobility and distribution and growth within AI specific applications. Our connectivity segment is projecting growth to largely be driven by the same factors of 'twenty 'twenty four including defense application in a growing space and market along.
Lynn Hutkin: Sure. Bobby, are you looking at it sequentially from Q2 to Q3?
Bobby Brooks: Yeah.
Lynn Hutkin: Okay. The other impact, in addition to the supplier on the trade restriction. The largest thing impacting power from Q2 to Q3 is actually the seasonality that we have every year in Europe in Q3. Things like rail and e-mobility, those are all based out of our Europe segment. Those are just naturally lower in Q3 because there are some closures at our Slovakia site for a few weeks in August each year. That would be the largest dip in addition to just the CUI business that we previously discussed.
Farooq: With distribution in that market.
Farooq: We think magnetics will have the largest percentage of growth based on current forecasted demand from our network and distribution customers. There are a number of factors or variables within each segment that contains these production, but this is what we see today. It is this new view of 2025 upon which we'll be assessing our SG&A spend and making.
Farooq: These adjustments to align our fixed costs with these anticipated field level.
Farooq: Minder. This commentary is only related to build these business and does not include incremental sales related to the Entercom acquisition, which is expected as noted to close in the fourth quarter. This year.
Bobby Brooks: Is it just the bookings that you guys saw in September and October is giving you guys that confidence that you're just going to see year-over-year growth return in the Power and Protection segment?
Farooq: Shifting over to capital allocation and as previously discussed we will be taking on new debt of $240 million in connection with the acquisition of Entercom and the interest on that debt will be approximately six 5%.
Farouq Tuweiq: Yeah, we think that is the case, Bobby. Obviously, a fair amount of moving pieces here. I think as we noted, we do expect a return to growth here as we just, across the business, including Power, looking at inventory levels, looking at conversations that are going on with our customers, the NPI, and especially as we're coming into the year end, more discussions. I'd say we're feeling better and a return to growth. Again, commentary across the business, including Power.
Farooq: This will bring our total outstanding debt to $300 million with a blended interest rate of approximately five 7%.
Farooq: And in addition to our regularly dividend to continue to invest in the business through Capex or next immediate priority from a capital allocation in the near term will be on debt paydown.
Farooq: To deleverage and avoid interest expense will continue to reassess our capital priorities as we have done on an ongoing basis.
Bobby Brooks: That's terrific to hear. Maybe just an update on finding that new supplier to replace that business that was lost because of the trade restriction.
Farooq: Overall, we are pleased with the progress we have made in shrink thing built based business over the past four years and are excited about the road ahead, entercom and the new members of our corporate team. We feel this is a pivotal moment for bell as it marks the transition from our self help phase to a new growth phase of Bell's journey and I could not be more excited to embark on this next chapter.
Farouq Tuweiq: Yeah. We are in the process of identifying replacements. As we talked about, and as you know, we are in a longer design cycle business. Step one is identifying, which we have identified some replacement parts. It's going to take a little bit of time to go and have the customers re-qualify their designs to substitute the parts from the old vendor to the new vendor. That's going to take some time. When considering the inventory in the channel, I would say that sense of urgency might not entirely be there off the bat here, as folks are burning down inventory. Probably the best bet for recoverability there would be something along the lines of redesigns or demand pickup within their own segments on a customer side. That's why we think we'll recover some of that as we go through 2025.
Speaker Change: And with that I'll turn the call back over to Dan.
Dan: Bruce at this point wed like to open up the call for questions.
Bruce: Thank you we will now be conducting a question and answer session.
Speaker Change: Would like to ask a question. Please press star one on the telephone keypad.
Farooq: With these anticipated field level as a reminder, this commentary is only related to build this business and does not include incremental sales related to the Entercom acquisition, which is expected to close in the fourth quarter. This year.
Speaker Change: Permission tone will indicate your line is in the question queue.
Speaker Change: Start to if you would like to remove your questions from the queue for participants using speaker equipment. It may be necessary to be comprehensive before passing the studies one moment please pull for questions.
Farooq: Shifting over to capital allocation and as previously discussed we will be taking on new debt of $240 million in connection with the acquisition of Entercom and the interest on that debt will be approximately six 5%.
Speaker Change: The first question comes from the line of Bob Brooks with Northland Capital markets. Please go ahead.
Farouq Tuweiq: We're kind of seeing where that shakes out. It's not going to be a quick flip of the switch just because we identify a certain alternative.
Bob Brooks: Hey, guys. Good morning, Thank you for taking my question.
Bob Brooks: So with the power and protection.
Farooq: This will bring our total outstanding debt to $300 million with a blended interest rate of approximately five 7%.
Bobby Brooks: Okay, that's awesome. Last one for me, just trying to dig a little bit more into the strong bookings. I know back in the Q1 call, we talked or discussed about the really interesting AI opportunities for, especially within the Power Solutions and Protection. I was just curious if any of those bookings that you guys saw in September and October have been related to any AI orders or AI end products or maybe any other of the kind of emerging growth opportunities for you, whether that's e-mobility space or rail?
Bob Brooks: Obviously, there is a pretty notable step down sequentially and you guys touched on it a little bit.
Bob Brooks: I know you had the supplier that you lost because of the recently enacted trade restrictions, but that was only that.
Farooq: In addition to our regularly dividend to continue to invest in the business through capex or <unk> immediate priority from a capital allocation in the near term will be on debt paydown to deleverage and avoid interest expense will continue to assess our capital priorities as we have done on an ongoing basis.
Bob Brooks: Only for $3 million to $4 million of business per quarter, and we were down more like $10 million. So could you just discuss a little bit more what drove that sequential step down and maybe compare that with what the factors youre seeing.
Farooq: Overall, we are pleased with the progress we have made in shrink thing built based business over the past four years and are excited about the road ahead, entercom and the new members of our corporate team. We feel this is a pivotal moment for bell as it marks the transition from our self help phase to a new growth phase of Bell's journey and I could not be more excited to embark on this next chapter.
Bob Brooks: Why you see.
Bob Brooks: Year over year growth in 2025.
Speaker Change: So Bobby.
Farouq Tuweiq: Yeah. I think the answer in short is yes. Some of the bookings have come from AI customers. We have to kind of follow hard orders, bookings that we got. Also, as we just look at the conversations being had and the forecasts with other guys that are about to or haven't yet put bookings on the books yet, we expect that to kind of come into order as well. I think the answer to your question is correct. The other one that we saw in the bookings that had a nice growth is our fuses business. Fuses generally, it's considered one of the earlier recovery items in our industry, so it is a good leader indicator. Fuses was up pretty materially for us in Q3. I think, Lynn, it was roughly the 30% to 35%, I think it was up, right?
Speaker Change: Are you looking at it sequentially from Q2 to Q3.
Speaker Change: Yeah Yeah.
Speaker Change: So the other impact so in addition to the supplier on the trade restriction.
Speaker Change: And with that I'll turn the call back over to Dan.
Dan: Thank you Bruce at this point, we'd like to open up the call for questions.
Speaker Change: Our largest thing impacting power from Q2 to Q3 is actually the seasonality that we have every year in Europe in Q3.
Speaker Change: Yes.
Speaker Change: Thank you we will now be conducting a question and answer session.
Speaker Change: I would like to ask a question. Please press star one on the telephone keypad.
Speaker Change: So things like rail and E mobility, those are all based out of our Europe segment.
Speaker Change: Information tone will indicate your line is in the question queue.
Speaker Change: And those are just naturally lower in the third quarter because there are some closures at our Slovakian site for a few weeks in August each year, so that would be the largest yet in.
Speaker Change: Start to if you would like to remove your questions from the queue for participants using speaker equipment. It may be necessary to pick up the handset before pressing the studies one moment please poll for questions.
Speaker Change: In addition to just a few.
Speaker Change: That was previously discussed.
Speaker Change: The first question comes from the line of Bob Brooks, but Northland capital markets. Please go ahead.
Speaker Change: And then is it just the.
Bob Brooks: Hey, guys. Good morning, Thank you for taking my question.
Speaker Change: The bookings that you guys saw in September and October has given you guys that confidence that youre going to see year over year growth returned in the power and protection segment.
Lynn Hutkin: Yeah.
Lynn Hutkin: It was nice to see the fuses up coupled with the bookings. These are good, solid indicators.
Speaker Change: Yes, we think that is the case, Bobby obviously, a fair amount of moving pieces here, but I think as we noted we do expect.
Bobby Brooks: I would completely agree with that. Thank you for the color, guys, and I'll return to the queue and hats off on the nice quarter.
Speaker Change: A return to growth here as we just across the business, including power looking at inventory levels within the conversations are going on with our customers the MPI and especially as we were coming into kind of the year and write more discussion so I'd.
Operator: Thank you. Next question comes from the line of Jim Ricchiuti with Needham & Co. Please go ahead.
Jim Ricchiuti: Hi. Thank you. Good morning. You may have provided this detail, I apologize if you did, but I'm wondering, can you quantify the impact from the strike at Boeing in the quarter? Follow-up to that is just whether the guidance for Q4 has taken into account the potential for a longer strike, which I guess now appears to be the case. Thanks.
Speaker Change: Say, we are feeling better.
Speaker Change: And our return to growth again commentary across the business included Pavel.
Speaker Change: That's terrific to hear and then maybe just an update on update on finding is that new supplier to replace that business that was lost because of the trade restriction.
Yes. So we are in the process of identifying replacements as we've talked about.
Farouq Tuweiq: We haven't quantified that, Jim. It definitely had an impact on us in terms of our amount of, let's say, couldn't ship, but I would say it wasn't overly material for this Q3. I think the team did a nice job reacting to that and kind of working on other things and other products. Heading into Q4, our guidance is reflective of, call it, of an impact of the strike. That's kind of what we're alluding to a little bit in terms of some of the volatility around that. We try to capture our best guess, kind of base case, if you will. Obviously, we're through October here and have an impact. I think, really, we try to take into account our guess on November and December.
Speaker Change: We are in a longer design cycle business.
Speaker Change: So step one is identifying which we have identified some.
Speaker Change: Some replacement parts.
Speaker Change: He is going to take a little bit of time to go and have the customers requalify theyre designed to substitute the parts from the old vendor to the new vendor. So that's going to take some time and when considering the inventory channel I would say that sense of urgency might not entirely be theyre off the bat here.
Speaker Change: As folks are burning down inventory, so probably the best bet for Recoverability, there would be something along the lines of redesigns or demand pick up within their own segments on our customer side. So that's why we think we'll recover some of that as we go through 'twenty five, but we're going to see where that shakes out, but it's not going to be a quick flip the switch just because we identify.
Farouq Tuweiq: I would say we're hoping for some recovery, but we don't think it'll be material in Q3, just given by the time they all come back to work, it'll take a few weeks for everything to get going.
Speaker Change: As an alternative.
Speaker Change: Okay. That's awesome and then last one for me.
Speaker Change: Just trying to dig a little bit more into the strong bookings and only now back in the first quarter call. We talked a bruise discussed about the really interesting AI opportunities for especially within the power and protection. So I was just curious if any of those bookings that you guys saw in September and October have been related to any.
Jim Ricchiuti: Yeah. I would think it's a position we take the way things look, that most likely we won't see sales for aerospace for this one customer for the rest of the year. Got it. Thanks. Just on the green shoots that you guys cited in networking and industrial, is this a case of perhaps just the excess inventory being worked down enough and some restocking, and, or, and this may be a harder question to answer, Jim, just signs of actual improvement in some of these markets and where you think there may be some actual improvement, particularly in the industrial area?
Speaker Change: AI orders or AI and products or maybe any other.
Speaker Change: Emerging growth opportunity for you under the E mobility space or more rail.
Speaker Change: I think Thats I think the answer is short is yes.
Speaker Change: So some of the bookings.
Speaker Change: Have come from AI customers.
Speaker Change: As we also so we have to kind of follow hard orders bookings that we got.
Speaker Change: Also as we just look at the conversations being had in our forecast with other guide there are about two are happy yet bookings on the books, yet we expect that to kind of come in short order as well.
Farouq Tuweiq: Sorry, Jim, if I understand your question, are you saying how much of the bookings is a replenishment of the just actual demand growth at the customer's level?
Speaker Change: So I think the answer to your question is correct. The other one that we saw in the bookings that are nice.
Jim Ricchiuti: Yeah, I guess what I'm saying, we've heard this a bit, that in some cases there may be inventories have been worked down and some of what we're hearing is just some natural replenishment, but not necessarily signs of actual demand driving that yet. I don't know if that's something you've noticed or better yet, if you see some in the industrial market, because you guys sell pretty broadly, can you tell where some of these green shoots are coming from?
Bob Brooks: Might not entirely be theyre off the bat here.
Speaker Change: Growth is our <unk> business and fuses generally.
Speaker Change: Folks are burning down inventory, so probably the best bet for Recoverability, there would be something along the lines of redesigns or demand pick up within their own segments on our customer side. So that's why we think we'll recover some of that as we go through 'twenty five, but we're kind of seeing where that shakes out, but it's not going to be a quick flip the switch just because we identify it.
Speaker Change: It's considered one of the earlier recovery items in our industry. So it is a good leader indicator. So fuses was up pretty materially for us.
Speaker Change: In Q3.
Speaker Change: And I think it was a roughly 30% to 35% I think it was up right. So.
Bob Brooks: An alternative.
Speaker Change: So it was nice to see the fuzes up coupled with the bookings.
Speaker Change: Okay. That's awesome and then last one for me.
Speaker Change: Just trying to dig a little bit more into the strong bookings and only now back in the first quarter call. We talked a bruise discussed about the really interesting AI opportunities for especially within the power and protection. So I was just curious if any of those bookings that you guys saw in September and October have been related to any.
These are good solid indicators.
Speaker Change: I would do it.
Speaker Change: We agree with that.
Speaker Change: Thank you for the color guys and then I'll return to the queue and hats off on the <unk>.
Daniel Bernstein: Yeah, Jim, I think when we talk industrial, it's a little more harder to pick out. For us, when we look at new growth opportunities, not replenishment opportunities, really the areas that we see that is, we see space, for example, where we picked up 160 customers in distribution that are buying orders today that might go into high volume. With EV, we see those are new opportunities. AI, I think, probably our two largest customers we're going to pick up next year might come from AI. I think if you look at new creation, new demand, I would think AI, space, and EV are the driving forces of new customers that are buying from us.
Speaker Change: Nice quarter.
Speaker Change: Thank you. Our next question comes from the line of Jim <unk>.
AI orders or AI and products or maybe any other kind of emerging growth opportunities for you, whether that's E mobility space or or rail.
Speaker Change: Needham <unk> co. Please go ahead.
Speaker Change: Alright, thank you.
Jim <unk>: Good morning, you may have.
Speaker Change: Provided this detail I apologize if you did but I'm wondering.
Speaker Change: Can you quantify the impact from the strike in the quarter and follow up to that is just whether the guidance for Q4.
Speaker Change: Yeah, I think that's I think the answer is short is yes.
Speaker Change: So some of the bookings.
Speaker Change: Have come from AI customers.
Speaker Change: As we also so we have to kind of fall apart orders bookings that we got.
Speaker Change: I was taken into account the potential for a long strike.
Speaker Change: Now appears to be the case.
Speaker Change: Also as we just look at the conversations being had in our forecast with other guide there are about two are happy yet bookings on the books, yet we expect that that's going to come in short order as well.
Speaker Change: Yes, so we havent quantified that Jim we definitely had an impact on us in terms of.
Farouq Tuweiq: I think I agree with Dan on some of the new customers that Wim van derzon were saying are pretty good. I think on the existing customers, because remember, Jim, I think when inventory gets backed up, and Dan, correct me if I'm here, when inventory generally gets backed up, it's not as bad of a picture from our customer's perspective, right? Because they still have inventory to sell. I think once the inventory comes down, you turn to a little more normal cadence of ordering that a little bit more reflective of demand. They kind of go a little bit hand in hand. Obviously we were down pretty decent numbers this year, and I would attribute that demand not being down that much from our customer source speak, but it was really kind of working down the inventory side of it.
Speaker Change: Our amount of let's.
Speaker Change: So I think the answer to your question is correct. The other one that we saw in the bookings had a nice.
Speaker Change: Let's say it couldn't ship, but I would say it was it was.
Speaker Change: Nothing.
Speaker Change: It wasn't overly material for this quarter. So I think the team did a nice job reacting to that kind of working on other things and.
Speaker Change: Growth is our fuses business and fuses generally.
Speaker Change: It is considered one of the earlier recovery items that are industry. So it is a good leader indicator. So fuses was up pretty materially for us.
Speaker Change: In other products.
Speaker Change: Heading into Q4, our guidance is reflective of Av.
Speaker Change: Call it.
Speaker Change: The impact of the strike.
Speaker Change: In Q3.
Speaker Change: I think the predictable and Thats kind of what we're alluding to elevate in terms of some of the volatility around that so we try to capture our best guess.
Speaker Change: And I think it was a roughly a 30% to 35% I think it was up right. So.
Speaker Change: So it was nice to see the fuzes up coupled with the bookings.
Speaker Change: Kind of base case of flu. If you will obviously, we're through October here and have an impact. So I think we really think we can.
Speaker Change: These are good solid indicators.
Jim Ricchiuti: Yeah, that's helpful. Just did you give a commercial space revenue number? I know it's just a small part of the business, but it's obviously a growth area.
Speaker Change: I would I would.
Speaker Change: Had to take in account our guests on November and December so.
Speaker Change: We agree with that.
Speaker Change: Thank you for the color guys and I'll return to the queue in.
Speaker Change: We're hoping for some recovery, but its not we don't think it will be material in Q3, just given by the time they will come back to work will take a few weeks ago I would think to say physician with date, where things look good.
Lynn Hutkin: Yeah. The space revenue for Q3 was $2 million. That brings our year-to-date up to $6.3 million.
Speaker Change: On the nice quarter.
Jim Ricchiuti: Got it. Thanks very much.
Speaker Change: <unk> aerospace for this one customer the rest of the year.
Operator: Thank you. Next question comes from the line of Theodore O'Neill with Litchfield Hills Research. Please go ahead.
Speaker Change: Got it thanks, and just on the Green shoots.
Theodore O'Neill: Thank you very much, and congratulations on a good quarter. My first question is about Enercon Technologies, and I was wondering if you could talk a bit more about what this brings to the table in terms of products that you may not have had before in the aerospace and defense industry, and what the cross-selling opportunities are.
Speaker Change: Got excited in networking and industrial.
Speaker Change: This isn't the case.
Speaker Change: Perhaps you see excess inventory.
Speaker Change: <unk> work down in <unk> and some restocking.
Speaker Change: And just maybe a harder question to answer and Tim just signs of actual improvement in some of these markets and where you think there may be some actual improvement, particularly in.
Farouq Tuweiq: Thank you for that. For Enercon, which, for everybody's benefit, will be sitting in our, and ultimately roll into our power segment. Today, our power segment does not service these end markets, so it is a new market addition, both on the defense, commercial air, and emerging space as well. Now we can start creating some interesting cross-pollination between the connectivity and the power segment. That's one. Two is Enercon also opens up a couple of new markets potentially for us that we are not in today. The other thing from a product perspective, I would say generally, if you ask power supply people, they'll say power supplies are power supplies, right? There's some nuances and sophistication to each of them. I would say their product set is a little bit different than ours, but also kind of the same, right?
Speaker Change: And in the industrial area.
Speaker Change: Sorry, Joseph I understand the question are you, saying how much of the bookings is a replenishment of the actual.
Speaker Change: Actual demand growth of the customers' level.
Speaker Change: Yes, I guess, what I'm, saying.
Speaker Change: We've heard this a bit that in some cases.
Speaker Change: There may be.
Speaker Change: Inventories have been worked down and some of some of what we're hearing is just some natural replenishment, but not necessarily signs of actual demand driving that yet.
Speaker Change: <unk>.
Speaker Change: I don't know, if that's something you've noticed or better yet if you see in the industrial market because you guys sell pretty broadly.
Farouq Tuweiq: We sell some of that product into the rail that's pretty highly sophisticated, highly custom types of applications. Where Enercon excels is their MOQs are one piece, right? They're highly custom. They are, given the conservative nature of the customer side, with various regulatory requirements and manufacturing elements around product tracing and the like, they obviously have that side of it as well. You've got to look at it, while we may know the products, and we do know some of these products, it's really the ecosystem, the customer relationships, the go-to market, and the brand name that they bring is what differentiates them. We tend to think of it more of an end market expansion and some opportunity potentially for the cost side, which we didn't underwrite as part of our base case, but we think there's opportunity there.
Speaker Change: Can you tell where some of these green shoots are coming from yes, Jerry I think when we talked industrial it's a little more hard to pick out but for us when we look at new growth opportunities that replenishment opportunities.
Speaker Change: Really the areas that we see that as we see space for example, where we picked up 160 customers distribution.
Speaker Change: Mining orders today that might go into high volume and then.
Speaker Change: We see new opportunities and of course, AI I think are probably our two largest customers were going to pick up next year might come from AI. So I think if you look at.
Speaker Change: New creation of new demand.
Speaker Change: AI space and EDI are the driving forces.
Speaker Change: Of new customers by buying from us.
Speaker Change: And I think I agree with that.
Farouq Tuweiq: Really, it's a revenue play.
Daniel Bernstein: Just to add some more flavor to it, just for example, one of the target areas that we're looking at before we acquired them was Europe, and they realized to be successful in Europe they had to have a manufacturing base. We have an ideal factory that can support their needs. We're going to be with them next week, I'm sorry, in 2 weeks. For them to look at our factory and see what the possibilities are we can offer them. Also, besides cross-selling opportunities, many of our customers are the same, but we do have some customers that they sell to that we don't sell to back and forth. A bigger solution for us is the more we can go to any military aerospace customer and give them a full basket of products, the more we can build up our relationship with that customer.
Speaker Change: Some of the new customers, a wednesday, or we're seeing a pretty good I think on the existing customers.
Speaker Change: I remember, Jim I think when inventory gets backed up.
Speaker Change: Correct me if I am here with inventory generally gets backed up it is not as bad as the picture from our customers' perspective, right because they still have inventory yourself.
Speaker Change: Once the inventory comes down and return to a little more normal cadence of ordering a little bit more reflective of demand. So they kind of go a little bit hand in hand.
Speaker Change: So obviously, we were down pretty decent numbers this year and I would attribute that demand not being down that much from our customer so to speak but it was it really kind of working down the inventory side of it.
Speaker Change: Got it that's helpful. And then just did you give the commercial space revenue number I know, it's a small part of the business, but it's obviously.
Daniel Bernstein: Now there's very few customers that can offer both connectivity and power supply, which takes a lot off their purchasing table. This way they can meet with one group or one company to solve a lot of their problems going forward. We think it's just a very exciting opportunity across the board.
Speaker Change: Growth area.
Speaker Change: Yes, so the space revenue for Q3 with with $2 million.
So that brings our year to date up to $6 3 million.
Speaker Change: Got it thanks very much.
Theodore O'Neill: Okay. Yeah, makes sense. My other question is just about the rail business. Is this a highly regional business, and what region is showing the strength in rail?
Speaker Change: Thank you next.
Speaker Change: The next question comes from the line of <unk> O'neil with Litchfield Hills Research. Please go ahead.
Farouq Tuweiq: I think the way you think about it is largely our manufacturing comes out of Slovakia. The customers that we service are global. When we talk about rail, obviously, maybe other parts of the world are working from our customer's perspective, but given our normal cadence in the European shutdown, that's why it impacts the business, because our manufacturing occurs in Slovakia. That's how I kind of think about the manufacturing impact for us.
Speaker Change: Thank you very much and congratulations on the good quarter.
My first question is about Entercom technologies and I was wondering if you could talk a bit more about what this brings to the table in terms of products.
Speaker Change: You may not have had before in the aerospace and defense industry and what the cross selling opportunities are.
Speaker Change: Yes, so thank you for that.
Speaker Change: So for Entercom.
Daniel Bernstein: We would say a good portion of our sales are European-based customers, rail customers, that sell throughout the world.
Which forbids benefit.
Speaker Change: It will be sitting in our ultimate roll into our power segment.
Farouq Tuweiq: Correct. Yeah. We'll kind of transact there, then they ship it around. That's a good point.
Speaker Change: Today, our power segment does not service. These end market. So it is a new market addition, both on the defense commercial air and emerging space as well. So now we start creating some interesting cross pollination between the connectivity and the power segment. So that's one.
Theodore O'Neill: Okay, thanks very much.
Operator: Thank you. As there are no further questions at this time, ladies and gentlemen, we have reached the end of question and answer session. I would now like to turn the floor over to Daniel Bernstein for closing comments.
Speaker Change: Two is Entercom also opens up a couple of new markets potentially for us that we are not in today.
Daniel Bernstein: Just once again, thank you for joining our call today, and we're looking forward to continued success, and we'll speak to you the final Q4 next year. Have a good day.
Speaker Change: Without that much from our customer so to speak but it was it really kind of working down the inventory side of it.
Speaker Change: Got it that's helpful. And then just did you give the commercial space revenue number I know it is just part of the business, but it's obviously a growth area.
Speaker Change: And the other thing from a products perspective, I would say generally if you ask power supply to the real estate power supplies. Our power supplies are there some nuances.
Operator: Thank you. This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.
Speaker Change: Yes, so the space revenue for Q3 with <unk> with $2 million.
Speaker Change: Sophistication to each of them I would say their product set is a little bit different than ours, but also kind of the same right. So we sell.
Daniel Bernstein: Thank you very much.
Speaker Change: So that brings our year to date up to $6 3 million.
Speaker Change: Some of that product into the real that's pretty highly sophisticated highly custom types of applications.
Speaker Change: Got it thanks very much.
Speaker Change: Thank you next.
Speaker Change: The next question comes from the line of <unk> O'neil with Litchfield Hills Research. Please go ahead.
Speaker Change: <unk> is their <unk> are one piece right. So theyre highly highly custom.
Speaker Change: Thank you very much and congratulations on the good quarter.
Speaker Change: And they are.
Speaker Change: Given the conservative nature of the customer sites with various regulatory requirements and manufacturing island.
Speaker Change: My first question is about Entercom technologies and I was wondering if you could talk a bit more about what this brings to the table in terms of products.
Speaker Change: The elements of our product tracing of the lake. They obviously have that that side of it as well so you've got to look at it while we may know the products that we do know some of these products. It's really the ecosystem the customer relationships that go to market and the brand name that they bring is what differentiates them. So we tend to think of it more of an end market expansion.
Speaker Change: That you may not have had before in the aerospace and defense industry and what they're cross selling opportunities are.
Speaker Change: Yes, so thank you for that.
Speaker Change: So for Entercom.
Speaker Change: For everyone's benefit.
Speaker Change: It will be sitting in our ultimate roll into our power segment.
Speaker Change: And some opportunity potentially for the cost side, which we had underwriting as part of our base case, but we think there's opportunity there, but really it's a revenue play and just to add some more flavor to it just for example, what are the target areas that were looking at before we acquired that was Europe and they realize to be successful in Europe. They had to have a manufacturing base.
Speaker Change: Today, our power segment does not.
Speaker Change: These end market. So it is a new market addition, both on the defense commercial air and emerging space as well. So now we start creating some interesting cross pollination between the connectivity and the power segment. So that's one two is Entercom also opens up a couple of new markets.
Speaker Change: Ideal factory that can support their needs, we're going to be with them next week.
Speaker Change: I'm sorry, two weeks for them to look at our factory and see what the possibly we can offer them also from of course, Besides cross selling opportunities. Many of our customers are the same but we do have some customers that they sell to them. We don't sell to a back book, but a bigger solution for US is the more we can go to any military aerospace customers and give them a full.
Speaker Change: Essentially for us that we are not in today.
Speaker Change: And the other thing from a product perspective, I would say generally if you ask power supply to the Allstate power supplies, our power supplies are there some nuances.
Speaker Change: Sophistication to each of them I would say their product set is a little bit different than ours, but also kind of the same right. So we sell.
Speaker Change: Vascular products, the more willing to build up our relationship with that customer and now theres very few customers that can offer both connectivity and power supply, which takes a lot of their purchasing.
Speaker Change: So this way they can meet with one group company to solve a lot of their problems going forward. So we think it's just a very exciting opportunity across the board.
Speaker Change: Okay, Yeah that makes sense.
Speaker Change: My other question is just about the rail business is this is this highly regional business in what region is showing the strength.
Speaker Change: Rail.
Speaker Change: I think the way you think of Ara is largely our manufacturing comes out of Slovakia.
Speaker Change: And the customers that we service or <unk>.
Speaker Change: So when we talk about rail.
Speaker Change: Obviously, maybe other parts of the world are working from our customers' perspective, but given our normal cadence in the European shutdown Thats why it impacts our business because our manufacturing occurs in Slovakia.
Speaker Change: I think what the manufacturing impact for us.
Speaker Change: A good portion of our sales are European based customers rail customers and sell throughout the world correct. Yes. So we'll kind of transact. There then they ship it around so to speak that's a good point.
Speaker Change: Okay. Thanks very much.
Speaker Change: Thank you.
Speaker Change: As there are no further questions at this time, ladies and gentlemen, we have reached the end of question and answer session I would now like to turn the floor over to Dan Bernstein for closing comments.
Dan Bernstein: Just once again, thank you for joining our call today, and we look forward to continued success and we speak to.
Speaker Change: Fourth quarter next year.
Speaker Change: Have a good day.
Speaker Change: Thank you. This concludes today's teleconference. You may disconnect your lines at this time.
Speaker Change: Thank you for your participation.
Speaker Change: Thank you very much.
Speaker Change: [music].
Speaker Change: [music].
