Q1 2025 Bel Fuse Inc Earnings Call

Operator: Greetings, welcome to the Bel Fuse Q1 2025 Earnings Call. At this time, all participants are in a listen-only mode. The 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. It is now my pleasure to introduce your host, Jean Marie Young with Three Part Advisors. Please go ahead, Jean.

Thank you.

Speaker Change: Greetings and welcome to the Bel Fuse first quarter 2025 earnings call. At this time all participants are in a listen only mode. The question and answer session will follow the formal presentation. But if you want to require operator assistance during the conference please press star zero on your telephone keypad.

Speaker Change: As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Gene Marie Young, with three part advisors. Please go ahead, Gene.

Jean Marie Young: Thank you, Daryl, 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 2025. 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 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. These material risks are summarized in the press release that we issued after market close yesterday.

Speaker Change: Thank you, Darryl, 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 security's laws.

Speaker Change: such as statements regarding the company's expected operating and financial performance for future periods, including guidance for future periods in 2025.

Speaker Change: 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.

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 by these forward-looking statements due to a number of risks on certain fees and other factors.

Thank you.

Speaker Change: These material risks are summarized in the press release that we issued after market closed yesterday.

Jean Marie Young: 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 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 have been included in our press release. Our press release and our SEC filings are all available at the IR section of the website. Joining me today on the call is Daniel Bernstein, President and CEO, Farouq Tuweiq, CFO, and Lynn Hutkin, Vice President of Financial Reporting and Investor Relations. With that, I'd like to turn the call over to Dan. Dan?

Speaker Change: 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.

Speaker Change: is discussed in our filings with the Securities and Exchange Commission, including almost recent annual report on form 10K and our quarterly reports on other documents.

Speaker Change: 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 reconciliation of our gap results to non-GAAP results have been included in our press release.

Speaker Change: Our press release and our SEC filings are all available at the IR section of the website.

Lynn Hutkin: Joining me today on the call is Dan Bernstein, President and CEO , Fruitswick, CFO , and Lynne Hutton, Vice President of Financial Reporting and Investor Relations. With that, I'd like to turn the call over to Dan.

Daniel Bernstein: Thank you, Jean. We were pleased with our Q1 results, which were in line with our expectations for the quarter. Our recent acquisition of Enercon continued to perform well and has helped to further diversify Bel from our end markets and geographic perspective. During Q1 2025, the Aerospace & Defense, or A&D, end markets accounted for 38% of our global sales, making it our largest end market segment. Other highlights during Q1 included AI, which contributed to $4.6 million of revenue, and space, which contributed $2.3 million of revenue during Q1 2025. This represents double-digit growth within each of these end markets compared to Q1 2024. Other factors impacting the quarter were lower sales into our consumer market related to a banned Chinese supplier, e-mobility, and a normalization of sales into our rail end market.

Dan Bernstein: Thank you, Jean. We were pleased with our first quarter results which were in line with our expectations for the quarter.

Dan Bernstein: a recent acquisition of Ennecon continue to perform well and has helped to further diversify Bel from my end-markets and geographic perspective.

Dan Bernstein: During the first quarter of 2025, the aerospace defense or A&D and markets account for 38% of our global sales, making it our largest and market segments.

Bye.

Dan Bernstein: Other highlights during the first quarter included AI which contributed to 4.6 million of revenue and space which contributed 2.3 of revenue during the first quarter of 2025.

Dan Bernstein: This represents double-digit growth when in each of these end markets compared to the first quarter of 2024. Other factors impacting the quarter or lower sales into a consumer market related to a bad Chinese supplier, immobility, and a normalization of sales into a real end market.

Daniel Bernstein: We are definitely entering a new challenging phase with the global tariffs. However, based on our diversification strategy, our manufacturing, and our product portfolio, I am confident that we will navigate through this. With that, I'm returning the call over to Lynn. Lynn?

Dan Bernstein: We are definitely entering a new challenging phase with the Global Tarot. However, based on diversification, strategy, or manufacturing and our product portfolio, I am confident that we will navigate through this. With that, I am turning the call over to Lynn.

Lynn Hutkin: Thank you, Dan. From a financial perspective, we observed continued margin expansion when comparing Q1 2025 to Q1 2024. Sales for Q1 2025 reached $152.2 million, reflecting an 18.9% increase from Q1 2024. The strong performance within our A&D end market and the improvement in sales in our Magnetic Solutions segment helped to offset the year-over-year decline in our networking, consumer, rail, and e-mobility end markets within our Power Solutions and Protection segment during Q1 2025 compared to Q1 2024. Our gross margin improved to 38.6% in Q1 2025, up from 37.5% in Q1 2024, with these profitability gains primarily driven by our Magnetic Solutions and Connectivity Solutions segments. Gross margin increased by 110 basis points in Q1 2025 compared to Q1 2024. This margin improvement was supported by a favorable product mix and the successful implementation of various cost reduction and efficiency programs.

Lynn Hutkin: Thank you, Dan. From a financial perspective, we observed continued margin expansion when comparing Q-125 to Q-124.

Lynn Hutkin: Fail to the first quarter of 25 reached 152.2 million, reflecting a 18.9% increase from the first quarter of 24.

Lynn Hutkin: The strong performance within our AND end market and the improvement in sales and our magnetic segment helped offset the year-over-year decline in our networking, consumer, rail, and

Lynn Hutkin: Our gross margin improved to 38.6% and Q1 2025 up from 37.5% and Q1 2024. With these profitability gains primarily driven by our magnetics and connectivity segments.

Lynn Hutkin: Gross margin increased by 110 basis points in Q-1 2025 compared to Q-1 2024.

Lynn Hutkin: This marched improvement was supported by a favorable product mix and the successful implementation of various cost reduction and efficiency programs.

Lynn Hutkin: Turning to our product groups. Sales of Power Solutions and Protection in Q1 2025 amounted to $83.1 million, reflecting a 37.9% increase compared to the same period last year. This growth was largely driven by our new Aerospace & Defense exposure, which contributed $32.4 million to the power segment for Q1 2025. On the consumer side, sales decreased by $2.8 million in Q1 2025 compared to Q1 2024, primarily due to the trade restriction imposed on one of our suppliers in China, as mentioned in our prior earnings calls. Additionally, given e-mobility sales were still robust in Q1 2024, we saw a $1.6 million year-over-year decline in this end market in Q1 2025.

Lynn Hutkin: Now turning to our product groups, sales of power solutions and protection in the first quarter of 2025 amounted to 83.1 million, reflecting a 37.9% increase compared to the same period last year.

Lynn Hutkin: On the consumer side, sales decreased by 2.8 million in Q125 compared to Q124. Primarily due to the trade restriction imposed on one of our suppliers in China, as mentioned

Lynn Hutkin: Additionally, given immobility sales were still robust in Q1 of 2024, we saw a $1.6 million dollar year-over-year decline in this end market in Q1 25.

Lynn Hutkin: Sales into the rail end market have started to normalize, coming off an unusually strong 2024, resulting in a $1.5 million reduction during Q1 2025 compared to the same period of 2024. These declines were partially offset by a $3.8 million increase in sales to our AI customers, bringing total AI sales for Q1 2025 to $4.6 million. Further, circuit protection sales increased by $700,000 in Q1 2025 compared to Q1 2024. The gross margin for the power segment in Q1 2025 was 42.6%, reflecting a decline of 140 basis points from Q1 2024. This decrease was primarily attributed to non-recurring items that were recorded at a 100% gross margin in Q1 2024. On the plus side, our power gross margins were favorably impacted by appreciation of the US dollar versus the Chinese renminbi during the 2025 quarter.

Lynn Hutkin: Sales into the rail end market have started to normalize coming off an unusually strong 2024 resulting in a $1.5 million reduction during Q1 25 compared to the same period of [inaudible]

Lynn Hutkin: These declines were partially offset by a $3.8 million increase in sales to our AI customers.

bringing total AI sales for Q1 25 to 4.6 million.

Lynn Hutkin: Further circuit protection sales increased by 700,000 in Q-125 compared to Q-124.

Thank you.

Lynn Hutkin: The gross margin for the power segment in the first quarter of 25 was 42.6% reflecting a decline of 140 basis points from Q124.

Lynn Hutkin: This decrease was primarily attributed to non-recurring items that were recorded at a 100% gross margin in Q1 2024.

Lynn Hutkin: On the plus side, our power gross margins were favorably impacted by appreciation of the US dollar versus the Chinese Remembee during the 2025 quarter.

Lynn Hutkin: Turning to our Connectivity Solutions group, sales for Q1 2025 reached $50.7 million, a decrease of 6.5% compared to Q1 2024. Sales for commercial air applications in Q1 2025 were $12.9 million, which represents a decline of $1.7 million or 12% from Q1 2024. Additionally, sales into the industrial end markets fell by $800,000 compared to the same period last year. On the positive side, connectivity products sold into defense applications totaled $12.2 million in Q1 2025, an increase of 13% from Q1 2024, and sales into the space end market reached $2.3 million in Q1 2025, up by 15% from Q1 2024. The gross margin for this group was 37.9% in the first quarter of 2025, representing an improvement of 180 basis points from Q1 2024.

Lynn Hutkin: Turning to our connectivity solutions group, Fales for Q1 2025 reached 50.7 million, a decrease of 6.5% compared to Q1 2024.

Lynn Hutkin: Fails for commercial air applications in Q1 2025 were 12.9 million which represents a decline of 1.7 million or 12% from Q1 2024.

Lynn Hutkin: Additionally, sales into the industrial and markets fell by 800,000 compared to the same period last year.

Lynn Hutkin: On the positive side, connectivity products sold into defense applications, total 12.2 million in Q1 2025, an increase of 13% from Q1 2024, and sales into the space and market reached

$2.3 million in Q125, up by 15% from Q124.

Lynn Hutkin: The gross margin for this group was 37.9% in the first quarter of 2025, representing an improvement of 180 basis points from Q1 2024.

Lynn Hutkin: This margin expansion was largely attributable to operational efficiencies achieved through facility consolidations completed in 2024, along with favorable foreign exchange impacts related to the peso. These positive drivers were partially offset by minimum wage increases in Mexico that took effect in Q1 2025. In Q1 2025, our Magnetic Solutions group recorded sales of $18.5 million, representing a 36.1% increase compared to Q1 2024. This level of growth aligns with expectations discussed during last quarter's earnings calls, where we noted that sales volumes had stabilized, and we were beginning to see a rebound since Q2 2024. The gross margin for this group improved to 24.7% in Q1 2025 compared to 16% in Q1 2024, marking an 870 basis point improvement year over year.

Lynn Hutkin: This margin expansion was largely attributable to operational efficiencies achieved through facility consolidations completed in 2024, along with favorable foreign exchange impacts related to the pace of.

Lynn Hutkin: These positive drivers were partially offset by minimum wage increases in Mexico that took effect in Q1 2025.

Lynn Hutkin: Lastly, in the first quarter of 2025, our magnetic solutions group recorded sales of 18.5 million, representing a 36.1% increase compared to the first quarter of 2024.

Lynn Hutkin: This level of growth aligns with expectations discussed during last quarter's earnings calls, where we noted that sales volumes had stabilized and we were beginning to see a rebound since the second quarter of 2024.

Lynn Hutkin: The gross margin for this group improves to 24.7% in Q1 2025 compared to 16% in Q1 2024 for marking an 870 basis point improvement year-over-year.

Lynn Hutkin: This increase in margin was primarily driven by the higher sales volume in Q1 2025, as well as recent facility consolidations in China and favorable exchange rates related to the Chinese renminbi compared to Q1 2024. At the consolidated level across all product segments, our total backlog of orders reached $395.7 million, reflecting an increase of $14.1 million or 4% compared to 31 December 2024. R&D expenses reached $7.2 million in Q1 2025, a higher level compared to Q1 2024, primarily due to the acquisition of Enercon and the inclusion of their expenses. We expect future quarters to generally align with the Q1 2025 expense. Selling general and administrative expenses totaled $29.5 million, representing 19.4% of sales. Compared to the previous year, SG&A increased by $4.6 million in 2025. Again, the primary factor contributing to this rise in SG&A is the inclusion of Enercon expenses.

Lynn Hutkin: This increase in margin was primarily driven by the higher sales volume in Q1 2025, as well as recent facility consolidation in China and favorable exchange rates related to the Chinese revenue be compared to Q1 2024.

Lynn Hutkin: At the consolidated level, across all product segments, our total backlog of orders reached $395.7 million, reflecting an increase of $14.1 million or 4% compared to December 31,

Lynn Hutkin: R&D expenses reached $7.2 million in Q1 25, a higher level compared to Q1 24 primarily due to the acquisition of ENERCOM and the inclusion of their expenses.

Lynn Hutkin: We expect future quarters to generally align with the Q125 expense.

Belling General and Administrative Expenses total $29.5 million.

Representing 19.4% of sales.

Lynn Hutkin: Compared to the previous year, S-GNA increased by 4.6 million in 2025.

Lynn Hutkin: Again, the primary factor contributing to this rise in S.G.A. is the inclusion of intercom expenses.

Lynn Hutkin: Within SG&A, increases were seen in legal fees, salaries, fringe benefits, and amortization expense, which were largely offset by a reduction in incentive compensation. As there were no unusual items in SG&A during Q1 2025, we believe this level of expense is generally indicative of the expected run rate for future quarters in 2025. Looking at our balance sheet and cash flow, we finished the quarter with $67 million in cash and securities, a decrease of $2 million from the $69 million we reported at the end of 2024. This change was mainly due to the repayment of long-term debt amounting to $7.5 million, $2.8 million spent on capital expenditures, and a dividend payment of $829,000. These cash outflows were partially offset by $8.1 million in net cash generated from operating activities.

Lynn Hutkin: But NSGNA increases were seen in legal fees, salaries, fringe benefits, and amortization expense, which were largely offset by a reduction in incentive compensation.

Lynn Hutkin: As there are no unusual items in S-GNA during Q125, we believe this level of expense is generally indicative of the expected run rate for future quarters in 2025.

Lynn Hutkin: Looking at our balance sheet and cash flow, we've finished the quarter with 67 million in cash in securities, the increase of 2 million, from the 69 million we reported at the end of 2024.

Lynn Hutkin: This change was mainly due to the repayment of long-term debt, amounting to $7.5 million.

Lynn Hutkin: $2.8 million spent on capital expenditure and a dividend payment of $829,000.

Lynn Hutkin: These cash outflows were partially offset by 8.1 million in net cash generated from operating activities.

Lynn Hutkin: I would now like to turn the call over to Farouq.

Farouq Tuweiq: Thank you, Lynn. Good morning, everybody. After coming out of a solid and predictable Q1, we have less clarity as we look ahead to Q2. In order to frame what we are seeing, let's first talk about our base business demand, putting tariffs aside. As we mentioned on our February call, we were largely optimistic entering into 2025, with growth expected across the business with varying degrees. We said magnetics was expected to be our largest percentage grower this year, followed by Enercon on a pro forma basis. The end markets of defense, space, and AI were all robust and growing. We expected to see a rebound in networking and distribution sales as we went through the year, predominantly in H2.

Thank you, Lynn. Good morning, everybody.

Speaker Change: After coming out of a solid and predictable first quarter, we have less clarity as we look ahead to the second quarter. In order to frame what we are seeing, let's first talk about our base business demand putting tariffs aside.

Speaker Change: As we mentioned on our February call, we were largely optimistic entering into 2025, with the growth expected across the business with varying degrees. We said magnetics was expected to be our largest percentage of grower this year, followed by an arcana in a pro form of basis.

Speaker Change: The end markets of defense, space, AI, all robust and growing.

Speaker Change: We expected to see a rebond and networking distribution sales as we went through the year predominantly in the second half.

Farouq Tuweiq: Year over year challenges this year would largely be in our power segment, with tough comps to 2024 for the rail and consumer markets, and continued softness in e-mobility. Each of these comments from our February call is still the current state of affairs of our base business. The good news is, aside from tariffs, there are no changes to report at this time. Now on to the tariff discussion. To provide some broad context, approximately 25% of our consolidated sales are brought into the US from countries outside of the US, and therefore potentially could be subject to recent tariffs. The other 75%, the majority of our business, is either manufactured outside the US and shipped to customers located outside of the US, or is manufactured in the US for local consumption.

Speaker Change: Year-over-year challenges this year would largely be in our power segment with tough comps to 2024 for the rail and consumer markets and continued softness and immobility. Each of these comments from our February call is still the current state of affairs of our base business.

Speaker Change: So the good news is, aside from tariffs, there are no changes to report at this time.

Speaker Change: Now on to the tear of discussion to provide some broad context approximately 25% of our consolidated sales are brought into the U.S. from countries outside of the U.S. and therefore potentially could be subject to recent tariffs.

Speaker Change: The other 75% the majority of our business is either manufactured outside the US and shipped to customers located outside of the US or is manufactured in the US for local consumption.

Farouq Tuweiq: Of the 25%, a little over 10% is China, with the balance largely coming from Europe, India, Israel, and Mexico, along with a few other places. Keep in mind that even these imports are not all equal, and certain of our products imported into the US come through various trade advantage zones. For example, our Mexico products are covered under the USMCA trade agreement, and these are currently exempt from tariffs. A similar trade agreement exists between the US and the Dominican Republic and the Caribbean, broader nations. Those do appear to be subject to tariffs today. Even as it relates to imports from China, certain of our customers who are the importers of record operate within free trade zones in the US, and therefore can receive product into the US and ship it back out of the US all on a tariff-free basis.

Speaker Change: On the 25% a little over 10% is China with the balance largely coming from Europe , India, Israel and Mexico along with a few other places.

Speaker Change: Keep in mind that even these imports are not all equal, and certain of our products imported into the US come through various trade advantage zones. For example, our Mexico products are covered under the US MCA trade agreement, and these are currently exempt from tariffs.

Speaker Change: A similar trade agreement exists between the U.S. and the Dominican Republic and the Caribbean broader nations.

However, those do appear to be subject to tears today.

Speaker Change: Even as it relates to imports from China, certain of our customers who are the importers of records operate within free trade zones in the US and therefore can receive product into the US and ship it back out of the US all on a tariff free basis.

Farouq Tuweiq: As we look at the road ahead on trade, we view tariffs in 2 separate buckets: China and everybody else. China is its own concern, as we all know about, so we leave that at that. As for the rest, we feel clarity will come in Q2 as agreements are reached with friendly nations such as India and Israel. The bottom line is we will be looking to pass all tariff exposures onward. As of today, we have started to see push-out requests from some customers related to products coming into the US from China, specifically until there's further clarity. We believe our Q2 will likely be the most impacted as customers remain in a holding pattern while the administration works out the individual trade deals.

Speaker Change: As we look at the road ahead on trade, we view tariffs in two separate buckets, China and everybody else.

Speaker Change: As for the rest, we feel clearly will come in Q2 as agreements are reached with friendly nations such as India and Israel. The bottom line is we will be looking to pass old tariff exposures onward.

Speaker Change: As of today, we have started to see push out requests from some customers related to products coming into the US from China.

Speaker Change: specifically until there's further clarity. We believe our second quarter will likely be the most impacted as customers remain in a holding pattern while the administration works out the individual trade deals.

Farouq Tuweiq: In yesterday afternoon's earnings release, we noted a revenue guide for Q2 of a range from $145 to 155 million. Given the information we have as of today, this is our best estimate of where the quarter will land based on underlying demand and taking into account some potential downsides related to tariffs. Please keep in mind this is a highly dynamic and changing environment that we're working closely with our customers to navigate. Today, we are better prepared to deal with these uncertain times as we have built a more nimble and resilient organization in recent years, including us starting to move some products from China into our India operations mid to late last year and expect to do more so as time goes on.

Speaker Change: In yesterday afternoon's earnings release, we noted a revenue guide for Q2 of a range from 145 to 155 million.

Speaker Change: Given the information we have as of today, this is our best estimate of where the corridor will land based on underlying demands and taking into account some potential downsides related to tariffs.

Speaker Change: Please keep in mind this is a highly dynamic and changing environment that we're working close with our customers to navigate.

Speaker Change: Today we are better prepared to deal with these uncertain times as we have built a more nimble and resilient organization in recent years, including us starting to move some products from China into our India operations mid to late last year and expect to do more show as time goes on.

Farouq Tuweiq: While tariffs do create uncertainty, they also do create an opportunity for us, and we will be looking for it on the sales and procurement sides. On the sales front, we aim to develop and grow our tier 2 customer base as a means of mitigating fluctuations that can happen with our tier 1 customer volumes. New tools will enable our sales teams to engage in digital data mining and opportunity pipeline tracking. These items, coupled with enhancements to our commission structure, aim to drive growth within new customers. On the procurement side, a series of initiatives are currently underway. Further, inflationary pressures are resulting in higher wages in the countries in which Bel operates, emphasizing the need for further automation.

Speaker Change: While tariffs do create uncertainty, they also do create an opportunity for us and we will be looking for it on the sales and procurement sides.

Speaker Change: On the sales front, we aim to develop and grow our tier two customer base as it means the mitigated fluctuations that can happen with our tier one customer volumes. New tools will enable our sales team to engage in digital data mining and opportunity pipeline tracking.

Speaker Change: These items coupled with enhancements or commission structure and to drive growth within new customers.

Speaker Change: On the procurement side, a series of initiatives are currently underway. Rising geopolitical tensions are driving tariff increases in trade restrictions, reinforcing the need for supply and diversification and regional sourcing strategies.

Speaker Change: Further, inflationary pressures are resulting in higher wages in the countries in which Bel operates, emphasizing the need for further automation.

Farouq Tuweiq: As we did on the SKU level profitability side a few years back and more recently, our procurement spend will be managed through data analytics and KPI tracking. Cost savings are expected to be realized over the next 12 to 18 months, driven by price negotiation, spend consolidation, identifying alternate suppliers, automation, and other cost optimization opportunities. These are all things we are excited about. From a liquidity perspective, this has become more of a focus for us given the murky near-term outlook. As a reminder, our credit facility is set to expire in September 2026, and our plan was to refinance the facility during the summer of 2025 to ensure a new arrangement was in place prior to the current facility going into a current liability classification.

Speaker Change: As we did on the skill level profitability side a few years back and more recently, our procurement spend will be managed through data analytics and KPI tracking.

Speaker Change: Cost savings are expected to be realized over the next 12 to 18 months, driven by price negotiation, spend consolidation, identifying out alternate suppliers, automation, and other cost optimization opportunities.

These are all things we are excited about.

Speaker Change: From a liquidity perspective, this has become more of a focus for us given the marketing near-term outlook. As a reminder,

Speaker Change: Our credit facility is set to expire in September 2026, and our plan was to refinance the facility during the summer of 2025 to ensure a new arrangement was in place prior to the current facility building into a current liability classification.

Farouq Tuweiq: Given the current macro environment and uncertainty of how the market will look this summer, we decided it's best to be more proactive in this regard versus waiting until the summertime. We are currently, and we have launched a process of working with our bank group to amend our existing credit facility to increase our capacity under the agreement and to extend the maturity date. We anticipate this will be finalized in the next week or two. We're focused on debt paydown as well. While we did not pay as much as we had hoped in Q1, only about $7 million, this is understandable and expected, as Q1 is a very heavy cash outflow quarter for Bel Fuse due to our various annual payments such as IT licenses, insurance dividend, and annual bonuses.

Speaker Change: Given the current macro environment and uncertainty of how the market will look this summer, we decided it best to be more proactive in this regard versus waiting until the summertime.

Speaker Change: We are currently and we have launched a process of working with our bank group to amend our existing credit facility to increase our capacity under the agreement and to extend the maturity date. We anticipate this will be finalized in the next week or two.

Speaker Change: We're focused on that paydown as well. While we did not pay as much as we had hoped in Q1, only about $7 million, this is understandable and expected that Q1 is a very heavy cash outflow quarter for Bel Fuse.

Speaker Change: due to our various annual payments, such as IP licenses, insurance dividend and annual bonuses.

Farouq Tuweiq: To put that in perspective, in April alone, by this coming Monday, Tuesday, we would have paid $10 million down further, against our debt and expect to pay down an incremental $10 to 15 million by end of this quarter, so May and June. In summary, while we are encouraged by our business demand and internal initiatives on the sales and procurement fronts, the current tariff landscape cannot be ignored. Bel will almost certainly be impacted by it in some way. However, we believe our exposure is contained to a relatively small percentage of our business, especially given the industries in which we operate. While the current levels of China tariffs are unprecedented, tariffs in general are not new to Bel, and we have successfully navigated them in the past. Importantly, our business today is more diversified and less dependent on China than it has ever been.

Speaker Change: To put that in perspective in April alone by this coming Monday Tuesday, we would have paid 10 million by end of this course of May and June .

Speaker Change: In summary, while we are encouraged by our business demand and internal issues on the sales and procurement fronts, the current tariff landscape cannot be ignored. Bel will almost certainly be impacted by it in some way. However, we believe our exposure is contained to a relatively small percentage of our business.

is especially given in this series in real-time operate.

Speaker Change: While the current levels of Chinese tariffs are unprecedented, tariffs in general are not new to Bel, and we have successfully navigated them in the past.

Speaker Change: Importantly, our business today is more diversified and less dependent on China than it has ever been. We'll continue to take actions with our control to mitigate those factors outside of us. With that, I'll turn the call over to them.

Farouq Tuweiq: We'll continue to take actions within our control to mitigate those factors outside of us. With that, I'll turn the call over to Daniel.

Daniel Bernstein: All right. Thank you, Farooq. Before opening the call for questions, as this is my last earnings call as a CEO, I wanted to take this opportunity to thank all our associates around the world for their tremendous level of hard work and dedication to Bel over these many years. To think back at the business my father founded over 75 years ago, he would be amazed at what we have achieved together as a team. It's been a true honor to lead such a talented group of individuals during my tenure as CEO. To the Bel shareholders, thank you for your support and belief in Bel as we grow and continue to evolve. I'm grateful that you have chosen to be part of Bel during this journey. As a large shareholder myself, I'm confident that Farooq and the executive team will do an excellent job.

Speaker Change: All right, thank you for root. Before opening the call for questions, as this is my last earning call as a CEO , I want to take this opportunity to thank all our associates around the world for the tremendous level of hard work and dedication to Bel over these many years.

Speaker Change: To think back at the business my father found it over 75 years ago. He would be amazed at what we have to achieve together as a team.

Speaker Change: He's been a true honor to lead such a talented group of individuals dream my tenure as CEO .

Speaker Change: and to the Bell shareholders. Thank you for your support and belief in Bell as we grow and continue to vow. I'm grateful that you've chosen to be part of Bell during this journey. As a large shareholder myself, I'm confident the Farouk and the Executive Team will do an excellent job.

Daniel Bernstein: With that, I'd like to turn the call back to Daryl to open up the call for questions.

Daryl: With that, I'd like to turn the call back to Darrow to open up the call for questions.

Operator: Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two to remove yourself from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment please while we poll for your questions. Our first questions come from the line of Bobby Brooks with Northland Capital Markets. Please proceed with your questions.

Speaker Change: Thank you. We will now be conducting a question-and-answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tunnel will indicate your line is in the question queue. You may press star 2 to remove yourself from the queue.

Speaker Change: For participants using speaker equipment and may be necessary to pick up your handset before pressing the star keys. One moment please while we pull for your questions.

Speaker Change: Our first questions come from the line of Bobby Brooks with Northland capital markets. Please proceed with your questions.

Bobby Brooks: Hey, good morning, guys. Thank you for taking my question. I just want to say first, great call on the tariff impact. That's really appreciated. It seems like you guys have really good insulation from it. I was just hoping maybe could you just discuss it a little bit by product segment, between kind of contrasting how maybe Magnetic Solutions, Power Solutions and Protection, and Connectivity Solutions are separately impacted. Maybe it is all the same between all three, but I feel like there's probably a little bit divergence between the three.

Bobby Brooks: Hey, good morning guys. Thank you for taking my question. I just want to say for a great great call on the paraffin patch. That's really appreciated. It seems like you guys have really good information from it. But I was just hoping maybe could you just discuss it.

Bobby Brooks: a little bit by product segment between, you know, kind of contrasting how maybe magnetic power connectivity are separately impacted. Maybe it is all the same between all three but I feel like there's probably a little bit diverges between the three.

Farouq Tuweiq: Sure. Hi, Bobby Brooks. This is Lynn Hutkin. By product segment, I guess let's first start with connectivity. The vast majority of connectivity is not impacted by the US tariffs. They do the majority of their manufacturing in the US and in the UK, for local consumption in each of those regions. There's a very small amount of impact there. Largely unimpacted, let's say. On the power side, we estimate that about 60% or thereabouts of power is not impacted by the US tariffs. The balance of power, as you know, there's manufacturing in China, Slovakia, Israel. A portion of those goods that are manufactured there do come into the US, and are currently subject to tariffs. On the magnetic side, again, it's a similar percentage. About 60% there is not subject to US tariffs.

Sure. Hi Bobby. This is Lynn.

So by product segment, I guess let's first start with connectivity.

Bobby Brooks: The vast majority of connectivity is not impacted by the U.S. tariffs. They do the majority of their manufacturing in the U.S. and then the U.K.

Bobby Brooks: for local consumption in each of those regions. So there's a very small amount of impact there. So largely unimpacted, let's say.

Bobby Brooks: on the power side, we estimate that about 60% or thereabouts of power is not impacted by the U.S. tariffs. The balance of power, as you know, there's manufacturing in...

Bobby Brooks: and China, Slovakia, Israel. So a portion of those goods that are manufactured there do come into the US and are currently subject to tariffs.

Bobby Brooks: On the magnetic side, again, it's a similar percentage, about 60% there is not subject to U.S. tariffs.

Lynn Hutkin: There is a portion that is manufactured in the DR, which as Farouq mentioned, is currently subject, even though it is under CAFTA, it still appears to be subject to those 10% tariffs that are in place today. That's how it breaks down by product group.

Speaker Change: There is a portion that, you know, is manufactured in the DR, which as Rook mentioned is currently subject even, even though it is under CAFTA.

Bobby Brooks: It still appears to be subject to those 10% pair of Sutter in place today. So that's how it breaks down by a product group.

Bobby Brooks: Got it. That's super helpful color. Second, Connectivity the past several quarters has kind of been the bright spot for you guys in terms of year-over-year growth. I was just a little surprised to see it down 6.5% this quarter. You did mention that commercial air was down 12% year-over-year. Was that really the primary driver of this decline? Just was hoping to get more color on that decrease and maybe how you think that dynamic evolves going forward.

Speaker Change: got it. That's super helpful color. And then second, you know, connectivity to past several quarters has kind of been the bright spot for you guys in terms of like year over year growth. So it's a little surprise to see it down to it can have for some this quarter.

Speaker Change: You did mention that commercial air was down 12% year over year. Was that really the primary driver of this decline? Just just was hoping to get more color on that decrease and maybe how you think that dynamic of walls going forward.

Lynn Hutkin: On the connectivity side, the year-over-year decline was largely driven by the reduction in commercial air. A lot of that just has to do with timing, where their production levels are still down a bit. That was the main driver. There was also some softness in the industrial area. The balance of the segment was still strong, and defense was up year-over-year. I would say largely commercial air was the driver there.

Take care, everybody.

Speaker Change: Yeah, so on the connectivity side, the year of your decline was largely driven by the reduction in commercial air. And a lot of that just has to do with timing where their production levels are still down a bit.

Speaker Change: So that was the main driver. There was also some softness in the industrial area, but the balance of the segment was still strong and defense was up here over here.

Farouq Tuweiq: I think, Bobby, based on all the public comments that's out there, right, is there's a hope and expectation of continuing to ramp up the outputs as we go through the year, and we're seeing another request coming into the FAA. The other thing, keeping in mind that things kind of went on pause back in the fall timeframe, with all the union negotiations. All that's going to bring a work on the system. I think when we look at the outlook and the backlog, we definitely expect this to recover. Just happened to play out here this way.

Speaker Change: So I would say largely commercial air was the driver there.

Speaker Change: And I think, Bobby, based on all the public comments that's out there, right, is...

Speaker Change: is there's a hope and expectation of continuing to ramp up the outputs as we go through the year and we'll see another request coming into the FAA.

Speaker Change: the other thing keeping in mind that, you know, things kind of went on pause back in the fall timeframe. With all the union negotiations so all that's going to bring a work on the system. I think when we out when we look at the outlook and the backlog we definitely.

Speaker Change: expect this to recover. But just happen to play out here this one.

Bobby Brooks: Fair enough. That makes a lot of sense. Maybe the last one for me, obviously, you guys gave some pretty good nominal color on the AI benefits. It was like $4.6 million in the quarter, right? That was up double digits year-over-year. Could you maybe just rehash for us to remind, I think it'd be helpful for everybody on the call to get reminded of, my understanding, it's really the power segment that is seeing that AI benefit. Could you just discuss who these, I know sometimes you don't have visibility because it's going through distribution, but any visibility you can have on the type of AI customers and ultimately what those products are being used for in the AI space, that'd be helpful. Thank you.

Speaker Change: Fair enough, that makes a lot of sense. And then maybe last one for me, obviously you guys gave some pretty good nominal color on the AI benefits, you know, it was like 4.6 million in the quarter

up double digits year over year.

Speaker Change: Can you just discuss like who these I know sometimes you don't have the ability to go through distribution, but any visibility you can have on like the type of AI customers and ultimately what those products are being used for and you know the AI space that they helped. Thank you.

Farouq Tuweiq: Yeah. Bobby, appreciate the question, and as you called it out, right? When we call out AI, we think of that as the floor. Because above that, some of our other products will make their way into AI-type applications through various channels, including some of our networking customers. When we talk about AI, this is kind of undoubtable floor base case, if you will. That revenue is largely going to GPU manufacturers. Now I want to be very careful with saying that because we are not aligned to the kind of headline-grabbing guys, the large public companies that we all read about. We are focused generally on more private, heavily funded, next-gen type GPU manufacturers in the US largely. That's how really a testament to how Bel does things very well, which is we do a lot of handholding with our engineers, our customer engineers.

Bobby Brooks: Yes, so Bobby, I appreciate the question. And as you called it out, right? When we call out AI, we think of that as the cost more, because both of that, some of our other products will make their way into AI type applications.

Bobby Brooks: through various channels, including so of our networking customers. When we talk about AI, this is kind of a doubtable floor base case, if you will.

And that revenue

Bobby Brooks: is larger going to GPU manufacturers. Now I want to be very careful with saying that because we are not aligned to the kind of headline.

Bobby Brooks: Grabbing guys, the large public companies that we all read about. We are focused generally on more private, heavily funded, next gen type GPV manufacturers in the U.S. largely.

So, and that's how.

Bobby Brooks: really a testament to how Bell does things very well, which is we do a lot of hand-hand holding with our engineers, customer engineers. We co-developed and we become a true partner through our journey of growth. So in short, I would think of these as GPU tech manufacturers.

Farouq Tuweiq: We co-develop, and we become a true partner to them, throughout their journey of growth. In short, I would think of these as GPU-type manufacturers.

Bobby Brooks: Super helpful color. I appreciate the call and congrats on the strong Q1 print. Dan, cheers to the next step in your career. Thank you for all the help. I'll return to the queue.

Speaker Change: super super helpful. I appreciate the call and congrats on the strong 1Q print and Dan cheers to the next, cheers to the next step in your career. Thank you for all the help. I'll return to the queue.

Daniel Bernstein: Thank you for the kind words.

Farouq Tuweiq: Thanks, Bobby.

Thank you for the time words. Thanks, Bobber.

Operator: Thank you. Our next questions come from the line of James Rashutti with Needham & Company. Please proceed with your questions.

Speaker Change: Thank you. Our next questions come from the line of James Rachute with Needament Company. Please proceed with your questions.

James Rashutti: Hi, good morning. Hey, Dan. I'll echo my congratulations as well. Wish you the best. Farooq and Lynn, a couple of questions. I'm wondering if you could talk about the Enercon business, what you're seeing in that business. Maybe including, yeah, if you can, the change in the business, the growth of the business on a pro forma basis year-over-year, since we don't have a lot of experience with it, for the Q1.

James Raschutte: I good morning. Hey, Dan. I'll echo my congratulations as well. We should the best. Bruce and Lynn a couple of questions. I'm wondering if

James Raschutte: You could talk about the inner part of business. What you're seeing in that business maybe including you know if you can change in the business the growth of the business on a pro-former basis year over years since we don't have a lot of experience with it for the March quarter.

Farouq Tuweiq: Yeah. I'd say, James, it is what it is. It's what we thought it was, which is all good, right?

Yeah, so I'd say June .

It's it's kind of

Thank you.

James Raschutte: It is what it is. It's what we thought it was which is all good. Right. Um, we think it's better than what we thought it was. Come on. There we go. Don't understand. Don't understand. Let's do it. Come on.

James Rashutti: Farouq, we think it's better than what we thought it was. Come on.

Farouq Tuweiq: There you go.

James Rashutti: Don't undersell it.

Daniel Bernstein: Farooq.

James Rashutti: Come on.

Farouq Tuweiq: Yeah, no, it's a great business.

James Rashutti: There you go.

Farouq Tuweiq: It's interesting because Dan and I, and Steve were just in Israel roughly the first week in April. We're kind of up to date there. As you remember, Jim, we initially talked about this back in September, then we closed it in November. We talked about it in February, here we are again. I think the theme of all throughout all these conversations is continued robustness and growth. Excellent team, technology, alignment with customers. Financial profile is kind of the growth side of things, the margin profile. To Dan's point, we're very excited about having the team. Also as we just think about on the Bel side of things. Today, as Dan said, A&D is roughly 38% of our business in the quarter, it's our largest market. Good tailwinds.

Dan Bernstein: It's a great business. It's interesting because Dan and I and Steve were just in Israel roughly the first week in April , so we're kind of up to date there.

Dan Bernstein: But, you know, as you remember Jim, we initially talked about this back in September , then we closed it in November . We talked about it in February and here we are again. And I think the theme of all throughout these conversations is continued robustness and growth.

Excellent, excellent team, technology, alignment with customers.

Speaker Change: Financial profile is kind of the growth side of things the margin profile so to dance point we're very excited about having the team.

Speaker Change: and also as we just think about on the bell side of things, right? Today, as Dan said, India is roughly 38% of our business in the quarter, so it's our largest market. Good tailwinds.

Farouq Tuweiq: Obviously as you know, Enercon is both suppliers into US and Israel and some other places such as the Europeans and India. We continue to be very excited about that. We also do see the opportunity to further accelerate our growth in places like Europe and in America. There's a lot of exciting things for us. It is, at a minimum, as advertised, but it's definitely ahead for us, which is great. Dan, you want to add to that, or does that about cover it?

Speaker Change: and obviously is, you know, NRKON is both suppliers and to US and Israel and some other places such as the Europeans and India.

Speaker Change: So we continue to be very excited about that. We also do see the opportunity to further accelerate our growth in places like Europe and in America.

So there's a lot of exciting.

Speaker Change: and a thing for us. So it is as at a minimum as advertised, but it's definitely ahead for us.

Daniel Bernstein: I think, again, we were surprised again, how much we do like it. We tend to be somewhat hesitant. I think there's a lot of things going on at this time that they're looking outside the box that we don't want to discuss because it's too initial. They are looking at a lot of exciting opportunities that personally, we didn't have in our own house. We think the future is very strong for them, and we just see a lot of upside. I think it's a great deal for the company and our shareholders.

which is

Dan Bernstein: Great. Then you want to add to that or reserve a cover of this.

Dan Bernstein: I think again, we do, you know, we were surprised, again, you know, how much we do like it. We tend to be somewhat hesitant. I think there's a lot of views going on at this time that they're looking outside the box that we don't want to discuss.

Dan Bernstein: because it's too initial but they are looking at a lot of exciting opportunities that personally we didn't have in our own house so we think the future is very very strong for them and we just see a lot of upside so i think it's i think it's a great deal for the company in our shareholders

James Rashutti: That's helpful.

Daniel Bernstein: was, as you know, a very excellent price compared to what's being sold in the marketplace today.

as a price we pay.

Dan Bernstein: It was a very, as you know, a very excellent price compared to what it's being sold from marketplace today.

James Rashutti: It may be a little early, and Farouq, you may have alluded to this in the answer you just gave, but are you seeing any revenue synergy opportunities yet, or is that something you anticipate coming later on?

Speaker Change: It may be a little early and proof you may have alluded to this and the answer you just gave. Are you seeing any revenue synergy opportunities yet or is that something you anticipate coming later on?

Farouq Tuweiq: Yeah, no. Remember, putting aside that this is all defense, which takes a little bit of while. Really it starts out with filling up the funnel in, let's call it, new opportunities. As we think about the funneling process, we definitely see some of the benefits of flagging things, let's say, between the Enercon folks and the Bel Fuse folks. We have a program in place to really push this, to ensure that our sales team and our business development market intelligence folks are aligned. As we see about filling in the funnel beyond what was already in the funnel, just the benefits of synergies, we are definitely seeing some of those opportunities. We have referred some of these opportunities to each other, if you will. We're definitely excited.

Speaker Change: Yeah, no, so remember in a putting aside that this is all defense right which takes a little bit a while so really it starts out with filling out the funnel and let's call it new opportunities.

Speaker Change: So, as we think about the funneling process, we definitely see

Speaker Change: from the benefits of flagging things, let's say, between the inter-confolks and the Bel Fuse folks, and we have a program in place to really push this to ensure that our sales team and our business development market subjects folks are aligned.

Speaker Change: So as we see about filling in the funnel right beyond what was already in the fall right just the benefit of synergies we are definitely seeing some of those opportunities and we have referred some of these opportunities to each other if you will.

Farouq Tuweiq: In terms of monetization, this is a little bit of a longer design cycle, but step one, fill up the funnel, which we are seeing and doing, which is good to see. When we do look at the underlying fundamentals of what's going on in broader defense, things are moving quicker just given the global world that we're living in today. We think that potentially be an accelerant than base normal times. I think we are in a good market, in a good time, and we have the right team around the table. I think all that should yield pretty good outcomes for us.

Speaker Change: So, we're definitely excited. But, you know, in terms of monetization, you know, this is a little bit of a longer design cycle, but step one, fill up the funnel, which we are seeing and doing, which is good to see. And then, you know, when we do look at the underlying fundamentals of what's going on in broader defense.

Speaker Change: things are moving quicker given the global world that we're living in today so we think that you know potentially be an accelerant

Speaker Change: then based normal times, right? So I think we are in a good market in a good time and we have the right team around the table. So I think all that should yield pretty good outcomes for us.

James Rashutti: Final question from me is just, I think last call, you talked about a couple of facility consolidations and the product transition line of the fuse line in China. Any update and any other plans for consolidation or changes in the footprint, just given what we're seeing out in the market?

Final question for me is just

Speaker Change: I think last call you talk about a couple of facility consolidations and the product transition line of Fuse line in China. Any update and any other plans for consolidation or changes in the footprint just given what we're seeing on the market.

Farouq Tuweiq: Yeah, it's a good question there, Jim. Correct, we are fully out of the fuse. We have a fully empty facility. I think we're out of there first maybe week or two in January. That's another one that we're fully out now. We're just in the process of winding that out from an entity and then a building perspective. That's good to see. We're seeing the cleanup in that operational structure, which is great to see. In terms of operations, everything's kind of proceeding on path, nothing new to announce. Maybe just to extend your question there a little bit, and I alluded to it into my comments. Obviously, there's China and there's everybody else in this day and age that we're living in.

You

Speaker Change: Yeah, you know, it's a good question there. They're Jim. So correct. We are fully out of the Fuse and we have a fully empty facility. I think we're out of there first, maybe a week or two and in January . So that's another one that we're saying we're fully out. Now we're just in the process of winding it out from a...

Speaker Change: Entity and a building perspective so that's good to see we're seeing that clean up in that that operational structure which is which is great to see.

Speaker Change: In terms of operations, you know, everything's kind of proceeding on path, nothing new to announce. Maybe just extend your question there a little bit, and I...

Speaker Change: alluded to it into my comments. Obviously, there's China and there's everybody else in this day and age that we're living in and we have started.

Farouq Tuweiq: We have started moving some of our products, both on the power and the magnetic side, from China into our India facility. Remember, we acquired an India facility there back in 2021, and that's kind of our foothold there into India. As we started that roughly, I think Q3 last year to Q4, we're getting the lines up and going. We did that in advance of obviously any of the tariffs or even the new administration coming in. As we look for the rest of the year, we will be looking to shift more, let's call it, at-risk revenue into our India operations. As we said earlier, roughly 10% of our revenue is subject to China. We'll want to move some of that as we can to the extent that we can into other places.

Speaker Change: uh moving uh some of our uh products both on the power and the magnetic side from China into our India facility. Number we acquired an India facility. They're back in.

Speaker Change: 2021 and that's kind of our foothold there into India. So as we started that roughly, I think you three last year to keep what we're getting the lines up and going. And we did that in advance of obviously any of the tariffs or even the new administration coming in.

Speaker Change: So, as we look for the rest of the year, we will be looking to shift more, let's call it, at risk, revenue into our, in the operations, as we said earlier roughly 10 percent.

of our revenue is subject to China.

and we'll we'll want to, you know.

Speaker Change: move some of that as we can into the extent that we can into other places. So I say the team has really done an excellent job on being nimble and forward with along with tight partnership with our customers to really try to kind of move this thing than our teams have been great both in China and India.

Farouq Tuweiq: I'd say the team has really done an excellent job on being nimble and forward along with tight partnership with our customers, to really try to move this thing. Our teams have been great both in China and India. That, maybe an extension of your question there, James, a little bit, but that's not to be slept on. As we build a more connected organization globally, we're putting in the plumbing to more dynamically move things across facilities, which is very good in this day and age.

Speaker Change: So that may be an extension of your question there Jim a little bit but that's not to be you know slept as we build a more connected organization globally. We're putting in the plumbing to more dynamically move things across facilities which is very good in this day and age.

James Rashutti: Thanks very much.

Thank you.

Farouq Tuweiq: You're welcome.

Thank you very much.

Operator: Thank you. Our next questions come from the line of Christopher Glynn with Oppenheimer. Please proceed with your questions.

You're welcome.

Speaker Change: Thank you. Our next questions come from the line of Christopher Glint with Oppenheimer. Please proceed with your questions.

Christopher Glynn: Thanks. Good morning, everyone. As much as Farouq's added to insight and execution over the past few years, it sounds like, Dan, you're still adding some value to his curve there with the advice on answering Enercon, and good luck in the future. Wanted to ask about the $8 to $10 million allowance there. Couple things. Do you see that as deferred or migrated from Bel? Hypothetically say, if you think if tariffs were maybe cut in half, would that break an impasse? It seems like the implication of the allowance is that you're holding price discipline and not willing to eat any tariffs.

Thanks. Good morning, everyone. You know, as much as

Speaker Change: Bruce added to insect execution over the past few years. It sounds like Daniel. You're still adding some uh

Speaker Change: value to the his curve there with the advice on answering entercon and good luck in the future. What is asked about the

Speaker Change: $8 to $10 million allowance there. A couple things. Do you see that is deferred or migrated from Bel and you know hypothetically say if you think

Speaker Change: you know if you know if tariffs were maybe cut in half would would that break in an impasse because it seems like you know the implication of the allowances that you're holding price discipline and not willing to eat any tariffs.

Farouq Tuweiq: Yes. That's a good question, Chris. What we're seeing is, I'd say, largely maybe the distributors, but also some OEMs as well, and I'm going to put some broad strokes here because there's always obviously exceptions. If you're going to take product coming in from China and pay, let's use round numbers, 150% tariff, and then the tariff gets resolved for, let's say, in a month. All of a sudden you have this really expensive product that you have paid for to bring it into the US, and then how do you sell that? If now the gates of cheaper products or lower tariffs come in. As people wrestle with having expensive goods coming in, that's one piece of it. We're seeing a few folks just say, Listen, let's just take a breather here. I got some componentry in the inventory.

Speaker Change: Yes, so that's your question Chris, right? So what we're seeing is, you know, largely maybe the distributors, but also some OEMs as well. And the, I'm going to put some broad strokes here because there's always obviously exceptions.

Speaker Change: So, if you're going to take product coming in from China and pay the series of our numbers 150% tariff.

Speaker Change: and then the tariff gets resolved for, let's say, in a month.

Speaker Change: But all of a sudden you have this really expensive product, right, that you have paid forward to bring it into the US and then, you know, how do you sell that, right, if now the gates of cheaper products or lower tariffs come in.

So as people wrestle with having expensive.

Speaker Change: Goods coming in. That's that's one piece of it. So we're seeing a few folks just say let's just take a breather hair. I got some component tree in the inventory. Let me chew into that inventory just until we get a little bit of clarity. So your question, well, what happens?

Farouq Tuweiq: Let me chew into that inventory just until we get a little bit of clarity. To your question, well, what happens? I think there's a few different outcomes. One, people really go deep into their inventory and becomes over-depleted, and then all of a sudden, you could potentially start getting this, let's say, makeup ordering or acceleration of ordering. More of a push-out type approach. That is a possibility. The other possibility is it's also going to depend on what happens with some of this gray trade zone that we keep hearing about, and what happens to the others? To put it in perspective, India today is at 27%, I believe. If today it's 150 tariff versus 27%, that's a pretty big difference.

Speaker Change: Yeah, I think there's a few different outcomes. One, people really go deep into their inventory and becomes over depleted and then all of a sudden, you know, you could potentially start getting this, you know, what they make up ordering or acceleration of ordering so more of a push out type approach. So that is a possibility.

Speaker Change: The other possibility is it's also going to depend on well what happens.

Speaker Change: with, you know, some of this great trade zone and that we keep hearing about and what happens to the others, right? So if you put in perspective.

Speaker Change: India today is at 27% I believe, right? So if today is 150 teraversus 27% that's a pretty big difference.

Farouq Tuweiq: If India goes to zero and China comes down to 40% or 50%, I think you might be back into the same game because there's a lot of efficiencies to be gained in places like China. It's hard to just look at China because we've got to look at what happens to everybody else. I would say some of the other locations globally got hit a lot harder, including Vietnam and Thailand, which are not necessarily places for us. Could it be this is a push-out or a pause? Yes. Could it be you get a, I don't want to say a floodgate, but a makeup orders, if you will? Sure. Could you also lose some of this revenue? I'd say maybe yes, in more of our commodity consumer business, but some of our other business I'd say it's a little bit more sticky.

Speaker Change: But if India goes to zero and China comes down to 40% or 50%, I think you might be back into the same game because there's a lot of efficiencies to be gained in places like China.

Speaker Change: So it's it's hard to just look at China because we got to look at what happens everybody else. I would say some of the other locations globally got hit a lot harder, including, you know, you know, Vietnam and Thailand, which are not necessarily places for us.

Speaker Change: So could it be this is a push outs or a pause? Yes.

Speaker Change: Could it be you, you know, you get a, I don't want to say a floodgate, but, you know, a makeup order. If you're sure, could you also lose some of this revenue? I'd say maybe yes and more of our commodity consumer business. But some of our other business, you know, I'd say that it's a little more sticky.

Farouq Tuweiq: The answer is yes, we think there could be deferred, if you will. The question is when and how long? That's why I said earlier, I think Q2, as we think about the rest of the world working out these one-on-one trades with the Trump administration, we think there'll be a lot of clarity in May and June, and then the dust will settle. I think it sounds like the public chatter, I think there's mixed messages on what's going on with China, but we are seeing potentially some people trying to get to something. I think people are just saying, Let's just take a breather here unless I absolutely need it. It could be deferred.

Speaker Change: So, the answer is yes, we think there could be deferred if you will. The question is when and how long. And that's why I said earlier, I think Q2, as we think about the rest of the world.

Speaker Change: working out these one-on-one trades with the Trump administration we think there'll be a lot of clarity in May and June and then we'll the dust will settle and I think it sounds like the public chatter I think there's mixed messages on what's going on with China.

Speaker Change: But we are seeing you know potentially some you know people trying to get to something so I think people are to say let's just take a breather here unless I absolutely need it and it could be different.

David Brown: Great. Thank you for all that color. Just wanted to dive into the networking market a little bit. I think we have a good glimpse of how that is playing through at magnetics with the comparisons and some normalization there. Could you touch on networking as pertains to the other two segments, please?

Great. Thank you for all that color. And um...

Speaker Change: I wanted to dive into the networking market a little bit. I think we have a good glimpse of how that is playing through at magnetics with the comparisons and some normalization there. Could you touch on networking as pertains to the other two segments please?

Lynn Hutkin: Sure. On the Power Solutions and Protection side, when we look at networking, and we'll carve out AI from that because we talked about AI separately. AI is strong for Power Solutions and Protection. On the networking side, though, we have seen some downward pressure in networking from last year versus this year. However, we have started to see an increase in bookings there, so it does seem to be coming back later this year. In Q1, networking was down, so that's an area of rebound that we're still waiting to come back. On the Connectivity Solutions side, there is a little bit of networking in there, but Connectivity Solutions is largely A&D industrial and with a portion of it going through distribution. It's not as much networking exposure in Connectivity Solutions.

Thank you.

Bye.

Thank you.

Speaker Change: Sure. So on the the power side, you know, when we look at networking and we'll carve out AI from that right because we talked about AI separately. So AI is strong for power on the networking side though.

we have seen some downward pressure and networking.

Speaker Change: from from last year versus this year. However, we have started to see an increase in bookings there, so it does seem to be coming back later, you know, this year, but in Q1 networking was down.

Speaker Change: So that's that's an area of rebound that we're still waiting to to come back. And then on the connectivity side, there is a little bit of networking in there, but but connectivity is largely.

Speaker Change: A&D industrial and you know with a portion of it going through distribution so it's it's not as not as much networking exposure in connectivity.

Farouq Tuweiq: I think, Chris, that dovetails with our expectation. We're seeing the backlog come in. I should say throughout the quarter in general, we've seen some very nice bookings come through, which kind of reaffirmed what I was saying earlier about our outlook for the year. Aside from tariffs.

Speaker Change: And I think Chris I don't fail with our expectation right we're seeing kind of the backlog come in and I should say throughout the quarter in general we've seen some very nice bookings come through and which kind of reaffirmed kind of what I was saying earlier about our outlook for the year so.

And then, yeah, aside from here.

David Brown: Yep. Last one from me. How are you seeing design-in activity in general? Is there any kind of consternation in the pacing relative to trade, or is it totally separate and, in an absolute sense, how is design-in activity?

Yeah.

Yeah.

Speaker Change: And last one for me, how are you seeing design and activity in general? Is there any kind of consternation in the pacing relative to trade or is it totally separate and in an absolute sense how is design and activity?

Daniel Bernstein: I think some things, because of COVID, we still have effects of COVID, where basically everybody's focusing on sourcing and so forth. I think it's leveled off now to a certain extent. We are pushing it hard, and I think the point of bringing in our new head of revenue is really a go-to-market strategy. It's really focused on what do we have to do to jump-start and do a better job than we have done in the past. As Farouq mentioned, we're taking a whole unique, different approach for us of how we go to market, the strategy we're using, how to address second-tier, third-tier customers. We're very fortunate to have the person that came to us, came to one of the largest distributors in the world. His revenue was about $1.6 billion, and he oversaw over 500 people.

Speaker Change: I think the things, you know, because of, you know, COVID we still have effects of COVID where basically, you know, everybody is focusing on sourcing and so forth.

Speaker Change: I think it's leveled off now to a certain extent. However, we all pushing it hard and I think the point of bringing in our new

Speaker Change: I have had a revenue is really a go-to market strategy is really focused on what do we have to do to jump start and do a better job than we have done in the past.

Farouk: So as Rook mentioned, we're taking a whole unique, a different approach for us of how we go to market, the strategy we're using, how to address second tier third tier customers. We're very fortunate to have the person that came to us, came to learn the largest distributors in the world.

Speaker Change: is revenue is about 1.6 billion, any over 500 people.

Daniel Bernstein: We do have high expectations for him to turn around our strategy of how we go to market going forward. For us, we think there's still many exciting opportunities out there.

Speaker Change: So we do have high expectations for him to turn around our strategy of how we go to market going velvet. So for us we think there's too many exciting opportunities out there.

Farouq Tuweiq: I think that's the overarching view there, Chris. When we lay it into end markets, obviously AI bucks that trend, right? It's kind of what Dan talked about, and then defense, right? We're seeing some nice stuff there, obviously. I think our overarching theme is, I think we're in a good place, but to Dan's point, we want more, and we think we're driving to a lot of that, and this will be a big year to put down the plumbing for that. In some areas, just given the dynamics of the world we're in, we're seeing some good stuff. What's interesting, Dan's comments remind me is, if you remember on our consumer side, we always talked about that Chinese supplier that got banned in Q2 last year.

Speaker Change: I think that's the overarching view there Chris, when we kind of lay it into kind of end markets. Obviously AI bucks that trend, right? It's kind of a dance talked about in a defense, right? We're seeing some nice stuff there. Obviously, um, and so, so I think what our overarching theme is, I think we're in a good place with a dance point. We want more.

Speaker Change: and we think we're driving to a lot of them. This will be a big year to put down the plumbing for that.

Speaker Change: But in some areas, just given the dynamics of the world run, we're seeing some good stuff. You know, it was interesting. You know, the dance comments remind me, if you remember, on our consumer side, we always talk about that Chinese supplier that got banned in Q2 last year.

Farouq Tuweiq: When we look at our business within consumer, aside from that Chinese consumer, it's actually experiencing really nice growth, which is, I think, a testament to the team. Now it's obviously off of smaller dollar amounts, but the growth we're seeing there from a percentage perspective is very good. I think some of the shift in the way we're thinking about things, we're seeing some bright spots. Obviously, I think tariffs move things a little bit here. Ultimately, we want more going forward.

Speaker Change: And when we look at our business within consumer aside from that Chinese consumer, it's actually experiencing really nice growth.

Speaker Change: which is, I think, a testimony to the team. Now it's obviously a smaller dollar amount, but the growth we're seeing there is from a percentage perspective, it's very good. And I think some of the shift in the way we're thinking about things. We're seeing some bright spots.

Speaker Change: But obviously, you know, I think Tara is going to move things a little bit here. But ultimately, we want more going forward.

Christopher Glynn: Thanks. Thanks, guys.

Thanks. Thanks guys.

Operator: Thank you. Our next questions come from the line of Greg Palm with Craig-Hallum. Please proceed with your questions.

Speaker Change: Thank you. Our next questions come from the line of Greg Palm with Craig Halem. Please proceed with your questions.

Greg Palm: Yeah, thanks. Good morning, everybody, and Dan, would just like to echo my congratulations as well on a very successful tenure and career at Bel.

Speaker Change: Yeah, I think it's a good morning everybody and Dan would just like to echo Mike congratulations as well on a very successful 10-year career or bell

Daniel Bernstein: Thank you so much.

Greg Palm: Can we maybe just start on the quarter? It was sort of at the upper end of the guidance. I am curious, did you see any pull-in of orders ahead of those tariffs?

Thank you so much.

Speaker Change: Can we maybe just start on on the quarter? You know it was sort of at the upper end of the guidance. I'm curious. Did you see any pull-in of orders ahead of those terrorists?

Farouq Tuweiq: Yeah, not so much this go around. We saw the inverse of that. I would say no. There might be an exception here and there, but it wasn't a theme for us this quarter.

Speaker Change: Yeah, not not so much this go on. We saw the inverse of that. So I would say no, there might be an exception here and there, but it wasn't it wasn't a theme for us this quarter.

Greg Palm: Okay. As you kind of think ahead, as a reaction to these tariffs, how quickly can you move manufacturing around into other regions if this becomes a permanent thing? I guess the bigger question is what kind of capacity do you have?

Speaker Change: Okay, and as you kind of think ahead, you know, as a reaction to these terrorists, I mean how quickly can you move manufacturing around into other regions if this becomes a permanent thing and I guess the bigger question is what kind of capacity is that?

Daniel Bernstein: Let me just answer that, Christopher. I think the question is for you is where do we move? I think that was the concern we had four years ago. A lot of our competitors, a lot of our customers moved to Mexico or Vietnam. I know those at this point have been hit very hard. That's our biggest problem is where do we go and so forth. We have done a good job of building a base in India. Four years ago, we had no operation in India. Today, we have three different operations in India. I think we're looking, too, I'm sure. We're looking for a third. We really are focused to prepare ourselves to be able to move quickly if it needs to be. Farouq?

Speaker Change: at this point have been hit very hard, and that's our biggest problem is

Speaker Change: We had to go and so forth. But we have done a good job of looking at you have building a base in India four years ago. We had no operation in India. Today we have three different operations in India. I think

Speaker Change: You know, we're looking too. I'm sorry. We're looking for a third. So we really are focused to prepare ourselves to be able to move quickly if it needs to be.

Farouq Tuweiq: Yeah, I think, Greg, just keeping in mind that our product is, we're not making stuff and just selling it, right? It comes with audits. Customers have to take a look at it. They got to make sure the facility does what they need it to do. You need customer approvals before you can move facilities. In places like defense, that takes a very long time. We're not doing the more heavily commodity stuff. For us, it takes a little bit of while. As a result of that, we start putting the plumbing in, like I said, into India, right, from back in Q3 last year. The question becomes is, we've always contemplated where do we go, and India was a very natural thing. I think we have a very friendly relations with India.

Thank you. Bye-bye.

Speaker Change: Yeah, and I think great just keeping in mind that our product is, you know, we're not making stuff and just selling it, right? It comes with audits. Customers have to take a look at it. They got to make sure the facility does what they need to do. You need customer approvals before you can move facilities in places like defense that takes very long time.

Speaker Change: And as a result of that, you know, we start putting, you know, the plumbing in, like I said, into India, right from back in Q3 last year.

Speaker Change: You know the the question becomes is we've always contemplated where do we go in India was was a very natural thing I think we have a very very frankly relations with India and I think ultimately all the body language indicates that we will work something out.

Farouq Tuweiq: I think ultimately, all the body language indicates that we will work something out. We have contemplated in the past looking at places like in Thailand and Vietnam. When we look at the tariffs those guys got hit with, I would say thank God we didn't spend all that money moving to those places just to end up getting hit with some crazy tariffs. I think we'll get some clarity on what nations we're really friendly with, and we think India will be in that, and I think that's going to probably be a focus of ours.

Speaker Change: But, you know, we have come to play in the past looking at places like in Thailand and Vietnam. And when we look at the tariffs, those guys got hit with, you know, it's...

Speaker Change: I would say thank God we didn't spend all that money moving to those places just to me and I'm going to with some crazy tear. So I think we'll get some clarity on who and what nations we're really friendly with and we think we'll be in that and I think that's going to probably a focus of ours.

Greg Palm: Yep, understood. I guess lastly on the AI-related revenue. That was a pretty big step up in this quarter relative to the annual in 2024. I'm curious, is that a function of current customers ramping up? Is that expansion of new customers? What exactly are you seeing in that particular vertical?

Yep, understood.

Speaker Change: And then I guess lastly on on the AI related revenue so that's a pretty big step up you know in this quarter relative to

Speaker Change: You know the annual in 24 I'm curious is that a function of current customers ramping up is that you know expansion of new customers what's exactly what exactly you've seen in that particular vertical.

Farouq Tuweiq: I think it's a combination. It's interesting, right? When we go after these kind of customers, and to be clear, to a little bit of a different extent, but when we look at space, for example, right, obviously, it's been around for a little bit longer, but we've seen some of that 15% year-over-year growth. When we looked at e-mobility before e-mobility cooled down, right, you align yourself with these customers, you get in early, you design with them. As they start ramping up their sales efforts and getting customers, you will see that pretty big step function. I would look at the AI jump as people we've had a relationship with for a long time, and as they start proving out their technology and selling their technology on the GPU side, we see big steps.

Speaker Change: I think it's a combination I mean it's interesting right when we go after these kind of customers and to be clear It's a little bit of a different extent but when we look at

Speaker Change: Space, for example, right? Obviously it's been around for a little bit longer, but we've seen some of that 15%

Speaker Change: You're over your growth and when we looked at immobility before immobility cooled down right you align yourself these customers to get in early design with them and then as they start ramping up their sales efforts and getting customers you will see that you know pretty big step function.

Speaker Change: So I would look at the AI jump as people who have had a relationship with for a long time and as they start

Speaker Change: Proving out their technology and selling their technology on the GPU side we see big steps. So I think what you're seeing right now is we're going through these big steps.

Farouq Tuweiq: I think what you're seeing right now is we're going through these big steps. I'd say these customers that we speak to are relatively new-ish type companies. They're not, like I said, the main headline guys that you read into the newspapers. These people are, I'd say, they're old new-ish customers. For us, new-ish means we've been with them for a while, we've talked to them for a while, but now new-ish in a sense we start seeing that revenue side of it.

Speaker Change: And say these customers that we speak to are relatively new-ish type companies. And so they're not the main headline guys that you read into the newspapers. So these people are, I'd say, they're all new-ish customers.

Speaker Change: But for us, newest means we've been with them for a while. We've talked to for a but now, newest, and since we've started seeing their revenues side of it.

Greg Palm: Understood. All right. Best of luck. Thanks.

Farouq Tuweiq: Appreciate it.

Understood. All right. Best of luck. Thanks.

Operator: Thank you. Our next questions come from the line of Theodore O'Neill with Litchfield Hills Research. Please proceed with your questions.

for sure.

Speaker Change: Thank you. Our next questions come from the line of Theodore O'Neill with Litchfield Hills Research. Please proceed with your questions.

Theodore O'Neill: Thanks very much, and congratulations on the good quarter. I was wondering, in looking at your opportunity set in new products, design wins, and in new customers, does this change in the environment change the way you focus on those issues?

Thanks very much and congratulations on the good quarter.

Theodore O'Neill: So, I was wondering if looking at your opportunity set in sort of new products, design wins and new customers to assist, change in the environment, change the way you focus on those issues.

Farouq Tuweiq: Yeah. We tend to, in a very cliche manner, think about market unsettledness in terms of opportunity. Obviously, as we think about China tariffs, right? We're going to feel that a little bit on the 10% side, but we also have other competitors that will feel it. I'm not entirely sure. I think it changes maybe, let's say, our operations. We've always been focused on operations. Where should we be? To Dan's point, where do you go? We're going to get some clarity on that, and we've been already kind of laying down the pipework into India. From an operation perspective, sure. I think from a sales perspective, we do think there is opportunities. In these times, these are the times that we need to be out there supporting our customers and ingratiating ourselves, and leading with our minds versus kind of commodity.

Theodore O'Neill: Yeah, you know, it's, you know, we tend to kind of in a very cliche manner, think about market unsettledness in terms of opportunity.

Theodore O'Neill: So, obviously, you know, as we think about China terrocks.

Theodore O'Neill: Right, so we're we're going to feel that a little bit on the 10% side, but you know we also have other competitors out there so.

Theodore O'Neill: I'm not entirely sure. I think it changes maybe let's see our operations. So we've always been folks on operations. Where should we be? What should we take to dance point? Where do you go? So we're going to get some clarity on that. And we've been already kind of laying on the pipe work in India. So from operation perspective, sure.

Theodore O'Neill: I think from a sales perspective we do think there is opportunities and in these times these are the times that we need to be out there supporting our customers.

Theodore O'Neill: and ingratiating ourselves and leading with our minds versus Commodity.

Farouq Tuweiq: Does it change a little bit? Sure. Ultimately, we are a long design cycle business, and if you remember, Theo, over 90% of our business, our customers themselves are B2B. Right? Businesses will invest, and they're part of the technology solution. I would say it changes a little bit, creates opportunity, but we're committed on where we go from here. Again, tariffs been around since 2018, 2019, right? Now, nobody I think thought it would escalate to this level, but we do think cooler heads at some point will prevail.

Theodore O'Neill: Does it change a little bit? Sure, but ultimately we are a long design cycle business. And if you remember the over 90% of our business our customers themselves are B2B.

Right, so

Business is one best.

Theodore O'Neill: And we're there part of the technology solution so I would say change a little bit creates opportunity but we are we're committed on on kind of where we go from there and again there's been around since 2018 2019 right when the so it's not a now nobody I think thought it would escalate to this level.

Theodore O'Neill: but we do think cooler heads at some point will prevail.

Theodore O'Neill: My last question is, given what's going on in the market, what's the level of activity you're seeing in terms of potential acquisitions?

Speaker Change: And my last question is, given what's going on in the market, what's the level of activity you're seeing in terms of

Farouq Tuweiq: Yeah. We're redoing our facility to get more capacity. We're focused on mounting down because we think that's just kind of a good thing to do, and one of the reasons is maybe we'll see how the world goes out here, but may create opportunity on that side of it. I would say overall, we started seeing a little bit of a healthier M&A market in Q1. As the tariff discussions started taking hold, companies that were going to come out or people that were entertaining a sale kind of went to pause a little bit. I think there's just a lot of wait and see, similar to our customers, we're seeing that on the M&A side. I would say the M&A market is quiet. It's a wait and see approach. Q2, I would say we expect it's probably largely quiet.

potential acquisitions.

Speaker Change: Yeah, so we're we're we're doing our our facility to get more capacity. We're focused on down paying down because we think that's just kind of a good thing to do and one of the reasons is maybe we'll see how the world goes out here but make great opportunity on on that side of it. I would say overall we started seeing a little bit of a healthier M&A market in Q1.

Speaker Change: But then as the tear of discussion start taking hold, companies that were going to come out or people that were entertaining a sale kind of went to pause a little bit. I think there's just a lot of wait and see similar to our customers we're seeing at M&A side. So I would say the M&A market is quiet. It's a wait and see approach.

Speaker Change: So Q2 I would say we expect it's probably largely quiet and then we'll see where the rest of the year shakes out but I'd say we're on a good light path initially from just the overall market activity Q1 before we can hit a little bit of a pause there.

Farouq Tuweiq: Maybe we'll see where the rest of the year shakes out. I'd say we were on a good glide path initially from just the overall market activity in Q1 before we kind of hit a little bit of a pause there.

Theodore O'Neill: Okay. Thanks very much. Good luck to you, Dan.

Daniel Bernstein: Thank you very much.

Okay, thanks very much and good luck to you, Dan.

Operator: Thank you. Our next question has come from the line of Hendi Susanto with Gabelli Funds. Please proceed with your question.

Thank you very much.

Speaker Change: Thank you. Our next questions come from the line of handy Susanta with Gabelli funds. Please proceed with your question. Good morning and then first of all to Dan. Thank you for all these many years and all the best for your next chapter.

Hendi Susanto: Good morning. First of all to Dan, thank you for all these many years, and all the best for your next chapter.

Farouq Tuweiq: I might have to call you up every quarter because I'll miss you so much.

Speaker Change: So I might have to call you up every quarter because I miss you so much.

Hendi Susanto: Please admit, Dan. My first question is, now that we have tariffs and tariff challenges, what is the latest status of the inventory correction and expectation on market recovery in some areas that you haven't discussed?

He's with me then.

So, my first question is, [inaudible]

Speaker Change: Now that we have Taris and Taris challenges, what is the latest status of the inventory correction and expectation on market recovery in some areas that you have been discussed?

Farouq Tuweiq: There was the pre-tariffs. We knew consumer would be a little bit challenged kind of later on through the year, but tariffs kind of changed some of that. Remember, tariffs, while we've said it's around 25% of our business, it's not all the same. We kind of look at the 10% coming out of China as the really big question mark on what happens there. The other 15%, I think is kind of acceptable, and some of that's going into kind of really growing end markets like defense. I would say, of that 15%, there's good market growth and recovery in some areas. It's the China piece that we're waiting to get some clarity on. I'd say overall, and this is kind of why we repeated what we talked about in February, where we do expect the recovery.

Yes, so could I...

Speaker Change: So there was a free terrorist, you know, we knew consumer bill a little bit challenged going to later on through the year, but tariff, you know, kind of changed some of that. But I remember tariff's while we've said it's around 25% of our business.

Speaker Change: It's not all the same. So we can look at a 10% coming out of China as the really big question mark on what happens there. The other 15% I think is kind of acceptable and you know some of that's going to kind of really growing into end markets like defense.

Speaker Change: So, I would say, you know, on that 15% there's good market growth and recovery in some areas. It's the China piece that we're waiting for you to get some clearing on.

Speaker Change: I take overall and this is going to why we repeated what we talked about in February where we do expect new recovery. So I think we just need to get a little bit clarity on Q2, but ultimately.

Farouq Tuweiq: I think we just need to get a little bit clarity on Q2, but ultimately, we think we'll get through it and have a little more clarity heading in. That's why we called out in our earnings release last night, and some of the, let's call it revenue that maybe got impacted with this pause that we're in right now.

Speaker Change: We think we'll get through it and have a little more clarity heading in. And that's why we called out in our earnings release last night, and some of the, let's call it revenue that maybe got impacted with its pause that we're entering right now.

Hendi Susanto: Of the 10% of sales that has exposure, any insight into how much of those where Bel Fuse has a single supplier positions, like Bel Fuse is the only supplier? Is there also any insight where customers may have multiple suppliers, but all of those have the same challenge? In other words, everyone is on par with one another, and there's no alternative of shifting to, let's say, non-China location?

Speaker Change: Yes. And then of the 10% of sales that has exposure, any insights into how much of those where Bel Fuse has.

Bel Fuse.

a single, um

Speaker Change: Supplier positions like Bel Fuse is the only supplier and then any else and if there are Also an insight where customers may have multiple suppliers, but all of those have the same challenge in other words It's a everyone is on on par with one another and there's no

Alternative of like shifting to, let's say like non-China location.

Farouq Tuweiq: Yeah. I appreciate the question. I'd say it kind of runs the gamut. Some of it is we're sole source, and some of it is multi-source. Some of it is highly engineered custom work that we do, and some of it is commodity, like some of our consumer stuff. I would just say it runs the gamut. That's why even when we do look within that number, it's not one big brush where we could say, Okay, it all goes out the window or all stays. Right? It will be a few different shades of that. To your point about maybe some of the more kind of commodity stuff, could somebody switch buying from, let's say, China to a place in Vietnam? Sure, it's not like Vietnam today has zero tariffs, right? It is better tariff level, but China has a lot of efficiencies, right?

Oh

Speaker Change: Yeah, I appreciate the question. The update could have run the gamut. Some of it is we're soul source and some of it is multi source. Some of it is highly engineer custom work that we do and some of it is camaraderie like to work it's numerous stuff.

So I would just say it runs the gamut.

Speaker Change: so that's why you know even when we do look within that number it's not one big brush where we could say okay it all goes out the window or all stays.

Speaker Change: Right, so it will be a few different shades of that.

Speaker Change: Do your point about maybe some of the more commodity stuff could somebody switch buying from let's say China to a place in Vietnam. Sure, but it's not like Vietnam has zero tariffs.

Farouq Tuweiq: Mathematically, sure, slower tariffs, but as we think about the efficiency side of things, China still is very good into that world. Will we expect maybe to lose some of that in more commodity stuff? Sure. I think there's a lot of wait and see just in the market right now. Again, our industry, switching is not the easiest of choices to happen overnight. Generally, there needs to be a little bit of a plan for it.

Speaker Change: Right, so it is better terra level but China has a lot of efficient seats right so mathematically sure it's lower terra.

Speaker Change: But you know, as we think about the efficiency side of them, you know, China still is very, very good into that world. So will we expect maybe to lose some of that in more quantities of short?

Speaker Change: But I think there's a lot of weight I'm seeing just in the market right now because again our industry, you know switching is not the easiest of choices to happen overnight. Generally there needs to be a little bit of a plan for it.

Hendi Susanto: Yeah. May I clarify how much exposure Enercon business has to tariff?

Speaker Change: Yeah, and it may satisfy how much exposure and their own business has to tariff.

Farouq Tuweiq: Yeah. I would say we do have some of their product that gets shipped in from Israel, so that would get tariffed. Maybe a couple other locations as well. Remember, that's all kind of largely defense sole source, right? That stuff, we are passing it on. I would say that's a high switching cost. Again, nobody likes paying those, but I think those we feel solid about or more comfortable with.

Speaker Change: Yeah, so I would say, you know, we do have some of their products that get shipped in from Israel, so that would get tariffed.

Speaker Change: And, you know, maybe a couple other locations as well. But remember, that's all kind of a largely defense soul source, right? So that's stuff.

Speaker Change: You know, we are passing it on. I would say that's a high, high, high switching cost. Again, nobody likes paying those, but I think, you know, those we feel solid about for more comfortable with.

Lynn Hutkin: The majority, Hendi, there is, as you know, there are a couple of manufacturing facilities for Enercon in the US, and part of their production process brings in partially assembled product from the Israel site. It's largely intercompany. The tariffs would be at Bel's cost currently. To Farouq's point, everything goes into defense for the most part.

Speaker Change: And the majority, a handy there is, as you know, there are a couple of manufacturing facilities for EnterCon in the U.S.

Speaker Change: And part of their production process brings in, you know, partially assembled product from the Israel site, so it's largely inter-company so the tariffs would be at, you know, the bells cost currently, but to first point, everything goes into defense.

Hendi Susanto: Got it. Yeah. This is a hypothetical question. Let's say if tariff persists, based on how you dealt with tariff in the past, do you foresee negotiation on a customer-by-customer basis? Do you expect a quick or prolonged negotiation? What are some lessons learned from, let's say, negotiation on how to split the tariffs with your customers in the past?

for the most part.

Speaker Change: And then this is the hype of these questions, like, but let's say it tariffs persists based on how you dealt with tariffs in the past.

Do you foresee negotiation on a customer by customer basis?

Speaker Change: And then do you expect like a quick or like prolonged negotiation like what are some lessons learned from that's like negotiation on how to split the tariffs with your customers in the past.

Farouq Tuweiq: I think I'll keep the commentary there a little bit high level, Hendi. Generally, our nature of our business, it's customer to customer, right? Any time we do a purchase order or order or anything, it's customer to customer. Therefore, we're not just putting some things on a shelf and then people come buy them, right? Everything we do is really one-to-one. Within those one-to-one, there's different level SKUs within a customer of what products we're selling, right? Again, it's hard to paint a broad brush. Generally, our approach is we're not really in a position to be eating the tariffs. Our industry, broadly speaking, and including Bel Fuse, did that back in 2018, 2019. We've been operating under those tariffs. The industry's done that. Now, it's a different dollar amount, to your point.

Speaker Change: Yeah, I think I'll give the the commentary. They're a little bit high level Hindi, but generally our nature of our business it's customer to customer right so so we're so anytime we do a P purchase order order or anything it's customer to customer so therefore we're not just putting some things.

Speaker Change: on a shelf and then people come by so it's everything we do is really one-to-one. Within those one-to-one, there's different levels skewed that they're in a customer of what products were selling, right? So again, it's hard to paint a broad brush.

Speaker Change: You know, we're not really in a position to be eating the terrorists.

and with you know our industry broadly speaking

and including Bel Fuse did that back in 2018-2019.

Speaker Change: And we get up under those tariffs and the industry's done that now. It's a different dollar amounts to your point.

Farouq Tuweiq: For us, from a scale perspective, the kind of value engineering that we bring, we're not really in a position to be eating those things. The other thing I would say is roughly 70%, and Lynn correct me if I'm wrong, of our imports are coming into the US. Our customer is the importer of record. What that basically means is we're delivering the product somewhere, let's say, for example, in Hong Kong, and they're bringing it into the US, so they're dealing with the tariffs, right? So on. I think that's a pretty important thing. Ultimately, the tariffs are getting paid, but we're not the ones that are standing front and center on that.

Speaker Change: But for us, from a scale perspective, the kind of value engineering that we bring we're not really in a position to be getting those things. The other thing I would say is roughly 70%.

Speaker Change: of our imports are coming to the U.S. Our customer is the importer of record.

Speaker Change: And with that, basically means we're delivering the products somewhere, let's say, for example, in Hong Kong, and they're bringing it to the US of their dealing with the tariffs, right? And so on.

Speaker Change: So, and that thing that's a pretty important thing. I mean, ultimately the tariffs are getting paid, but we're not the ones that are standing front and center on that. So, again, we realign our shipping, let's say routes.

Farouq Tuweiq: Again, we realigned our shipping, let's say, routes over the last 2, 3 years to include more of this importer of record off to the customer versus us getting into the shipping business. One way of saying is it's all 1-to-1, and our operating mantra, barring any exceptions, is to pass it on.

Speaker Change: over the last two or three years to include more of this record of import and records off to the customer.

Speaker Change: versus us getting into the shipping business. So, long way of saying is, you know, it's all one-to-one and our operating mantra of barring any exceptions is to pass it on.

Hendi Susanto: Thank you so much, Dan, Farouq, Lynn, and Gene.

Thank you so much, Dan, Parok, Lynn, and Ian.

Farouq Tuweiq: Thank you.

Hendi Susanto: Thank you.

Lynn Hutkin: Thank you, Hendi.

Operator: Thank you. This now concludes our question and answer session. I would now like to turn the floor back over to Daniel Bernstein for closing comments.

Thank you. Thank you.

Speaker Change: Thank you. This now concludes our question and answer session. I would now like to turn the floor back over to Dan Bernstein for closing comments.

Daniel Bernstein: Again, I'd like to thank everybody for following us, and I can't tell you how pleased I am to have Farouq Tuweiq and the executive team we put together over the past two years. As I said, I'm extremely successful on the future of the company. Once again, I truly want to thank everybody for your support over these years. You made my job a lot easier. Generally, I would say I'd speak to you in a quarter, but I'm not going to speak to you in a quarter. I'll speak to you at the annual meeting if you ever want to come to the annual meeting. Thank you.

Dan Bernstein: Just again I'd like to thank everybody for following us and I can't say I'm pleased I am now for Rooka Boy and the executive team we put together over the past two years.

Dan Bernstein: and I said I'm extremely successful on the future of the company and once again I truly want to thank everybody for your support over these years. You made my job a lot easier.

Dan Bernstein: So gentlemen, I would say I'd speak to you in a quarter, but I'm not going to speak to you in a quarter, but I'll speak to you at the annual meeting if you ever want to come to the annual meeting.

Operator: Ladies and gentlemen, thank you for your participation. This does conclude today's teleconference. You may now disconnect your lines, and have a wonderful day.

Thank you.

Speaker Change: Ladies and gentlemen, thank you for your participation. This does conclude today's teleconference. You may now disconnect your lines and have a wonderful day.