Q1 2025 Bel Fuse Inc Earnings Call

Lynn Hutkin: Conference Center. May I have your name, please?

Rachel Smith: This is for Rachel Smith.

Lynn Hutkin: For which call?

Rachel Smith: Bel Fuse Inc.

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 in which require operator assistance during the conference please press star zero on your telephone keypad.

Lynn Hutkin: One second.

Speaker Change: These material risks summarized in the press release that we issued after market close yesterday additional information about the material risks and other important factors that could potentially impact our financial performance and cause actual results to differ materially from our expectations is discussed in our filings with the Securities and Exchange Commission.

Speaker Change: Including our most recent annual report on Form 10-K, and our quarterly reports and other documents that we have filed on 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.

Speaker Change: And our SEC filings are all available at the IR section of the website joining me today on the call is Dan Bernstein, President and CEO.

Speaker Change: Swank, CFO and Linda <unk>, Vice President of financial reporting and Investor relations with that I'd like to turn the call over to Dan Dan.

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

Dan Bernstein: Our recent acquisition and the Com continued to perform well and has helped to.

Dan Bernstein: To further diversify bell for my end markets and geographic perspective during the first quarter of 2020, followed the aerospace defense Alright, easy end markets accounted for 38% of our global sales, making it our largest end market segment.

Dan Bernstein: Other highlights during the first quarter included AI, we can Craig.

Dan Bernstein: Contributed to four 6 million of revenue and space, which contributed 2.3 I remember that during the first quarter of 2025. This represents double digit growth within each of these end markets compared to the first quarter of 2024.

Dan Bernstein: Other factors impacting the quarter were lowest sales into our consumer market related to a band Chinese supplier E mobility, and a normalization of sales into a real end market. We are definitely entering a new challenging phase with a global tariffs. However, based on our diversification strategy or man.

Dan Bernstein: Taxi and our product portfolio I am confident that we will navigate through this with that I'm, turning the call over to Lynn Lynn.

Lynn: Thank you Dan from a financial perspective, we observed continued margin expansion when comparing Q1 'twenty five to Q1 'twenty four.

Lynn: For the first quarter of 'twenty, five reached 152.2 million, reflecting a 18, 9% increase from the first quarter of 'twenty four.

Lynn: The strong performance within our A&D end market and the improvement in sales in our magnetic segment helped to offset the year over year decline in our networking consumer rail and E mobility end markets within our power segment. During the first quarter of 2025 compared to the same quarter of 24.

Lynn: Our gross margin improved to 38, 6% in Q1, 'twenty 25 up from 37.5% in Q1, 'twenty 'twenty four with these profitability gains primarily driven by our magnetics and connectivity segments.

Lynn: Gross margin increased by 110 basis points in Q1, 2025 compared to Q1 2024.

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

Lynn: Now turning to our product groups.

Lynn: Sales of power solutions and protection in the first quarter of 2025 amounted to $83 1 million, reflecting a.

Lynn: 37.9% increase compared to the same period last year.

Lynn: <unk> was largely driven by our new aerospace and defense exposure, which contributed $32 4 million for the power segment for the first three months of 2025.

Lynn: On the consumer side sales decreased by 2.8 million in Q1 25 compared to Q1, 'twenty four primarily due to the trade restriction imposed on one of our suppliers in China as mentioned in our prior earnings calls.

Lynn: Additionally, given the E mobility sales were still robust in Q1 of 'twenty 'twenty four we saw a $1.6 million year over year decline in this end market in Q1 25.

Sales into the rail end market has started to normalize coming off an unusually strong 2024, resulting in a 1.5 million dollar reduction during Q1, 'twenty five compared to the same period of 24.

Lynn: These declines were partially offset by a $3 8 million dollar increase in sales to our AI customers.

Lynn: Bringing total AI sales for Q1 25 to $4 6 million.

Lynn: Further circuit protection sales increased by 700000 in Q1 25 compared to Q1 'twenty four.

Lynn: The gross margin for the power segment in the first quarter of 'twenty five was 42.6%, reflecting a decline of 140 basis points from Q1, 'twenty 'twenty four let's.

Lynn: This decrease was primarily attributed to nonrecurring items that were recorded at a 100% gross margin in Q1 'twenty 'twenty four.

Lynn: On the plus side, our power them gross margins were favorably impacted by appreciation of the U S dollar versus the Chinese renminbi and the.

Lynn: 2025 quarter.

Lynn: Turning to our connectivity solutions group sales for Q1, 'twenty twenty-five reached $50 7 million a decrease of six 5% compared to Q1 'twenty 'twenty four.

Lynn: Sales for commercial air applications. In Q1, 2025 were $12 9 million, which represents a decline of 1.7 million or 12% from Q1 'twenty 'twenty four.

Additionally, sales into the industrial end markets fell by 800000 compared to the same period last year.

Lynn: 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.

Lynn: Reached 2.3 million in Q1 25.

Lynn: Up by 15% from Q1 24.

Lynn: The gross margin for this group was 37, 9% in the first quarter of 2025, representing an improvement of 180 basis points from Q1, 'twenty 'twenty four.

Lynn: This margin expansion was largely attributable to operational efficiencies achieved through facility consolidations completed in 2024.

Lynn: Along with favorable foreign exchange impacts related to the peso.

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

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

Lynn: The gross margin for this group improved to 24, 7% in Q1 2025 compared to 16% in Q1, 'twenty 'twenty four marking an 870 basis point improvement year over year. This.

Lynn: 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.

Lynn: At the consolidated level across all product segments. Our total backlog of orders reached $395 $7 billion, reflecting an increase of $14 1 million or 4% compared to December 31 2024.

Lynn: R&D expenses reached $7 2 million in Q1, 'twenty five a higher level compared to Q1, 'twenty four primarily due to the acquisition of Entercom and the inclusion of their expenses.

Lynn: We expect future quarters to generally align with the coupon twenty-five expense.

Lynn: Selling general and administrative expenses totaled $29 5 million.

Lynn: Representing 19, 4% of sales.

Lynn: Compared to the previous year SG&A increased by $4 6 million in 2025.

Lynn: Again, the primary factor contributing to this rise in SG&A is the inclusion of an iconic sponsors.

Lynn: Within SG&A increases were seen in legal fees salaries fringe benefits and amortization expense.

Lynn: Which were largely offset by a reduction in incentive compensation.

Lynn: As there are no unusual items in SG&A Junkie 125, we believe this level of expenses generally indicative of the expected run rate for future quarters in 2025.

Lynn: Looking at our balance sheet and cash flow, we finished the quarter with $67 million in cash and securities.

Lynn: A $2 million from the $69 million and we reported at the end of 2024.

This change was mainly due to the repayment of long term debt amounting to seven 5 million.

Lynn: 2.8 million spent on capital expenditures and the dividend payment of $829000.

Lynn: These cash outflows were partially offset by $8 1 million and net cash generated from operating activities.

Farooq: I would now like to turn the call over to Farooq.

Farooq: Thank you Lynn and good morning, everybody.

Farooq: After coming out of a solid and predictable first quarter, we have less clarity as we look ahead to the second quarter.

Farooq: Could you frame, what we are seeing let's first talk about our base business demand putting tariffs aside.

Farooq: As we mentioned on our February call, we were largely optimistic entering into 'twenty to 'twenty five with growth expected across the business with varying degrees.

Operator: Greetings, welcome to the Bel Fuse Q1 2025 Earnings Call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star 0 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.

Farooq: Said magnetics would expect it to be our largest percentage of grower this year.

Farooq: Followed by.

Farooq: On a pro forma basis.

Farooq: The end markets of defense space.

Farooq: The overall Boston growth.

Farooq: We expected to see a rebound in networking distribution sales as we went through the year predominantly in the second half.

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.

Farooq: Year over year challenges this year will largely be in our power segment with tough comps through 2024 for the rail and consumer markets and continued softness in mobility.

Farooq: Each of these comments from our February call still the current state of affairs of our base business.

Farooq: Good news is aside from tariffs there are no changes to report at this time.

Farooq: Now onto the tariff discussion to provide some broad context.

Farooq: Separately, 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.

Farooq: The other 75% the majority of our businesses either manufactured outside the U S and shipped to customers located outside of the U S or is manufactured in the U S for local consumption.

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?

Farooq: Of the 25% a little over 10% as China with the balance largely coming from Europe, India, Israel, and Mexico, along with a few other places keeping.

Farooq: Keep in mind that even these imports are not all equal in certain of our products imported into the U S come through various trade advantage stones. For example, our Mexican core products are covered under the U S. MCA trade agreements and these are currently exempt from tariffs a similar trade agreement exists between the.

Farooq: The us and the Dominican Republic, the Caribbean broader nations.

Farooq: However, those do appear to be subject to tariffs today.

Farooq: <unk> been as it relates to imports from China.

Farooq: One of our customers who are the importers of record operates within free trade zones in the U S.

Farooq: Therefore can receive products into the U S and ship it back out of the U S. All wanted tariff free basis.

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 from 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 $4.6 million of revenue, and space, which contributed $2.3 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.

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

Farooq: China has its own concern as we all know about so we have we believe that.

Farooq: Yes.

Farooq: As for the rest we feel clarity will come in Q2 as agreements are reached with friendly nations, such as India and Israel.

Farooq: Bottom line is we will be looking to pass all tariff exposures onward.

Farooq: As of today.

Farooq: Started to see pushout requests from some customers related to products coming into the U S from China.

Farooq: Specifically until there's further clarity.

Farooq: 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 and yesterday afternoon's earnings release, We noted our revenue guide for Q2 of a range from $1 45 to $1 $55 million.

Farooq: 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 downside related to tariffs.

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 turning the call over to Lynn. Lynn?

Farooq: Please keep in mind. This is a highly dynamic and changing environment that we're all working closely with our customers to navigate.

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 segment helped to offset the year-over-year decline in our networking, consumer, rail, and e-mobility end markets within our Power segment during Q1 2025 compared to the same quarter of 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 and Connectivity segments. Gross margin increased by 110 basis points in Q1 2025 compared to Q1 2024.

Farooq: Today, we are better prepared to deal with these uncertain times as we have built a more nimble and resilient organization in recent years.

Farooq: Including a 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.

Farooq: While tariffs do create uncertainty. They also do creates 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 two customer base as a means of mitigating fluctuations that can happen with our tier one customer volumes mutuals will enable our sales team to engage.

Farooq: In digital data mining and opportunity pipeline tracking.

Farooq: These items, coupled with enhancements to our commission structure and to drive growth within new customers on.

Farooq: On the procurement side a series of insurers are currently underway rising geopolitical tensions are driving tariff increases in trade restrictions.

Enforcing the need for supplier diversification and regional sourcing strategies.

Farooq: Further inflationary pressures are resulting in higher wages in the countries in which <unk> operates emphasizing the need for further automation.

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

Farooq: 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 keep your eye tracking cost savings are expected to be realized over the next 12 to 18 months driven by price negotiation spend consolidation I didn't find alternate suppliers automation and other cost optimization.

Farooq: Opportunities.

Farooq: These are all things we are excited about.

Farooq: From a liquidity perspective, this has become more of a focus for us given the market and near term outlook as a reminder.

Farooq: Our credit facility is set to expire in September 2026, and our plan was to refinance our 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.

Farooq: Given the current macro environment and uncertainty of how the market will look this summer.

Farooq: We decided it best to be more proactive in this regard versus waiting until the summertime.

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. 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.

Farooq: We are currently and we have launched the 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 anticipate this will be finalized in the next week or two.

We're focused on debt pay down as well.

Farooq: 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 adult use due to our various annual payments such as ICU licenses insurance dividend and annual bonuses.

Farooq: To put that in perspective in April alone.

Farooq: This coming Monday, Tuesday, where you would have paid $10 million out further.

Farooq: Against our debt and expect to pay down an incremental 10 to 15 million by end of this quarter, So may and June.

Farooq: In summary, while we are encouraged by our business demand and internal initiatives on the sales and procurement fronts current tier tariff landscape cannot be ignored.

Lynn Hutkin: 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. 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.

Farooq: Bill will almost certainly being 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.

Farooq: While the current levels of China tariffs are unprecedented tariffs in general are not new to bill and we have successfully navigated them in the past.

Farooq: Importantly, our business today is more diversified and less dependent on China than it has ever been.

Farooq: We will continue to take actions within our control to mitigate those factors outside of us.

Farooq: I'll turn the call over to Dan.

Speaker Change: Alright, Thank you Farooq before opening the call for questions. As this is my last earnings call as the CEO I wanted to take this opportunity to thank all our associates around the world for their tremendous level of hardware hard work and dedication to bell over the many years to think back into the business. My father stands at over <unk>.

Speaker Change: 75 years ago, you 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 and to the Bell shareholders. Thank you for your support and belief in Val as we grow and continue to evolve I am grateful that you have chosen to be part of bell during this journey.

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

Speaker Change: As a large shareholder myself I am confident.

Speaker Change: And the executive team will do an excellent job with that.

Darrell: I'd like to turn the call back to Darrell to open up the call for questions.

Darrell: 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.

Darrell: 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 and may be necessary to pick up your handset before pressing the star keys.

Darrell: Moment, please while we poll 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.

Bobby Brooks: Great Great column, the tariff impact that's really appreciated it seems like you guys have really good installation from it but I.

Lynn Hutkin: 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. 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.

Bobby Brooks: I was just hoping maybe could you just discuss it a little bit by product segment.

Speaker Change: <unk> kind of contrasting how maybe magnetics power and connectivity or separately impacted maybe it is all the same between all three but I feel like there's probably a little bit divergence between theory.

Glenn: Sure Hi, Bobby this is Glenn.

Glenn: So by products segment, I guess, let's first start with connectivity. 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 for for local consumption and in each of those regions. So there.

Glenn: A very small amount of impact there so largely unimportant, let's say.

Glenn: On the power side, we estimate that about 60% or thereabouts of power is not impacted by the U S tariffs and the balance of power you know as you know, there's there's manufacturing and and.

Glenn: In China, Slovakia, Israel. So a portion of those goods that are manufactured there do come in to the U S are in are currently subject to tariffs.

Lynn Hutkin: 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. 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.

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

Glenn: There is a portion that are you know is manufactured in the Dr which as Farooq mentioned is currently subject, even even though it is under CAFTA.

Glenn: It still appears to be subject to those 10% tariffs that are in place today.

Glenn: So that's that's how it breaks down by product group.

Glenn: Got it.

Speaker Change: Super helpful color, and then second connectivity of the past several quarters has kind of been the bright spot for you guys in terms of like year over year growth. So I was a little surprised to see it down six 5% this quarter.

Speaker Change: You did mentioned 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 evolves going forward.

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

Speaker Change: Thanks.

Speaker Change: Yeah. So on the connectivity side the the year over year decline was largely driven by the.

Speaker Change: The reduction in commercial air and a lot of that just has to do with with with timing, where you know their production levels are still down a bit.

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, 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.

Speaker Change: So that that was the main driver there was also some softness in the industrial area.

Speaker Change: But the balance of the the segment was still strong and defense was up year over year. So I would say largely commercial air was the driver there.

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

Speaker Change: Hope and expectation of continued to ramp up the output as we go through the year in which you cannot the requests 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.

Speaker Change: With all the Union negotiation, so all that stuff's going to work on the system I think when we when we look at the outlook. The backlog, we definitely expect this to to recover.

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: But just happened to play out here in this way.

Speaker Change: Fair enough that's that makes a lot of sense and then.

Speaker Change: Maybe last one for me.

Speaker Change: Obviously, you guys gave some pretty good nominal color on the AI.

Speaker Change: As you know it was like $4 6 million in the quarter and that was up double digits year over year could you maybe just rehash for us to remind I think it would be helpful. I'm sure everybody on the call to get reminded of.

Speaker Change: My understanding it's really the power segment as that has seen the AI benefit and could you just discuss like who these I know sometimes you don't have visibility because it's going through distribution, but any visibility you can have on like the type of customers and ultimately what those products are being used for in the AI space.

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: That'd be helpful. Thank you.

Bobby Brooks: Yeah. So Bobby appreciate the question and as you called it out right when we call out when you think about it more.

Bobby Brooks: Because both of that some of our other products will make their way into AI type applications through various channels, including some of our networking customers who are we even talk about AI. This is going to double.

Bobby Brooks: Floor base case, if you will.

Bobby Brooks: Yeah that.

Bobby Brooks: Our revenue is largely going to GPU.

Bobby Brooks: Manufacturers that want to be very careful with saying that because we are not alive to that kind of headline.

Speaker Change: Grabbing guys. The large public companies that we all read about we are focused generally on.

Speaker Change: More private heavily funded next gen type GBP manufacturers in the U S largely.

Speaker Change: So.

Speaker Change: That's how really a testament to how belt does things very well, which is we do a lot of handholding with our engineers customer engineers, we co develop and we become a true partner to them throughout their journey of growth. So.

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 will 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 onwards. 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. In yesterday afternoon's earnings release, we noted a revenue guide for Q2 of a range from $145 to 155 million.

In short I would think of these as GPU.

Speaker Change: Manufacturers.

Speaker Change: Super Super helpful color I appreciate the call and congrats on the strong <unk> printing.

Dan Bernstein: Dan tiers for the next cheers.

Speaker Change: The next step in your career.

Speaker Change: Thank you for all Bell model to return to the queue.

Dan Bernstein: So for the kind words, thanks Robert.

Speaker Change: Thank you our next questions come from the line of James Ricchiuti with Needham <unk> Company. Please proceed with your questions.

James Ricchiuti: Hi, Good morning, Hey, Dan ill Echo my congratulations as well wish you the best.

Speaker Change: Farooq and win a couple of questions.

Speaker Change: I'm wondering.

Farouq Tuweiq: 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 downside 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. 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.

James Ricchiuti:

Speaker Change: You could talk about the NFL business, what you're seeing in that business, maybe including yeah. If you can 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 March quarter.

James Ricchiuti: Yeah, So I'd say.

James Ricchiuti: Jim.

James Ricchiuti: Kind of.

James Ricchiuti: It is what it is it's what we thought it was which is all good.

James Ricchiuti: Right.

James Ricchiuti: We think it's better than what we thought it was.

Speaker Change: [laughter] Golar.

James Ricchiuti: So I'm just kind.

Speaker Change: Come on.

Speaker Change: No. It's a great business there we go.

Speaker Change: It's interesting because Dan and I and.

Farouq Tuweiq: 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 team to engage in digital data mining and opportunity pipeline tracking. These items, coupled with the enhancements to our commission structure, aim to drive growth within new customers. On the procurement side, a series of initiatives are currently underway. Rising geopolitical tensions are driving tariff increases and trade restrictions, reinforcing the need for supplier diversification and regional sourcing strategies. Further, inflationary pressures are resulting in higher wages in the countries in which Bel operates, emphasizing the need for further automation. 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.

Speaker Change: Steve or just.

Speaker Change: In Israel, the first roughly the first week in April so we're kind of kind of a.

Speaker Change: To date there.

Speaker Change: But you know as you remember Jim we initially talked about this back in September then we closed that in November we talked about it in February and here we are again.

Speaker Change: I think the theme of all throw all these conversations is continued robustness on growth.

Speaker Change: Excellent excellent team technology alignment with customers' financial profile.

Speaker Change: Is kind of the growth side of things the margin profile, so to Dan's point.

Speaker Change: We're very excited about having the team and also as we just think about on the bell side of things right today.

Speaker Change: Ed.

Speaker Change: Andy is roughly 38% of our business in the quarter. So it's our largest market.

Speaker Change: Good tail winds.

Farouq Tuweiq: Cost savings are expected to be realized over the next 12 to 18 months, driven by price negotiation, spend consolidation, identifying of 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. 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.

Speaker Change: And obviously as you know Entercom is both suppliers and to U S.

Speaker Change: Israel and some other places such as the Europeans in India should we continue to be very excited about that we also do see the opportunity to.

Speaker Change: To further accelerate our growth in places like Europe and in America.

Speaker Change: So theres a lot of exciting.

Speaker Change: Things for it so it is at a minimum as advertised but it's definitely ahead for US which is great. Dan do you want to add to that or reserve I'll cover.

Dan Bernstein: I think again, we do we were surprised again, how much we do like it.

Speaker Change: We tend to be somewhat hesitant.

Speaker Change: 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 there's two initiatives, 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.

Farouq Tuweiq: We are currently, and we have launched the 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 IP licenses, insurance dividend, and annual bonuses. 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.

Speaker Change: You see a lot of upside so I think it's I think it's a great deal for the company and our shareholders.

Speaker Change: Price was helpful.

Speaker Change: It was a very as you know a very excellent price compared to what was being sold in the marketplace today.

Speaker Change: Yeah.

Speaker Change: And maybe a little early.

Speaker Change: Improved he may have alluded to this in the end.

Speaker Change: So you just keep it.

Speaker Change: Are you seeing any revenue synergy opportunities yet or is that something you are.

Speaker Change: Basically coming later on.

Speaker Change: Yeah no so.

Speaker Change: Remember you know putting aside this is all defense right, which takes a little bit of while so really it starts out with filling up the funnel and let's call. It a new opportunities. So as we think about the funneling process, we definitely see some of the benefits of flagging things, let's say between the Entercom folk.

Farouq Tuweiq: 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 industry 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. 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 Dan.

Speaker Change: And the Bellevue spokes and we are we have a program in place too.

Speaker Change: Kind of really push this to ensure that our sales teams and our business development market intelligence folks are alive.

Speaker Change: So as we see about filling in the funnel right beyond what was already in the fall right just the benefits of synergies.

Speaker Change: Definitely seeing some of those opportunities and we have referred some of these opportunities to each other if you will.

Speaker Change: So we're definitely excited but in terms of monetization.

Speaker Change: This is a little bit of a longer design cycle, but step one fill up the funnel, which we are seeing and doing which was good to see and then when we do look at the underlying fundamentals of what's going on in broader defense.

Daniel Bernstein: All right. Thank you, Farouq. 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 the 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 Farouq and the executive team will do an excellent job.

Speaker Change: Things are moving quicker just given the global world that we're living in today. So we think that potentially be an accelerant than base normal times right. So I think we are in a.

Speaker Change: The good market and a good time.

Speaker Change: We have the right team around the table. So I think all of that should yield pretty good outcomes for us.

Speaker Change: Final question for me is just.

Speaker Change: I think last call you talked about a couple of facility consolidations and the the product transition line of fuse line in China any update and any other.

Speaker Change: Plans for Consol.

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

Speaker Change: The consolidation or changes in the footprint just given what we're seeing out in the market.

Speaker Change: Yes, it's.

Operator: Thank you. We will now be conducting a question and answer session. 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: It's a good question there Jim So correct, we are fully out of the views.

Speaker Change: We have a fully empty facility I think we are out there the first maybe a week or two in January. So that's another one that were they were fully out and now we're just in the process of winding down for me.

Speaker Change: And in a building perspective, so that's good to say, we're seeing the cleanup and that that operational structure, which is which is great to see.

Speaker Change: In terms of operations of everyone's kind of proceeding.

Speaker Change: Nothing new to announce maybe just extend your question there are a little bit.

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 magnetics, power, and connectivity 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.

Speaker Change: You alluded to it in my comments, obviously, there is China and as everybody else in this day and age that we're living in.

Speaker Change: We had started.

Speaker Change: Moving some of our products both on the power and the magnetic side from China into our India facility Remember, we acquired the India facility there back in 2021, and that's kind of our.

Speaker Change: Porthole there into India. So as we started that roughly I think Q3 last year to Q4, 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 so as we look towards the rest of the year, we will be looking to.

Lynn Hutkin: Hi, Bobby, this is Lynn. 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.

Speaker Change: Shift more let's call it at risk revenue into our India operations.

Speaker Change: As we said.

Speaker Change: Earlier roughly 10%.

Speaker Change: Our revenue is subject to China.

Speaker Change: And we will want to.

Speaker Change: Some of that as we can into a two extended weekend into other places. So I'd say the team has really done an excellent job on being nimble and forward with along with tight partnership with our customers.

Speaker Change: To really try to kind of move this thing that our teams have been great both in China and India.

Speaker Change: So that maybe an extension of your question there, Jim a little bit, but that's not to be slipped out 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: Got it thanks very much.

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: Youre welcome.

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

Christopher Glynn: Thanks, Good morning, everyone.

Christopher Glynn: As much as through added to insight and execution over the past few years, it sounds like youre still adding some value.

Christopher Glynn: Value to the his.

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.

Christopher Glynn: His curve there with the.

Christopher Glynn: My son answering entercom.

Christopher Glynn: Good luck in the future.

Christopher Glynn: What did test about the.

Christopher Glynn: $8 million to $10 million allowance there couple of things do you see that as deferred or migrated from bell and.

Christopher Glynn: Hypothetically say if you'd think.

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

Lynn Hutkin: Yeah. 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.

Chris: Yes, so that's a good question Chris right. So what we're seeing is I'd.

Speaker Change: Okay.

Speaker Change: Largely maybe the distributors, but also some Oems as well.

Speaker Change: <unk>.

Speaker Change: I'm going to put some broad strokes here, because there's always obviously exceptions.

Speaker Change: If youre going to take product coming in from China, and pay let's use round numbers, 150% tariff and.

Speaker Change: And then the tariffs gets resolved for let's say in a month.

Farouq Tuweiq: I think, Bobby, based on all the public comments that's out there, right, there's that hope and expectation of continuing to ramp up the outputs as we go through the year, and we're seeing a lot of requests 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: But all of a sudden you have this really expensive product.

Right.

Speaker Change: Page four to bring it into the U S. And then you know.

Speaker Change: How do you sell that right now the gates of cheaper products or lower tariffs come in.

Speaker Change: So as people Russell with having expensive goods coming in that's one piece of it. So we're seeing a few folks just say listen let's just take a breather here I got some component tree in the inventory, let me too into that inventory just until we get a little bit of clarity just to your question what happens.

Bobby Brooks: Fair enough. That makes a lot of sense. Maybe 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, and that was up a double digits year-over-year. Could you maybe just rehash for us. I think it would be helpful for everybody on the call to get reminded of, my understanding, it is really the power segment that is seeing that AI benefit. Could you just discuss. I know sometimes you do not have visibility because it is 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 would be helpful. Thank you.

Speaker Change: I think theres a few different outcomes one people really go deep into their inventory and becomes over depleted and then all of a sudden you.

Speaker Change: It could potentially start getting this let's say makeup ordering or acceleration of ordering so more of a pushout type approach so that as a possibility.

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

Speaker Change: With some of these great trade zone and that we keep hearing about and what happens to the others right. So if you put in perspective, India. Today is at 27% I believe right. So if today, it's 150 tera versus 27%.

Speaker Change: That's a pretty big difference.

Speaker Change: If India goes to zero and China. It comes down to 40% or 50% I think you might be back into the same game because theres a lot of efficiencies to be gained in places like China.

Farouq Tuweiq: Yeah. Bobby, appreciate that question, and as you called it out. 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.

Speaker Change: It's hard to just look at China, because we've 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.

Speaker Change: Dov in Thailand, which are not necessarily places for us.

Speaker Change: Could it be this is a push outs or a pause yes.

Speaker Change: Could it be you know you.

Speaker Change: You get a I don't want to say a flood gate, but.

Speaker Change: Makeup orders if you will sure could you also lose some of this revenue I'd say, maybe yes, and more of a commodity consumer business plus all of our other business I'd say, it's a little bit more sticky.

Speaker Change: So the answer is yes, we think there could be.

Speaker Change: 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.

Farouq Tuweiq: 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. 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.

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.

Well the dust will settle in I think it sounds like the public chatter I think there was mixed messages.

Speaker Change: Now with China, but we are seeing potentially some people try to get to something so I think people are just saying, let's just take a breather here unless they absolutely need it.

Bobby Brooks: Super helpful call. 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: And it could be different.

Speaker Change: Yeah.

Speaker Change: Great. Thank you for all that color and EM.

Speaker Change: Just wanted to dive into the networking market a little bit you know I think we have a good glimpse of.

Daniel Bernstein: Thank you for the kind words.

Farouq Tuweiq: Thanks, Bobby.

Speaker Change: That is playing through.

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

Speaker Change: Magnetics with the comparisons and some normalization there could you touch on networking as it pertains to the other two segments. Please.

Jim Ricchiuti: Hi, good morning. Hey, Dan, I'll echo my congratulations as well. Wish you the best. Farouq 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, 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.

Speaker Change: Yeah.

Speaker Change: Sure so on the power side.

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

Speaker Change: We have seen are.

Speaker Change: 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 this year, but in Q1 networking was down.

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

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

Farouq Tuweiq: There you go.

Daniel Bernstein: Don't undersell it, Farouq. Come on.

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 is largely a.

Farouq Tuweiq: Yeah, I know. It's a great business.

Daniel Bernstein: There you go.

Farouq Tuweiq: It's interesting because Dan and I, and Steve were just in Israel roughly the first week in April. 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. 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.

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

Speaker Change: Hey, Chris I don't deals with our expectation right, we're seeing kind of the backlog come in I should say throughout the quarter in general we've seen some very nice bookings.

Speaker Change: Come through and which kind of reaffirmed kind of what I was saying earlier about our outlook for the year.

Speaker Change: So.

Speaker Change: And then yeah.

Speaker Change: <unk> [laughter].

Yes.

Speaker Change: And last one for me.

Speaker Change: 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 it was designed.

Farouq Tuweiq: Obviously as you know, Enercon is both suppliers and to US, and Israel and some other places such as Europe 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 as 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: I think some things because of Covid, we still had the effects of COVID-19.

Basically everybody is focusing on sourcing and so forth.

Speaker Change: I think it's leveled off now there are certain extent.

Speaker Change: However, we are we are.

Speaker Change: We are pushing it hard and I think the point of bringing in a new.

Speaker Change: Head of revenue is really a go to market strategy is really focused on what do we have to do to jumpstart and do a better job than we have done in the past. So as Bruce mentioned, we're taking a whole unique different approach for us of how we go to market. The strategy were using had address second tier third tier customers.

Daniel Bernstein: I think again, we were surprised 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, but 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.

Speaker Change: Very fortunate to have the person that came to us.

Speaker Change: Came to earn the largest distributors in the world is revenue was about $1 6 billion and he oversaw over 500 people.

Speaker Change: So we do have high expectations for him to turn around.

Speaker Change: Our strategy of how we go to market going forward. So for US, we think theres too many exciting opportunities out there.

Jim Ricchiuti: That's helpful.

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

Speaker Change: That's an overarching view the aircrafts, we kind of lay it into kind of end markets, obviously, AI bucks that trend right. It's kind of a day I talked about and a defense right. We're seeing some nice stuff there obviously.

Jim Ricchiuti: 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: And so so I think our overarching theme is I think we're in a good place, but to Dan's point, we want more.

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

Farouq Tuweiq: Yeah, no. Remember, putting aside that this is all defense, right? 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, right beyond what was already in the funnel, right, 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: But in some areas just given the dynamics of the World run we're seeing some some good stuff you know what's interesting Dan's comments remind me is if you remember on our consumer side, we always talk about that Chinese supplier that had got banned in Q2 last year.

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

Speaker Change: Tariffs can move things a little bit here, but ultimately we want more going forward.

Speaker Change: Okay.

Speaker Change: Thanks, guys.

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. Then, 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, right? 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: Thank you our next questions come from the line of Greg Palm with Craig Hallum. Please proceed with your questions.

Speaker Change: Yeah.

Speaker Change: Good morning, everybody and then we'd just like to Echo my congratulations as well on a very successful 10 year career at Bell.

Speaker Change: Thank you so much.

Speaker Change: Can we maybe just start on on the quarter.

Speaker Change: No.

Speaker Change: Sort of at the upper end of the guidance I'm curious did you see any pull in of orders ahead of those tariffs.

Speaker Change: Yeah, no not so much. This go round, we saw the anniversary 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.

Jim Ricchiuti: All right. Final question from me is just, I think last call you talked about a couple of facility consolidations and the product transition line, 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?

Speaker Change: Okay, and as you kind of figure had 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 a bigger question I just described.

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 say we're fully out now. We're just in the process of winding that out from a 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.

Speaker Change: Let me just answer that because I think the question is to you is where do we move.

Speaker Change: I think that was the concern we had four years ago, you know a lot of our competitors a lot of our customers moved to Mexico Vietnam.

Speaker Change: So at this point have been hit very hard and that's our biggest problem is we end up with.

Speaker Change: So and so forth, but we have done a good job of.

Speaker Change: Looking at building a base in India four years ago, We had no operation in India today, we have three different operations.

Speaker Change: In India I think.

Speaker Change: We're looking to I'm, sorry, and we're looking for a third so we really are focused.

Speaker Change: Fair ourselves to be able to move quickly if it needs to be.

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, and 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 into, to the extent that we can into other places.

Speaker Change: Okay.

Speaker Change: Yeah, and 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 you've got to make sure of that facility does what they needed to do customer approvals before you can move facilities in places like defense that takes a very long time and places so we're not doing kind of.

Speaker Change: More heavily commodity stuff so for us it takes a little bit of while.

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

Speaker Change: The question becomes is we've always contemplated where do we go in India was a very natural thing and I think we have a very friendly relations with India and I think ultimately all the body language indicates that we will work something out, but we have come to play in the past looking at places like in Thailand, and Vietnam and when we look at the tariff. So those guys got hit with.

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 kind of move this thing. Our teams have been great both in China and India. That, maybe an extension of your question there, Jim, 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: It's I'd say, thank god willing to spend all that money [laughter] moving.

Speaker Change: Moving to those places just didn't mean I'm gonna with some crazy tariffs. So I think we'll get some clarity on who is when nations, where really friendly with them. We think India will be in that and I think that's going to probably be a focus of ours.

Speaker Change: Yeah understood 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 you know.

Jim Ricchiuti: Thanks very much.

The annual in 'twenty four 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 are you seeing in that particular vertical.

Farouq Tuweiq: You're welcome.

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

Rachel Smith: 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. Good luck in the future. Wanted to ask about the $8 to $10 million allowance there. A couple of 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.

Speaker Change: It's a combination.

Speaker Change: It's interesting when we go after these kind of customers and to be clear.

Speaker Change: So it's a little bit of a different extents, but when we look at.

Speaker Change: 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 and when we looked at E mobility before he mobility cooled down right you align yourself with these customers to get in early design with them.

Speaker Change: As they start ramping up their sales efforts and getting customers you will see that you know a pretty big step function.

Speaker Change: I would look at the AI jump as people who've got a relationship with for a long time and as they start.

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

Speaker Change: Savings customers that we still probably are a relatively new ish type companies.

Farouq Tuweiq: Yeah. That's a good question, Chris. Right. What we're seeing is, I'd say, largely maybe the distributors, but also some OEMs as well. I'm gonna put some broad strokes here because there's always obviously exceptions. If you're gonna 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, right? That you have paid for to bring it into the US, how do you sell that, right? 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, I got some componentry in the inventory.

Speaker Change: And and.

Speaker Change: So theyre not.

Speaker Change: Like I said the main headline guys that you read into the newspapers.

Speaker Change: So these people are I'd say, the old newish customers, but for US newish means we've been with them for a while we've talked before but now new wishing myself you start seeing the revenue side of it.

Speaker Change: Understood Alright, a best of luck. Thanks.

Speaker Change: I appreciate it.

Speaker Change: Thank you our next questions come from the line of Theodore O'neill with Litchfield Hills Research. Please proceed with your questions. Thanks, very much and congratulations on the good quarter.

Speaker Change: So I was wondering if you're looking at your opportunity set in sort of.

Speaker Change: New products design wins, and new customers does this change in the environment change the way you you focus on those.

Speaker Change: Issues.

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 pushout 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 and that we keep hearing about and what happens to the others, right? To put it in perspective, India today is at 27%, I believe, right? If today it's 150 tariff versus 27%, that's a pretty big difference.

Yeah.

Speaker Change: It's.

Speaker Change: We tend to kind of like very cliche man or think about a market settle miss in terms of opportunity.

Speaker Change: So obviously you know as we think about China tariffs right. So we are going to feel that out a little bit under 10% side, but we also have other competitors that we feel so I'm not totally sure I think it changes maybe let's see our operations. So we've always been focused on operations, where should we be once you go back to Dan's point, where do you go.

Speaker Change: So we're going to get some clarity on that and we've been already kind of laid on the pipe work into India. So from an operational perspective sure 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 and ingratiating ourselves.

Speaker Change: And leading with our mines.

Farouq Tuweiq: If India goes to 0 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: Versus kind of commodities so.

Speaker Change: Does it change a little bit sure, but ultimately we are a long design cycle business and if you remember.

Speaker Change: Over 90% of our business, our customers themselves or B to B right. So businesses will invest and where they are part of the technology solution. So I would say it changes a little bit creates opportunities, but we are we're committed on on kind of where we go from here and again there it's been around since 2018 2019 right. When there so it's not a now nobody.

Speaker Change: I think thought it would escalate to this level, but we do think cooler heads at some point, we will prevail.

Speaker Change: And my last question is given what's going on in the market.

Speaker Change: The level of activity, you're seeing in terms of.

Speaker Change: Potential acquisitions.

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: Yeah. So we're redoing our facility to get more capacity, we're focused on 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 it may create opportunity on that side of it I would say overall, we started seeing a little bit of a healthier M&A market.

Speaker Change: Q1.

Speaker Change: And does the tariff discussion started taking hold companies that we're gonna come out or people that were entertaining a sale kind of in a pause a little bit.

Speaker Change: Theres, just a lot of wait and see similar to our customers. We've seen a nice side. So I would say the M&A market is quiet, it's a wait and see approach.

Rachel Smith: 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 Magnetic Solutions with the comparisons and some normalization there. Could you touch on networking as pertains to the other two segments, please?

Speaker Change: So Q2, I'd say, we expect it to probably largely quiet.

Speaker Change: And then we'll see where the rest of the year shakes out, but I'd say, we're on a good glide path initially.

Speaker Change: From just the overall market activity in Q1, before we kind of hit a little bit of a pause there.

Speaker Change: Okay. Thanks, very much and good luck to you Dan.

Speaker Change: Thank you very much.

Lynn Hutkin: Sure. On the power side, when we look at networking, and we'll carve out AI from that, right? Because we talked about AI separately. AI is strong for power. 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. 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 side, there is a little bit of networking in there, but connectivity is largely A&D industrial and with a portion of it going through distribution. It's not as much networking exposure in connectivity.

Speaker Change: Thank you our next questions come from the line of Hendi <unk> with Gabelli funds. Please proceed with your question.

Speaker Change: Good morning, and then first of all to Dan. Thank you for all these many years and all the best for your next chapter.

Speaker Change: I might have to call, yes every corner Miss you so much.

Speaker Change: So you just need them.

Speaker Change: So my first question is no.

Speaker Change: Not that we have Paris 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.

Speaker Change: Yes, so could have missed.

Speaker Change: So there was a three tariffs.

Speaker Change: New consumer would be a little bit challenging to later on through the year, but tariffs you know kind of changed some of that but remember.

Speaker Change: Tear ups, while we've said it's around 25% of our business.

Speaker Change: It's not all the same so we kind of look at the 10% coming out of China.

Speaker Change: Big question, Mark on what happens there the.

Speaker Change: The other 15% I think is as good or acceptable and.

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

Speaker Change: Some of that's going to kind of really growing into end markets like defense.

Speaker Change: So I.

Speaker Change: I would say you know what.

Speaker Change: That 15%.

Speaker Change: Theres good market.

Speaker Change: Growth in recovery in some areas.

Speaker Change: The piece that we're waiting to get some clarity on so.

Rachel Smith: 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?

Speaker Change: I'd say overall.

Speaker Change: Why we repeated what we talked about in February where we do expect the recovery. So I think we just need to get a little bit clarity on Q2, but ultimately.

Speaker Change: We think we will get through it and have a little more clarity heading into <unk> and that's why we called out in our earnings release last night and day some of the let's call. It revenue that maybe got impacted with this pause that we're at right now.

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. However, 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 to really focus 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: And then of the 10% of sales that has exports sugar.

Speaker Change: Any insight into how much of those were Bel fuse has.

Speaker Change: Our singles.

Speaker Change: Supplier positions like like battlefield battlefield is the only supplier and then any else.

Speaker Change: Is that all.

Speaker Change: Also in inside where customers may have multiple suppliers, but all of those have the same challenge in other words, it's a.

Speaker Change: Everyone is on par with one another and there's no.

Speaker Change: Ultimately if all by shifting to let's say like non China location.

Speaker Change: Yes, I appreciate the question I'll take it kind of runs the gamut. Some of it is we're sole source and some of it is multi sourced some of it is highly engineered custom work that we do and some of it is commodity like some of our consumer stuff.

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.

So I would just say it runs the gamut.

Farouq Tuweiq: I think that's the overarching view there, Chris. When we kind of lay it into end markets, obviously AI bucks that trend, right? 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.

Speaker Change: So 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 are all stays right. So it will be a few different shades of that to your point about.

Speaker Change: Maybe some of the more commodity stuff could somebody.

Speaker Change: Switch buying from let's say, China to a place in.

Speaker Change: And Vietnam sure, but its not like Vietnam have today has zero tariffs like so it is better tariff level, but China has a lot of efficiencies right. So mathematically sure a slower tariffs, but you know as we think about the efficiency side of things you are trying to still is very very good.

Farouq Tuweiq: 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. 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 are going to move things a little bit here. Ultimately, we want more going forward. Thanks. Thanks, guys.

Speaker Change: Well, so what do we expect maybe to lose some of that and more commodity stuff sure.

Speaker Change: But I think theres a lot of wait and see just in the market right now because again our industry switch.

Speaker Change: Switching is not the easiest of choices to happen overnight generally there needs to be a little bit of a plan for it.

Mary: Yeah, and this is Mary.

Speaker Change: How much exposure in our cotton business has two tariff.

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

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

Speaker Change: And maybe a couple of other locations as well.

Greg Palm: Yeah, thanks, Mike. 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: Remember, that's all largely defense sole source right so that stuff.

Speaker Change: Pass it on I would say, that's a high high high switching cost.

Speaker Change: Again, nobody likes paying those but I think those we feel solid about four or more comfortable with.

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'm curious, did you see any pull-in of orders ahead of those tariffs?

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

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: And part of their production process brings and.

Speaker Change: No partially assembled product from the Israel site. So it's largely intercompany southern tariffs would be at.

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: As you know belt with costs.

Speaker Change: Currently about to explain everything goes into defense are for the most part.

Speaker Change: Got it and then this is.

Speaker Change: But let's say if tariffs persist based on how you dealt with Pat if in the past.

Farouq Tuweiq: Let me just answer that, Craig. 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, and 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, and 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: Do you foresee negotiation on a customer by customer basis.

Speaker Change: And then do you expect like the quick or prolonged negotiation like what are some lessons learned from that sound like negotiation on how to split the patio.

Speaker Change: With your customers in the past.

Speaker Change: Well I think I'll give the commentary there a little bit high level handy, but generally our nature of our business its customer to a customer right. So so so any time, we do a purchase order or order or anything its customer to customer. So therefore, we're not just putting some things on the shelf and then people.

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 kind of 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.

Speaker Change: Come by up right. So it's everything we do is really a one to one.

Speaker Change: Within those one to one there's different level skus at the end of the customer what products, we're selling right. So it's again, it's hard to paint a broad brush.

Speaker Change: But generally our our approach is.

Speaker Change: As it is.

Speaker Change: We are not really in a position to be eating the tariffs.

Speaker Change: And with our industry broadly speaking.

Speaker Change: <unk> Delphi was did that back in 2018 2019.

Farouq Tuweiq: The question becomes is we've always contemplated where do we go. India was a very natural play. I think we have a very friendly relations with India. 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. We think India will be in that. I think that's going to probably be a focus of ours.

Speaker Change: We can operate under those tariffs and the industry has done that now it's a different dollar amounts to your point, but 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.

Speaker Change: The other thing I would say is roughly 70%.

Speaker Change: Unlike Linkedin correct, if I'm wrong.

Speaker Change: Imports are coming into the U S. Our customer as the importer of record.

That basically means is we're delivering the product somewhere at let's say for example in Hong Kong and they're bringing it in to the U S are there dealing with the tariffs right and so on.

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?

Speaker Change: So and I think that's a pretty important there I mean ultimately the tariffs are getting paid but we're not the ones that are sending a front and center on that.

Speaker Change: Again, we realigned our shipping let's say.

Speaker Change: [noise] routes.

Speaker Change: Over the last two or three years to include more of this record of imports importer of record after the customer.

Farouq Tuweiq: I think it's a combination. 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 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, and then 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: 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 barring any exception is to pass it on.

Lynn: Thank you so much Dan Farrell Lynn.

Speaker Change: And Julien.

Speaker Change: Thank you thank you Andy.

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.

Speaker Change: Just again I'd like to thank everybody.

Speaker Change: Following us and I can't tell you how pleased I am that Farooq, a board and the executive team, we put together over the past two years as I said I'm extremely successful.

Speaker Change: 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.

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've sold to are relatively new-ish type companies. They're not kind of, 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.

So generally I would say I speak to you in a quarter, but I'm not going to speak can't afford it.

Speaker Change: I will speak to you at the annual meeting if you ever want to come to the annual meeting.

Speaker Change: Okay.

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.

Speaker Change: [music].

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

Farouq Tuweiq: Appreciate it.

Operator: 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. Congratulations on the good quarter. I was wondering if looking at your opportunity set in sort of new products, design wins, and new customers, does this change in the environment change the way you focus on those issues?

Farouq Tuweiq: Yeah. We tend to kind of, in a very cliché 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? In fact, to Dan's point, where do you go? We're going to get some clarity on that, and we've been already laying down the pipe work into India. From an operational perspective, sure. 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 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 have been around since 2018, 2019, right? Nobody, I think, thought it would escalate to this level, 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?

Farouq Tuweiq: Yeah. We're redoing our facility to get more capacity. We're focused on mountain down because we think that's just a good thing to do, and one of the reasons is maybe we'll see how the world goes out here, but it 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 start taking hold, companies that were going to come out, or people that were entertaining a sale went to pause a little bit. I think there's just a lot of wait and see, similar to our customers we're seeing 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.

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 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.

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

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

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

Hendi Susanto: Please admit then. 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?

Farouq Tuweiq: Yeah. There was the 3 tariffs. We knew consumer would be a little bit challenged later on through the year, but tariffs changed some of that. Remember, tariffs, while we've said it's around 25% of our business, it's not all the same. We look at the 10% coming out of China as the really big question mark on what happens there. The other 15%, I think, is acceptable and some of that's going into really growing into 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 why we repeated what we talked about in February, where we do expect the recovery.

Farouq Tuweiq: I think we just need to get a little bit of clarity on Q2, 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, some of the, let's call it revenue, that maybe got impacted with this pause that we're in 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, and 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?

Farouq Tuweiq: I appreciate the question. I'd say it 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 commodity stuff, could somebody switch buying from, let's say, China to a place in Vietnam? Sure, but it's not like Vietnam today has zero tariffs, right. It is better tariff level, but China has a lot of efficiencies, right.

Farouq Tuweiq: Mathematically, sure, slower tariffs. As we think about the efficiency side of things, China still is very, 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.

Hendi Susanto: Yeah. May I verify how much exposure Enercon 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.

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

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 tariff with your customers in the past?

Farouq Tuweiq: Yeah. 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 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 depending on the customer of what products we're selling, right? Again, it's hard to paint a broad brush. Generally, our approach is we are not really in a position to be eating the tariffs. Our industry, broadly speaking, and including Bel Fuse, did that back in 2018, 2019, and we've been operating under those tariffs, and the industry's done that. Now, it's a different dollar amount, 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 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 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.

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

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

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.

Daniel Bernstein: Just 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. Again, 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.

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.