Bel Reports Third Quarter 2023 Results

Bel Fuse Inc. (Nasdaq: BELFA and BELFB) today announced preliminary financial results for the third quarter of 2023.

Third Quarter 2023 Highlights

Net sales of $158.7 million compared to $177.7 million in Q3-22. Non-GAAP adjusted net sales (which exclude raw material expedite fee revenue) were $157.7 million in Q3-23, down from $168.3 million in Q3-22
Gross profit margin of 35.0%, up from 29.0% in Q3-22
Net earnings of $19.4 million versus $16.5 million in Q3-22
Adjusted EBITDA of $29.9 million (18.8% of sales), up from $27.3 million (15.4% of sales) in Q3-22
Backlog level of $408 million at September 30, 2023

“We are pleased with our improved financial performance this quarter on a sales base that was in line with our expectations,” said Daniel Bernstein, President and CEO. “For several quarters, the team has successfully executed on our plan to focus Bel’s engineering efforts, manufacturing resources and sales team on those products that align with our financial targets and goals.

“Our diversity in products and end markets, coupled with ongoing cost management and strategic revenue discipline, enabled us to achieve higher gross margin dollars on a lower sales base. The 600 basis point margin improvement was largely led by favorable product mix, with a higher volume of products going into aerospace and defense, eMobility and rail applications as compared to last year’s third quarter. Further, our low-margin expedite fee revenue was $1.0 million in Q3-23, down $8.4 million from its level in Q3-22. We are proud of the efforts of our global team in achieving long-term strategic value for our shareholders in an everchanging macroenvironment,” concluded Mr. Bernstein.

Farouq Tuweiq, CFO, added “Coupled with many cost containment initiatives underway in the third quarter, Bel also made solid progress on our previously-announced facility consolidations. These projects were substantially complete by the end of the quarter, with final transitions on track for the end of 2023. These consolidation projects are expected to result in annualized cost savings of approximately $6.9 million. Of this, $1.6 million is expected to be realized in Q4-23 with the full run rate of cost savings expected throughout 2024.

“Looking at the remainder of the year, based on information available today, our current estimate for the fourth quarter of 2023 is GAAP net sales in the $146-$154 million range. Expedite fee revenue amounted to $10.5 million in Q4-22 and is not expected to occur at comparable levels in Q4-23. Gross profit margins for Q4-23 are expected to be roughly in line with Q3-23 levels. We are focused on continued progress in areas under our control, while making strategic investments within the business to support Bel’s future growth,” concluded Mr. Tuweiq.

Non-GAAP financial measures, such as Non-GAAP net earnings, Non-GAAP EPS, EBITDA and Adjusted EBITDA, exclude restructuring charges, gains on sales of business and properties, and certain litigation costs. Non-GAAP adjusted net sales exclude expedite fee revenue. Please refer to the financial information included with this press release for reconciliations of GAAP financial measures to Non-GAAP financial measures and our explanation of why we present Non-GAAP financial measures.

Conference CallBel has scheduled a conference call for 8:30 a.m. ET on Thursday, October 26, 2023 to discuss these results. To participate in the conference call, investors should dial 877-407-0784, or 201-689-8560 if dialing internationally. The presentation will additionally be broadcast live over the Internet and will be available at https://ir.belfuse.com/events-and-presentations. The webcast will be available via replay for a period of at least 20 days at this same Internet address. For those unable to access the live call, a telephone replay will be available at 844-512-2921, or 412-317-6671 if dialing internationally, using access code 13741796 after 12:30 pm ET, also for 20 days.

About BelBel (www.belfuse.com) designs, manufactures and markets a broad array of products that power, protect and connect electronic circuits. These products are primarily used in the networking, telecommunications, computing, general industrial, high-speed data transmission, military, commercial aerospace, transportation and eMobility industries. Bel's portfolio of products also finds application in the automotive, medical, broadcasting and consumer electronics markets. Bel's product groups include Magnetic Solutions (integrated connector modules, power transformers, power inductors and discrete components), Power Solutions and Protection (front-end, board-mount and industrial power products, module products and circuit protection), and Connectivity Solutions (expanded beam fiber optic, copper-based, RF and RJ connectors and cable assemblies). The Company operates facilities around the world.

Company Contact:Farouq Tuweiq Chief Financial Officer ir@belf.com

Investor Contact:Three Part AdvisorsJean Marie Young, Managing Director or Steven Hooser, Partner631-418-4339jyoung@threepa.com; shooser@threepa.com

Cautionary Language Concerning Forward-Looking StatementsThis press release contains “forward-looking statements” within the meaning of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995, including but not limited to, our guidance for the fourth quarter of 2023, our statements regarding our expectations for 2023 and the remainder of the year, and our statements regarding future events, performance, plans, intentions, beliefs, expectations and estimates, including statements regarding matters such as trends and expectations as to our sales and sales base, net sales, expedite fee revenue, gross margins, growth, costs, cost management and containment, anticipated cost savings, revenue discipline, products and product mix, and end markets, and statements regarding the Company's positioning, its strategies, future progress, investments, plans, targets, goals, focuses and initiatives, and the expected timing and potential benefits thereof, and statements regarding our expectations and beliefs regarding trends in the Company's industry and the macroeconomic environment generally. These forward-looking statements are made as of the date of this release and are based on current expectations, estimates, forecasts and projections as well as the beliefs and assumptions of management. Words such as “expect,” “anticipate,” “should,” “believe,” “hope,” “target,” “project,” “forecast,” “outlook,” “goals,” “estimate,” “potential,” “predict,” “may,” “will,” “might,” “could,” “intend,” variations of these terms or the negative of these terms and similar expressions are intended to identify these forward-looking statements. Forward-looking statements are subject to a number of risks and uncertainties, many of which involve factors or circumstances that are beyond Bel’s control. Bel’s actual results could differ materially from those stated or implied in our forward-looking statements (including without limitation any of Bel’s projections) due to a number of factors, including but not limited to, the market concerns facing our customers, and risks for the Company’s business in the event of the loss of certain substantial customers; the continuing viability of sectors that rely on our products; the effects of business and economic conditions; the impact of public health crises (such as the ongoing governmental, social and economic effects and ultimate impact of COVID-19); the effects of rising input costs, and cost changes generally; difficulties associated with integrating previously acquired companies; capacity and supply constraints or difficulties, including supply chain constraints or other challenges; difficulties associated with the availability of labor, and the risks of any labor unrest or labor shortages; risks associated with our international operations, including our substantial manufacturing operations in China; risks associated with restructuring programs or other strategic initiatives, including any difficulties in implementation or realization of the expected benefits or cost savings; product development, commercialization or technological difficulties; the regulatory and trade environment; risks associated with fluctuations in foreign currency exchange rates and interest rates; uncertainties associated with legal proceedings; the market's acceptance of the Company's new products and competitive responses to those new products; the impact of changes to U.S. legal and regulatory requirements, including tax laws, trade and tariff policies; and the risks detailed in Bel’s most recent Annual Report on Form 10-K for the fiscal year ended December 31, 2022 and in subsequent reports filed by Bel with the Securities and Exchange Commission, as well as other documents that may be filed by Bel from time to time with the Securities and Exchange Commission. In light of the risks and uncertainties impacting our business, there can be no assurance that any forward-looking statement will in fact prove to be correct. Past performance is not necessarily indicative of future results. The forward-looking statements included in this press release represent Bel’s views as of the date of this press release. Bel anticipates that subsequent events and developments will cause its views to change. Bel undertakes no intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. These forward-looking statements should not be relied upon as representing Bel’s views as of any date subsequent to the date of this press release.

Non-GAAP Financial MeasuresThe Non-GAAP measures identified in this press release as well as in the supplementary information to this press release (Non-GAAP adjusted net sales, Non-GAAP net earnings, Non-GAAP EPS, EBITDA and Adjusted EBITDA) are not measures of performance under accounting principles generally accepted in the United States of America ("GAAP"). These measures should not be considered a substitute for, and the reader should also consider, income from operations, net earnings, earnings per share and other measures of performance as defined by GAAP as indicators of our performance or profitability. Our Non-GAAP measures may not be comparable to other similarly-titled captions of other companies due to differences in the method of calculation. We present results adjusted to exclude the effects of certain unusual or special items and their related tax impact that would otherwise be included under U.S. GAAP, to aid in comparisons with other periods. We may use Non-GAAP financial measures to determine performance-based compensation and management believes that this information may be useful to investors.

Website InformationWe routinely post important information for investors on our website, www.belfuse.com, in the "Investor Relations" section. We use our website as a means of disclosing material, otherwise non-public information and for complying with our disclosure obligations under Regulation FD. Accordingly, investors should monitor the Investor Relations section of our website, in addition to following our press releases, SEC filings, public conference calls, presentations and webcasts. The information contained on, or that may be accessed through, our website is not incorporated by reference into, and is not a part of, this document.

[Financial tables follow]

Bel Fuse Inc.

Supplementary Information(1)

Condensed Consolidated Statements of Operations

(in thousands, except per share amounts)

(unaudited)

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2023			2022			2023			2022

Net sales	$	158,682		$	177,739		$	499,803		$	485,030
Cost of sales		103,217			126,205			335,137			354,084
Gross profit		55,465			51,534			164,666			130,946
As a % of net sales		35.0	%		29.0	%		32.9	%		27.0	%

Research and development costs		5,292			4,877			16,521			14,381
Selling, general and administrative expenses		23,717			22,223			74,149			67,216
As a % of net sales		14.9	%		12.5	%		14.8	%		13.9	%
Restructuring charges		2,091			3,969			6,306			4,000
Gains on sale of properties		(147	)		(1,596	)		(3,819	)		(1,596	)

Income from operations		24,512			22,061			71,509			46,945
As a % of net sales		15.4	%		12.4	%		14.3	%		9.7	%

Gain on sale of Czech Republic business		(135	)		-			980			-
Interest expense		(512	)		(944	)		(2,402	)		(2,411	)
Other income/expense, net		(96	)		(429	)		(286	)		(2,926	)
Earnings before income taxes		23,769			20,688			69,801			41,608

Provision for income taxes		4,321			4,140			8,006			2,959
Effective tax rate		18.2	%		20.0	%		11.5	%		7.1	%
Net earnings	$	19,448		$	16,548		$	61,795		$	38,649
As a % of net sales		12.3	%		9.3	%		12.4	%		8.0	%

Weighted average number of shares outstanding:
Class A common shares - basic and diluted		2,142			2,142			2,142			2,144
Class B common shares - basic and diluted		10,636			10,340			10,636			10,358

Net earnings per common share:
Class A common shares - basic and diluted	$	1.46		$	1.27		$	4.63		$	2.95
Class B common shares - basic and diluted	$	1.54		$	1.34		$	4.88		$	3.12

Bel Fuse Inc.

Supplementary Information(1)

Condensed Consolidated Balance Sheets

(in thousands, unaudited)

	September 30, 2023		December 31, 2022
Assets
Current assets:
Cash and cash equivalents	$	100,225	$	70,266
Accounts receivable, net		94,265		107,274
Inventories		139,997		172,465
Other current assets		28,529		31,403
Total current assets		363,016		381,408
Property, plant and equipment, net		38,193		36,833
Right-of-use assets		21,660		21,551
Related-party note receivable		1,905		-
Equity method investment		9,978		-
Goodwill and other intangible assets, net		76,125		79,210
Other assets		48,191		41,464
Total assets	$	559,068	$	560,466

Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable	$	43,984	$	64,589
Operating lease liability, current		6,190		5,870
Other current liabilities		67,508		65,845
Total current liabilities		117,682		136,304
Long-term debt		60,000		95,000
Operating lease liability, long-term		15,551		15,742
Other liabilities		44,424		51,074
Total liabilities		237,657		298,120
Stockholders' equity		321,411		262,346
Total liabilities and stockholders' equity	$	559,068	$	560,466

Bel Fuse Inc.

Supplementary Information(1)

Condensed Consolidated Statements of Cash Flows

(in thousands, unaudited)

	Nine Months Ended
	September 30,
	2023			2022

Cash flows from operating activities:
Net earnings	$	61,795		$	38,649
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization		9,962			11,604
Stock-based compensation		2,712			1,672
Amortization of deferred financing costs		33			34
Deferred income taxes		(4,894	)		(5,113	)
Net unrealized losses (gains) on foreign currency revaluation		130			(494	)
Gains on sale of properties		(3,819	)		(1,596	)
Gain on sale of Czech Republic business		(980	)		-
Other, net		(495	)		360
Changes in operating assets and liabilities:
Accounts receivable, net		11,931			(17,851	)
Unbilled receivables		1,590			(317	)
Inventories		29,313			(32,574	)
Accounts payable		(18,674	)		4,884
Accrued expenses		4,536			6,678
Accrued restructuring costs		(148	)		3,628
Income taxes payable		2,008			6,380
Other operating assets/liabilities, net		(13,575	)		8,125
Net cash provided by operating activities		81,425			24,069

Cash flows from investing activities:
Purchases of property, plant and equipment		(9,659	)		(5,612	)
Payment for equity method investment		(9,975	)		-
Investment in related-party notes receivable		(1,905	)		-
Proceeds from sale of property, plant and equipment		5,403			1,833
Proceeds from sale of business		5,063			-
Net cash used in investing activities		(11,073	)		(3,779	)

Cash flows from financing activities:
Dividends paid to common stockholders		(2,490	)		(2,470	)
Repayments under revolving credit line		(40,000	)		-
Borrowings under revolving credit line		5,000			-
Purchase of treasury stock		-			(349	)
Repayments of long-term debt		-			(2,500	)
Net cash used in financing activities		(37,490	)		(5,319	)

Effect of exchange rate changes on cash and cash equivalents		(2,903	)		(5,832	)

Net increase in cash and cash equivalents		29,959			9,139
Cash and cash equivalents - beginning of period		70,266			61,756
Cash and cash equivalents - end of period	$	100,225		$	70,895


Supplementary information:
Cash paid during the period for:
Income taxes, net of refunds received	$	18,148		$	7,496
Interest payments	$	3,738		$	2,129
ROU assets obtained in exchange for lease obligations	$	5,887		$	6,111

Bel Fuse Inc.

Supplementary Information(1)

Product Group Highlights

(dollars in thousands, unaudited)

	Sales							Gross Margin
	Q3-23		Q3-22		% Change			Q3-23			Q3-22			Basis Point Change
Power Solutions and Protection	$	74,862	$	76,433		-2.1	%		41.7	%		32.4	%		930
Connectivity Solutions		51,771		50,253		3.0	%		35.8	%		26.1	%		970
Magnetic Solutions		32,049		51,053		-37.2	%		22.0	%		30.4	%		(840	)
Total	$	158,682	$	177,739		-10.7	%		35.0	%		29.0	%		600

	Sales							Gross Margin
	YTD September 2023		YTD September 2022		% Change			YTD September 2023			YTD September 2022			Basis Point Change
Power Solutions and Protection	$	245,134	$	206,247		18.9	%		37.5	%		29.5	%		800
Connectivity Solutions		160,010		140,062		14.2	%		35.8	%		26.7	%		910
Magnetic Solutions		94,659		138,721		-31.8	%		23.0	%		27.0	%		(400	)
Total	$	499,803	$	485,030		3.0	%		32.9	%		27.0	%		590

Bel Fuse Inc.

Supplementary Information(1)

Reconciliation of GAAP Net Sales to Non-GAAP Adjusted Net Sales(2)

Reconciliation of GAAP Net Earnings to EBITDA and Adjusted EBITDA(2)

(in thousands, unaudited)

Three Months Ended

Nine Months Ended

September 30,

2023

2022

2023

2022

GAAP net sales

158,682

177,739

499,803

485,030

Expedite fee revenue

1,008

9,435

14,425

22,023

Non-GAAP adjusted net sales

157,674

168,304

485,378

463,007

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2023			2022			2023			2022

GAAP Net earnings	$	19,448		$	16,548		$	61,795		$	38,649
Interest expense		512			944			2,402			2,411
Provision for income taxes		4,321			4,140			8,006			2,959
Depreciation and amortization		3,391			3,288			9,962			11,604
EBITDA	$	27,672		$	24,920		$	82,165		$	55,623
% of net sales		17.4	%		14.0	%		16.4	%		11.5	%

Unusual or special items:
Gain on sale of Czech Republic business		135			-			(980	)		-
Gains on sale of properties		(147	)		(1,596	)		(3,819	)		(1,596	)
Restructuring charges		2,091			3,969			6,306			4,000
MPS litigation costs		132			-			2,903			-

Adjusted EBITDA	$	29,883		$	27,293		$	86,575		$	58,027
% of net sales		18.8	%		15.4	%		17.3	%		12.0	%

(1) The supplementary information included in this press release for 2023 is preliminary and subject to change prior to the filing of our upcoming Quarterly Report on Form 10-Q with the Securities and Exchange Commission.(2) In this press release and supplemental information, we have included Non-GAAP financial measures, including Non-GAAP adjusted net sales, Non-GAAP net earnings, Non-GAAP EPS, EBITDA and Adjusted EBITDA. We present results adjusted to exclude the effects of certain specified items and their related tax impact that would otherwise be included under GAAP, to aid in comparisons with other periods. We may use Non-GAAP financial measures to determine performance-based compensation and management believes that this information may be useful to investors.

Bel Fuse Inc.

Supplementary Information(1)

Reconciliation of GAAP Measures to Non-GAAP Measures(2)

(in thousands, except per share data)(unaudited)

The following tables detail the impact that certain unusual or special items had on the Company's net earnings per common Class A and Class B basic and diluted shares ("EPS") and the line items in which these items were included on the consolidated statements of operations.

	Three Months Ended September 30, 2023															Three Months Ended September 30, 2022
Reconciling Items	Earnings before taxes			Provision for income taxes			Net earnings			Class A EPS(3)			Class B EPS(3)			Earnings before taxes			Provision for income taxes			Net earnings			Class A EPS(3)			Class B EPS(3)

GAAP measures	$	23,769		$	4,321		$	19,448		$	1.46		$	1.54		$	20,688		$	4,140		$	16,548		$	1.27		$	1.34
Restructuring charges		2,091			407			1,684			0.13			0.13			3,969			985			2,984			0.23			0.24
Gains on sale of properties		(147	)		(29	)		(118	)		(0.01	)		(0.01	)		(1,596	)		(367	)		(1,229	)		(0.09	)		(0.10	)
Gain on sale of Czech Republic business		135			7			128			0.01			0.01			-			-			-			-			-
MPS litigation costs		132			30			102			0.01			0.01			-			-			-			-			-
Non-GAAP measures	$	25,980		$	4,736		$	21,244		$	1.59		$	1.68		$	23,061		$	4,758		$	18,303		$	1.40		$	1.48

	Nine Months Ended September 30, 2023															Nine Months Ended September 30, 2022
Reconciling Items	Earnings before taxes			Provision for income taxes			Net earnings			Class A EPS(3)			Class B EPS(3)			Earnings before taxes			Provision for income taxes			Net earnings			Class A EPS(3)			Class B EPS(3)

GAAP measures	$	69,801		$	8,006		$	61,795		$	4.63		$	4.88		$	41,608		$	2,959		$	38,649		$	2.95		$	3.12
Restructuring charges		6,306			1,007			5,299			0.40			0.42			4,000			990			3,010			0.23			0.24
Gains on sale of properties		(3,819	)		(763	)		(3,056	)		(0.23	)		(0.24	)		(1,596	)		(367	)		(1,229	)		(0.09	)		(0.10	)
Gain on sale of Czech Republic business		(980	)		(49	)		(931	)		(0.07	)		(0.07	)		-			-			-			-			-
MPS litigation costs		2,903			667			2,236			0.17			0.18			-			-			-			-			-
Non-GAAP measures	$	74,211		$	8,868		$	65,343		$	4.89		$	5.16		$	44,012		$	3,582		$	40,430		$	3.09		$	3.26