• Revenue: $123.6 million in Q3 2024, a 22.1% decline from Q3 2023.
• Gross Margin: Increased to 36.1% in Q3 2024 from 35% in Q3 2023.
• Power Solutions and Protection Sales: $48.7 million, a 35% decline from Q3 2023.
• Rail Products Sales: Grew over 40% from Q3 2023, accounting for a $2.6 million increase.
• Connectivity Solutions Sales: $55.7 million, up 7.6% from Q3 2023.
• Commercial Air Applications Sales: $12.5 million, a 10.3% increase from Q3 2023.
• Military Sales: $11.6 million, consistent with Q3 2023.
• Magnetic Solutions Sales: $19.2 million, a 40% decrease from Q3 2023.
• R&D Expenses: $5.4 million, consistent with Q3 2023.
• Selling, General and Administrative Expenses: $26.7 million, compared to $23.8 million in Q3 2023.
• Effective Tax Rate: 27.8% in Q3 2024, up from 18.2% in Q3 2023.
• Cash and Securities: $163.8 million, an increase of $36.9 million from year-end.
• Cash Flows from Operating Activities: $65.7 million in the first nine months of 2024.
• Capital Expenditures: $7.9 million.
• Inventory Reduction: $12.3 million reduction from year-end.

• Warning! GuruFocus has detected 3 Warning Sign with DB.

Release Date: October 24, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Bel Fuse Inc (NASDAQ:BELFA) reported third-quarter sales and gross margins above the midpoint of their guidance, driven by strong performance in the connectivity segment, particularly in aerospace, defense, and space applications.
• The company achieved a gross margin increase to 36.1% in Q3 2024 from 35% in Q3 2023, indicating improved profitability.
• Sales of rail products grew over 40% from Q3 2023, contributing positively to the company's revenue.
• The company has made strategic additions to its corporate team, including a new global head of sales and marketing and a global head of corporate contracts, to drive future growth.
• Bel Fuse Inc (NASDAQ:BELFA) is anticipating year-over-year growth across all segments in 2025, driven by networking, e-mobility, AI-specific applications, and defense applications.

Negative Points

• Third-quarter 2024 sales declined by 22.1% compared to the third quarter of 2023, primarily due to lower sales in the power and magnetic segments.
• Power solutions and protection sales decreased by 35% from Q3 2023, mainly due to lower sales of power products used in networking and consumer applications.
• The magnetic solutions group posted a 40% decrease in sales from Q3 2023, largely due to lower shipments to a large networking customer.
• The company faced a strike at one of its aerospace customers, which slowed shipments and impacted revenue in the connectivity segment.
• Bel Fuse Inc (NASDAQ:BELFA) is incurring restructuring costs related to the consolidation of its fuse manufacturing operations, with expected costs of $4.2 million, impacting short-term financials.

Q & A Highlights

Q: Can you explain the sequential decline in the Power and Protection segment and the outlook for 2025? A: The decline was primarily due to seasonality in Europe, particularly affecting rail and mobility, as well as the impact of trade restrictions on a supplier. However, recent bookings and customer conversations indicate a return to growth in 2025, driven by networking, e-mobility, and AI applications. - Lynn Hutkin, VP of Financial Reporting and Investor Relations and Farouq Tuweiq, CFO

Q: What is the status of finding a new supplier to replace the business lost due to trade restrictions? A: We are in the process of identifying replacement parts, but it will take time for customers to requalify designs. The urgency is mitigated by current inventory levels, and we expect some recovery in 2025. - Farouq Tuweiq, CFO

Q: Are the recent strong bookings related to AI or other emerging growth opportunities? A: Yes, some bookings are from AI customers, and we expect more orders soon. Additionally, our fuses business, an early recovery indicator, showed significant growth, suggesting positive trends. - Farouq Tuweiq, CFO

Q: How has the strike at an aerospace customer affected your business, and is it reflected in Q4 guidance? A: The strike had some impact, but it wasn't overly material for Q3. Our Q4 guidance accounts for potential ongoing effects, assuming no significant recovery within the quarter. - Farouq Tuweiq, CFO and Daniel Bernstein, CEO

Q: What does the Intercon Technologies acquisition bring to Bel Fuse, and what are the cross-selling opportunities? A: Intercon adds new markets in defense, commercial air, and space, complementing our power segment. It offers cross-selling opportunities with shared customers and enhances our ability to provide comprehensive solutions. - Farouq Tuweiq, CFO and Daniel Bernstein, CEO

For the complete transcript of the earnings call, please refer to the full earnings call transcript.