BELFA - Earnings call 4 2021

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Operator

Good day, and welcome to the Bel Fuse Inc. Fourth Quarter and Full Year 2021 Results Conference Call. Today's conference is being recorded.

At this time, I'd like to turn the conference over to Jean Young from Three Part Advisors. Please go ahead.

Jean Young

good and Emma, you, morning, everyone. Thank

other due These begin, conference or by call we expected expectations. and future Actual statements I'd company's future these on regarding materially like this that operating from periods. factors. number for of performance may everyone results remind financial are contains current implied a risks to company's based the to and the Before statements periods certain differ for statements forward-looking expressed those forward-looking

Additional as the may and about potentially the our our information non-GAAP Form including that time. SEC from our our factors impact quarterly results on and our included subsequent time yesterday's with in report Commission, XX-K financial could also this release. in call, included our press non-GAAP results annual press most with Securities filings We discussed is results and reconciliations during Exchange of release have been recent and to GAAP reports and results filings discuss to in other

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

Joining Tuweiq, and Hutkin, us Bernstein, of is today Director Reporting. CFO; Financial Lynn CEO; and on call President the Farouq Dan

to like Dan. Now call the to I'd turn over

Daniel Bernstein

Thank today. joining and of our you, Jean, you for all call

markets. new our groups, both and is well increase Our bookings to in quarter recent record like thank have fourth extremely at to across of end. demand end quarter to of team best This one in of and quarters and Bel times, for company. has memory. each their of Bel to I orders would year-over-year quarterly have every work backlog strong growth in they our improve of hard our majority challenging these product We dedication performed with enabling at sales embraced the our X for the achieved in our us efforts in associate our highs

XX. our us all-time In X,XXX high, into at This for totaling standard XXXX, growth. partners channel. remains $XXX December the for launched new future million well at Our an backlog we bode will

RMS acquisition acquired fully with earnings to line and are late from year million XXXX. The strong be XXXX CUI through XXXX XXXX. XX% and of contributed last Bel's a Our continues sales growth have EOS bottom combined in net in of to completed $X.X integrated of to performer

into chain the On included project, supply those continue our conversion we logistics, direct to Last completed we systems ERP availability, indirect challenges inflation. raw related cost navigate retention, and and X-year side, one. to labor overall material, year, X combining and

use have data We the transitioned on from margins and to functional of analytics system now SKU. a have better visibility by

million very the of systems conversion foundation $X in of will our has of Jackie the $X to marginate invested resources new has addition. still business manufacturing million. allocate utilize to provided system the decisions well. Last our resources. data annual how savings appointed now and fully integrated, and Overall, the a adaptation, become we we Although quickly Board, have our Brito recognized on this recent With best engineering, she valuable day-to-day our stage our onto legacy sales, internal we and ERP to as be cost early acquisitions quarter, to our in

aligned citizen, a with better recommendations we commitment corporate our to enhance are charitable and we how furthering cultural strong is associates' has With the companies, improvement. human X and assessment satisfaction. at for been completed, a areas implementing community to new values. This to programs becoming been engagement, with background associate she's job XXXX implemented challenged have And Bell. in doing the and Bel development, assessment of As experience around many retention our Jackie's resource and the identify contributions with and company

and make donating continue to to and work and within we would the provided choice. company, we our over in the will be local volatile the to journey organizations with and I'm throughout very XXXX will paid turn charitable can time which of progress Associates will off made proud be is be our customers. and the contributions now to for in. I matching financial now Bel sure in communities of the like Lynn Bel the we it call update. to associates, for stakeholders, best communities

Lynn Hutkin

Thank you, Dan.

minimal also which from protection up were circuit $X QX in by low-margin the be product XX.X% exit this were decline shift growth $XX.X for last the this our to our of related forward. year-over-year the largest XXX modules The market should and favorable to XX.X% XXXX improvement the for group, Power QX fourth which Other in or across QX from EOS, XXXX CUI seen by year-over-year product basis a products, quarter was margin increased in were Overall, sales strong As sales growth quarter Protection product we e-mobility sales an offset in variances Dan fourth a business. Future and of mentioned, part which product mix. were XX% of groups. that prior. from By for growth quarter. quarter. million million, custom came power fourth our the XXXX. quarter, quarter million factor year to of million of line, during going the through to sales related acquisition a quarter contributing as remained XXXX, generated sales continue million, areas driven Gross point was sales up end and compared $X.X in very of Gross quarter. XX% from increase into of notable our fourth Solutions year's to with our XX% a business fourth group fourth growth each from $XXX margin strong exit $X.X These to XX.X%

of million, of the of and Solutions $XXX robust X.X Power of year healthy from ratio year-end. with increase and Our XXXX Protection a book-to-bill backlog the group orders an finished XXX% a

sales of to quarter, past a quarter, end for last sales market. of slightly a higher-margin are of came aerospace of margin XX% of the XX% last Gross The million in where distribution in in from XXXX, from end or aerospace, million in the just XXX% aerospace of X.X book-to-bill fourth an which in year an bookings quarter. Connectivity market bookings products to the some million Turning of from group backlog we a million, challenged out resulting from XX% closed a our low year-end. channels last XXXX. increase in as market, was provide $X They the defense XXXX. the into To XX.X% for strong with quarter orders of quarter commercial quarter, that under $XX and year's XXXX. were be the improved increase by as fourth the from and commercial decrease XX% to Sales Connectivity this connectivity group rebound at ramp million $XX in Fourth with in Group. for ratio Solutions for market. $XX.X $X.X million, context that the quarter. year's were Solutions of XXXX full fourth of quarter XXXX Military Sales fourth were $XX commercial continued to increase our end in $XX up reflecting fourth equivalent million, increase which through year year's this remained were end on continued XXXX fourth the

modules used higher up Solutions from next-generation XX% Lastly, the are have demand XX.X% quarter, group for margins led wage our integrated the declined by switching connector our fourth further been Magnetic $XX.X quarter rates last and the had shift renminbi margin year's of Gross are that applications. for Chinese These group million, QX U.S. by from year China, for fourth in to in the products have this prior. in unfavorable dollar. increased rate where XX.X% versus of a primarily exchange manufactured impacted sales

a quarter related XXXX basis alone. fourth on point We impact margin to XX have FX estimated

Solutions orders, to X.X XXX Magnetic book-to-bill the a with year ship in Our XXXX since represents a This scheduled ratio XXX% finished the which increase XXXX. backlog of are group million in and year-end. of largely

selling, were the XXXX. quarter, $X.X the dollar to dollar sales, a expenses was a of $X.X perspective inclusion acquired of which related from increased EOS, as percentage of Our in of million or expenses and general XX.X% million $XX.X for up Of from sales. SG&A million down but fourth March the administrative

items. year-end a balance million of $XX.X sheet ended cash the of million, reduction and balance flow balance. $XX.X with We XXXX to Turning the from year a cash

million increased Our working from in growth sales by our $XX capital to receivable the due $XX.X XXXX half increase period accounts million balance the a of same We second XXXX. of XXXX. December versus during saw XX, experienced

increase XXXX. similar at December in XXXX, our have customers. XX, from DSO days by December XX increased demand receivable XX, a since turn, to in as raw resulted improved This, the materials our we $XX Our to XXXX. in of accounts December higher accommodate volume million been Inventories balance days a purchasing XX increase from at slightly in

other year approximately capital, for In $X.X $X.X million. impacting addition included working to for million, of expenditures capital $XX payments million items $X.X payments of acquisitions, million, cash changes million, of flows debt net payments interest and dividend of of $X.X in payments the

in items turn Farouq impacting $X.X received Farouq? for over also during proceeds us sale the the XXXX. million call from We properties now of in XXXX. I'll see that to we

Farouq Tuweiq

we're to a the of touch chain sourcing, are to raw and pricing, the cost material effective I responding With an impact wanted and we XXXX. continue supply overall to that look items out business There of towards in everyone. monitor ensure manner. to few upon morning, Good we as Lynn. Thanks, doing regard concerns, focus appropriate and

implemented increases that late continue to expeditious we this manner. As have of allow of another more targeted round today, processes a of will and market and various year. us XXXX in started procedures we fourth in through to dynamic that price react QX quarter have the implemented and Furthermore, price

Looking to expect to margins the inefficiencies year. had we first our see we do historically favorable to progress production impact related downward Year, throughout at New pressure of quarter due have Chinese initiatives that said, as XXXX,

challenge our at around various norm. procurement of team a teams various remain raw that focus chain for On all also eye will local in at close throughout shipping, and logistics, regulations and levels This other in. operating we the countries the all exposed as we if is a sourcing We're will the on a new bit our keeping a to side, supply operate coded seems world. which number are of a the this as of and best it's a materials remain it stage area little XXXX, key estimate things given the

first to our currencies initiating labor As Lynn renminbi ForEx the of for interest year as our the as program are financial mitigate related well year, an and as each rates, meaningfully is a exchange mentioned paid. a impact we which peso, in hedging with those financials currencies This Mexican impacted foreign fluctuations rate percentage earlier, in expanded large past particularly time Chinese are to our these swap.

things with think variable reminder, a us climb this being On to in is term QX Federal interest in the messaging from we the Reserve, will interest put well. of And and rate the swap, $XX some in saw some we of rates moved roughly that we that over coming will view fixed. as we rate out place of a the the revolver. That suit million our of this the

are and simple here provide these and a really better us with variables is operations of variability idea the operational programs, minimize While there as couple pricing minimize the to impact well. and into or take visibility

new on sense, M&A the challenge come continuously history, the and expect representing for in to we term, the near And makes that the upon that aggressive hunt recent a seen us. side, On market act really way be that With our the the we for it. as has in things valuations will said, are opportunities. same we

stated, various appropriate and to operational business with SKU the taking sequence. improvement footprint. Dan we down a are level approach to up examining and to As our aspects margin are committed and on of business demonstrable our across We're focused targeted the

upfront As we onetime to these initiatives, expect we do some embark incur on investments.

more be an I'll with quarters. Dan. keep in as mind, to Lynn stronger coming that, it this the details developed turn process in We ongoing be ] will things sharing a Dan? over [ company. With will Please as

Daniel Bernstein

the you please open can for up questions? Emma, call

Operator

Theodore Research. from And we'll Instructions] Litchfield first take now our from O'Neill Hills question [Operator

Theodore O'Neill

you the for in Slovakia, are what's just area I operations Ukraine, in have logistics happening the either on good ask planning or given that Congratulations your operations you're And to issues nearby? quarter. for any if seeing in about impact you, in in Question there?

Daniel Bernstein

At have the do in and of this throughout from It there's a Czech and happen. concern going we're the And border. Europe is Eastern we I what's think think Europe, XXX a tremendous about roughly concern. Central Slovakia. to miles Republic I point, operations

families concern on at it we However, and everybody. is a this in uncertainty the And that brings a their it people keeping watchful the to area time, mostly the are eye for it. and

Theodore O'Neill

from wondering redesigning that multiple if some use impacting sources, And at you I'm components we're that's products all? and companies to seeing are

Daniel Bernstein

No, on that with source. think started or be COVID, everybody can't past, one with the I you country one and realized SARS in now overly dependent

So our throughout to everybody, X I minimum trying a industry of sources. to get think, are X

same But doing like. parts the slower production than what it our where However, a thing, locations. trying diversify we're multiple process to we then b, from we're a, different and from been would sources having has getting

Operator

Instructions] [Operator next go Hendi from We'll from now our Susanto Funds. now to question Gabelli

Hendi Susanto

for you aerospace. commercial information the Thank on the

point in to aerospace Dan somewhat our can that sales So us in data like XXXX? expectation of for terms backlog, help any forecast commercial

Daniel Bernstein

to forecasting to or When it it wouldn't I'm to one? pass grab want on Lynn, to Farouq that questions, who comes and those going

Farouq Tuweiq

Yes.

air we're much now? how on specifically on sitting is question the Hendi, right commercial So backlog

Daniel Bernstein

and backlog revenue. is then question the think I

Hendi Susanto

recovery and like, initial the Revenue-wise, in the of aerospace? Yes. pace then

Farouq Tuweiq

And maybe just had XXXX, XXXX, from commercial to sales. And in kind million are recap we roughly it. down all to the can it in $XX was to Lynn, free of in way said -- to up feel XXXX, back million. here $XX million. went aerospace, $XX of to what Got jump in we And

million still $XX in off we're that mark XXXX. from So

Bel other numbers. I say The legacy this would thing obviously is

Now a with RMS, little the bit. equation has changed

scheduled to do steep. a of I is I that some folks' ramp a mentioned, and so million, north were I $X.X through the -- XXXX to as there. From on to time on that bookings was this bookings but perspective, which know, the million it don't or QX was, specific -- have in the are there. be So we we definitely But what under say about growth XXXX. pretty aerospace. we taking But don't path don't $XX.X to I here. $XX was it And that from perspective, indicates million to but give market, perspective. into sales number, have continue backlog commercial lot a that end it's you wouldn't we distribution. increased think would expect is Lynn, connectivity But an you just of just I if for have these are Yes, include not do ship of number a I received anything bookings handy? that bookings see

Daniel Bernstein

No.

this we in be pre-COVID the we've things I done think will in back to we can level. back year, readings the commercial aerospace but say XXXX, should of aerospace pre-COVID that get based that on to think building. it level, not commercial

Hendi Susanto

despite like And then Farouq, given you gross the like a strong demonstration share of for constrain? gross that manage margin how margin expectation improve margin gross guidance Any XXXX? supply can with chain -- of qualitative the you

Farouq Tuweiq

Yes.

regular level all obviously, to things it of, where [ Dan's So geopolitical the having the to chain is But the issue is. business, to and nice we're down challenge. addition able to SKU identify issues of of stuff now ERP there's way of a earlier because part and one an kind system you're challenge is and and just issues number in comment a lot this a remain ] supply right, does there

targeted So the it be can processes we where internally front and and identify we it some introduced can address end. earlier on we've

the more address So various down out be also We've road, where idea able proactive. put we'll things if procedures to of being is hand in it. the get

on look take some And another into our business. about higher on. So pass our to it's and/or strategic lean where also taking we're share market can think margins things really ability we of

them these here. [ look continue out I'd holds fully say addressing lot of we assuming the challenges pressures. world in things. are with addressed, And XXXX, ] a the should we be some QX to As the addressing and inflationary obviously, We're of do

QX, better. stabilize lead have of out that should and little a will to put in coming place things us So something we bit

And As expect a we look quarter us. be maybe for to QX do great out ahead specifically to QX. of we QX, year, very was last high obviously,

QX So -- and little us. for a bit is historically weaker

we that throughout on are gross margin it's And that in QX the being through little specifics we'll year the trying year. we've see the where said, somewhere on I side. sharing some and margin. we're a on also bit And to as what's really of Obviously, coming this we'll front. -- we'll year, more be last between benefits the of be we think go as So QX up done

Daniel Bernstein

conditions, to the have Historically, But at All and just our quote change color if a raw based that. customers on pricing backlog. we customer, backlog, days, materials to days. change stating more change be add we quoting to time, have XX and quickly, it's current have never we the XX received would same would firm will when little for bit letter to a the pricing on our change a we quotes

So a a change. able could X for books have price to see increase historically, we orders months, be the not make and on

can the any XX an backlog to quote, days. change order, immediately. have have we Now And any -- make ability for we ability we to any the change order open within

we So and much a approach lot moving then past today. quicker the have in than the with proactive living we're a environment deal to changing in more again,

Hendi Susanto

very sounds last question my And the Dan. end markets? on positive, geography e-mobility. is Any That and then particular

Daniel Bernstein

then we're to which standpoint, the or a a from an go maybe driving the they for is know. just I can force high backlog bout markets, not EV. think -- really power I I marketplace, But on a you focused in overall over had our think from back discuss group, niche

companies. So or not for we retrofitting companies, of those GM at type trucks, smaller look retrofitting vans,

growth just nice Group follow comes with not seen as Protection markets. However, service you vehicles Circuit Group the we those aggressive, because have there than -- up in our is want Protection Lynn, we through all EV? to pricing on some do EV our to when Circuit as it it's not

Lynn Hutkin

Yes, sure.

share So that. I can

million go our EV XXXX. did within $X from up over So by market sales

are growth related we see of perspective, mentioned. lot dollar increased to that, starting I to It's to always e-mobility bookings to by is a pickup been XXXX end And European, there. a as from market. some we're small a from but North see relatively And think, starting bookings So Dan there. XXXX million amount, continued in the this America, applications, $XX

Hendi Susanto

a and it’s that? is market and the North big China Lynn, America of in not portion concentrating So European

Daniel Bernstein

Not power the protection but from from the side. circuit side

Operator

or further no closing to team the have turn to I'd like at any we this As management time, remarks. back conference your additional questions for

Daniel Bernstein

everybody for appreciate to just today. April. forward thank I our looking reporting in to time like and joining your We call

Operator

today's participation, This Thank gentlemen. conclude you will call. conference and for your ladies

You may now disconnect.

Bel Fuse (BELFB) 25 Feb 222021 Q4 Earnings call transcript