Bel Fuse at East Coast IDEAS: Strategic Shifts Amid Challenges

On Wednesday, 11 June 2025, Bel Fuse Inc. (NASDAQ:BELFB) presented at The 15th Annual East Coast IDEAS Conference, offering insights into its strategic direction and performance. The company, known for its electronic components, highlighted both growth opportunities and challenges, including a significant acquisition and the impact of global tariffs.

Key Takeaways

• Bel Fuse completed its largest acquisition with Enercon, enhancing its Aerospace and Defense portfolio.
• The company navigated a 20% sales decline from 2023 to 2024 but improved margins through operational efficiencies.
• Leadership changes were emphasized, with Faruk Twik as CEO and Lynn Hutkins as CFO, signaling a strategic shift towards growth.
• Bel Fuse faces a 25% revenue exposure to tariffs, with strategies in place to mitigate risks.
• The company anticipates growth in Aerospace, Defense, and emerging markets like space and AI.

Financial Results

• Sales reached approximately $629 million with an EBITDA of 21%.
• The company holds $270 million in debt and $65 million in cash as of April 2025.
• Despite a 20% sales decrease, gross and EBITDA margins improved due to pricing strategies and facility consolidations.
• North America’s sales share has slightly decreased due to expansion in EMEA.
• The shift towards power products, now 54% of sales, was noted alongside challenges in magnetic solutions.

Operational Updates

• Bel Fuse consolidated six facilities to enhance operational efficiency and increased CapEx for automation.
• New leadership roles were established, including a global head of Europe sales and a head of strategic procurement.
• The company centralized raw material purchasing, which constitutes 70-80% of the power segment’s bill of materials.
• Industry-wide inventory corrections posed challenges, particularly in networking and distribution.

Future Outlook

• Bel Fuse expects continued strength in Aerospace and Defense, with growth in space and AI sectors.
• A rebound in networking and distribution is anticipated due to inventory corrections.
• Strategic plans focus on leveraging engineering talent, enhancing procurement, and pursuing growth opportunities.
• Guidance indicates potential shifts in China-related revenue to Q3 due to tariff impacts.

Q&A Highlights

• Distribution customers expressed positive sentiment at the recent EDS industry conference.
• The reduction in China tariffs has resumed shipments, though port delays persist.
• Enercon’s 2025 schedule is fully booked, with cross-sell opportunities expected to yield synergies by 2026.

In conclusion, Bel Fuse’s presentation at the conference underscored its resilience and strategic evolution. For a detailed understanding, readers are encouraged to refer to the full transcript.

Full transcript - The 15th Annual East Coast IDEAS Conference:

Operator: Delighted to introduce Belfuse, Faruk Twik, CEO, and Lynn Hutkins, CFO.

Faruk Twik, CEO, Belfuse: Alright. Thanks, team. Morning, everyone. Thank you for making some time for us here today. So we’ll we got a presentation we’ll run through here, and then happy to open it up for q and a at the end.

But these things are usually more interactive if we get questions. So get those ready, please. Alright. So Belfuse. We’re headquartered not too far from here, West Orange, New Jersey.

We celebrated seemingly a long time ago, but early last year, our seventy fifth anniversary, which is no small feat in our industry of electronic components where we’ve seen a lot of change in consolidation industry, but we’ve been we’ve been hanging out in the industry here, you know, with really a testament to our engineering and product set. With, you know, believe it or not, we start out in the business of making fuses for black and white TVs back in ’49. And then there was color TVs and personal compute and into where we are today, really more kind of b two b type company. Obviously, traded, roughly 629,000,000 of sales and 21% of EBITDA. You know, you guys will see some of this pro form a stuff throughout the presentation.

We did our largest acquisition in our history back in November of a company called Enercon. So that’s that’s kind of the the intention of the pro form a there, which we’ll talk about here in a little bit. Alright. So we pride ourselves on diversity geographically, end markets, go to market. And we’ve seen the benefits of that really come through in the last couple of years as we’ve seen the industry go through some too much inventory in the channel and some challenges there.

And we’ve seen kind of the benefits of that diversity side of things. Today, power, historically, should say, on the product level group, we’ve historically been a little bit more balanced, a a a But if you’ve got to track this here for the last couple of years, especially now with Enercon, we are 54% power. And our connectivity group, still 35%. So where they historically is in terms of percentage, they’ve seen some nice growth there. But we obviously have seen some challenges in our magnetic group, and which we’ll get into that in a little bit here.

End markets. Today, A and D is our largest end market. And Q1 was around 38%. But when we look at this here, it’s closer to 36%, so roughly a And the company I was talking about earlier that we acquired Enercon would sit into that A and D space. The large market for us is or I should say, you know, historically has been networking has been the largest one for us.

But with the acquisitions along with some of the challenges that market today, it’s our one. And then industrial is kind of your coverall. And then as we think about distribution, it’s a great market for us. It’s been down a little bit given too much inventory in the channel last year, and we’re seeing nice signs of recovery there. So we’re excited for that.

But think of that as really more of a market seeding and customer finding type relationship. It always it’s interesting to me because I think it is a safe assumption, but generally, investors would tend to think of this as a low margin business. But the reality is it’s it’s a very good corporate level margin business. So that’s a key one for us. Customer type, we’re largely direct OEM.

Obviously, these numbers are little bit skewed because distribution was down, but we are largely a direct relationship. That engineer to engineer hand holding in the trenches, long design cycles is very key for us. And the customer is always appreciate, obviously, the brand name, our engineering talent, and and the fact that we are really there for for the long time. And we’ve been there throughout history, which is a key thing for our customer base, which tends to be more conservative. Geographically, we align ourselves more to North America based companies.

Historically, North America was 70%, it’s come down a little bit with our recent acquisition. And then we’ve seen expansion in EMEA. Again, that’s where our company that we acquired Intercon would sit with some more Israel exposures in the EMEA side. So we’ve seen that kind of expand a little bit here. Some logos for some of our customers.

Looking at this a little bit by group here, and I’m not gonna hit on everything, but you’ll see that on the basis was was was kind of going through a a cycle down, some of the challenges within the channel. So we saw weakness in distribution, in networking, and and largely in industrial, but rail and e mobility. Rail was was the really standout one for us last year, and also we start seeing AI come through this segment as where we service AI. We talked about some of the customers here. If you look at the financials on the bottom, I should point out one of the big focus area for us the last three, four years, We’ve been in in kind of restructure, turnaround mode to get our margins to more industry aligned.

So you’ll see that just more of across the theme. So we’ll get into that in a why our margins have improved despite some difficulty in the headline. Connectivity solution, this was our legacy A and D exposure business. And this is kind of what we were known for on the A and D side, but similar design cycles, largely North American and European exposure type business here, But generally, low volume type applications. This has been a nice grower for us, especially as we’ve seen the MAX get off the line back in 2020, 2021 and defense spending ramp up.

Obviously, this has been a grower for us given the overall increased defense spending. Magnetic solutions, I would say this is our most concentrated business. It’s really concentrated in networking and distribution, which both of them have been down. That’s why you see that that big decline in in sales. We I would say in 2022, this segment obviously had a unusual number of revenue given some of the challenges and the dislocation and issues that were going on in the supply chain.

So it’s been a little bit tough for us. And then also we have a customer concentration in this segment. But the good news is on the rebound, and we’ve seen that come through, I think starting Q3 last year, and we’ve seen that sequentially grow. So we are excited to kind of get back to growth on that one. Change is something we’ve talked about a lot.

And for those of you that have kind of followed our story, today I think when we look at our margin profile, which Lynn will get into, on the gross margin level, you know, I bet you we’re in the top percentile, and despite our sales coming down last year. And we look at our EBITDA also, you know, probably at a minimum of fifty, sixty, 70 percentile of our industry. So we we know our strategy of cleaning up the the business has worked. This is just a broad stroke of what has been done the last few years. I would just we’re gonna bucket on really on the people side operations and strategy.

So on the people side, strengthening our bench, we have added our outside global head of Europe sales, Sabine. We added our global head of sales back in 2024. Our global focused head of, we call them contracts, really strategic procurement. So and we’ve you’ll see various changes on the executive team. Today, I’m, you know, CEO as of a couple of weeks ago, and Lynn CFO as well.

And when you looked at when I joined back in 2021, I was the new person. And today, only one person on the executive team kind of predates me. Some of it was internal elevations and promotions, some from the outside. But we I think we’re happy with where the people side of it is. Operations, we’ve done six facility consolidations across the businesses, and we have really invested a fair amount of money into our CapEx.

So six less facilities, more CapEx as the ROI started making sense. When we’re looking back at ’21, I think we’re four times levered. So we were 5% EBITDA margin roughly. So we were just trying to pay our bills and stay above water. And now we’ve moved into the offense side on the CapEx and automation as we think about global input costs going up.

Strategy has been a big discussion. I think something that maybe we’ve underinvested in. So we’ve really kind of done a good job back in ’22 and ’23 setting a plan and kinda going at it. If one thing I think folks here will point out to a lot of this was operational, internal focused factory level. And the the reason there really was just the world was a little bit shut down in terms of sales in general, so we thought it was more prudent to focus on getting our house in order to empower sales team.

As we think about 2025, a lot of focus on sales and achieving that growth, which we said earlier this year, we expect growth across across the business. Then we’ll hit on one slide here before turn it over to Lynn. Like we said, we had a transition here in May 2025. I think those that have also followed our story probably knew that Lynn and I both played maybe unusual roles for our previous titles. So, you know and we’ve been on this journey of change for the last four years.

So investors are like, what’s new now? We’re like, well, we’ve been doing a lot of stuff. Obviously, there’s some things we wanna get to the last 20%, 30, but we’ve been on this journey. We’re not waiting for for this. Our previous CEO, Dan Bernstein, stepped into the chairmanship role, but we are now we’ll be able to kind of get to some of the things maybe there was just misalignment on.

China tariffs, whatever I tell you right now, I’m sure it’ll be wrong tomorrow once we see a new tweet coming out. But we’ve talked about this a little bit more in-depth on our call in April. I think one of the misunderstood, let’s say, on the outside from a casual reader investor, is you’ll see we have a lot of square footage and a lot of people in China. So people assume we are, you know, all of our revenues in China and everything we’re making in China. The reality of the matter is the heavy China footprint is because our magnetic segment, which stays our smallest, is a very labor intensive product.

So therefore, they need a lot of square footage. A lot of the workers there need dorms. So you will see an out sized head count and and square footage, but that misaligns to the revenue. On the second quarter, we talked about that we have roughly 25% exposure to tariffs. So this is revenue, let’s say, that’s making its way back to The US.

Roughly 10 of that 25, so 10% is China specific, and the other 15% is other countries. With the big concentrations, the largest one there being Israel, and then also some India and some other kind of random places. So we, on the 15%, haven’t really seen any disruption or concern there, and we don’t really think that’s something that’s overly stressful. As a reminder, our industry has been operating under the tariff side of things back in 2018, 2019 when these things got initially put on. We’re passing it all on, and we’re, you know, we’re we’re we’re moving it on.

I should say the 10% that’s from China coming in, we saw some folks put a pause order in the second quarter as we they got clarity on the 170% tariff. Obviously, since then, that number has come down to something more manageable, and we’ve seen a resumption of of, let’s call, the shipping. The one caveat here is when we gave our guidance, which was around $1.45 to $1.55, we said there is this eight to 10,000,000 of this, let’s call it, at risk China. We’ll wait and see what happens. We will recover some of that, but some of those guys are gonna have to get back in line as lead times and get back in the production cycle.

So better news overall today. We’re passing on the tariffs. We think we’re, on a relative basis, I understood we’re very well set up to handle this this this environment. So, obviously, we continue to hope for more clarity. In terms of what we’re really focused on here and working, like I said, sales and growth has has you know, is something we’ve always talked about.

We’re we’re putting more muscle behind that. Like we said, we have great engineers, great product names, great reputation. We just wanna make sure that we’re really leaning into it. So this one is really exciting for us. And then also sales initiatives.

Like I said, we hired a very seasoned leader back in October. He’s been digesting the organization. I mean, we are global for a company that’s, let’s call it, 650,000,000 of sales. We’re very global. We’re in a lot of places.

And a part of that understanding is who does what where. So our Uma has been well in on that, and we’re very excited for the things that he’s working on, and we’ve put some of these things in place. We’ll maybe talk more about that as time goes on. Procurement, like I said, historically, we’ve done buying more at a BU level or really more at a facility level. I would say raw materials is our biggest cost expense, and it was the one that there was, you know, no true ownership of it.

Now this may seem a little bit simplistic, but when we look at something like power, which is our biggest segment today, 70 to 80% of the bill of material is material. So and and think about it more simplicity. If if we’re very good at acquiring raw material, you will have a really good chance of making your margins even if you mess up the people overhead side of it. But we had nobody kinda really focus on it. So that is a you know, I understand companies love saying procure and procure, but for us, this is a real opportunity.

We’ve done some nice things the last couple of years in terms of cost reductions and cost takeouts even in a tough environment. So we’re I think this one is is gonna be a good one for us. I think if you also followed our journey the last three, four years, we’ve been heavily focused on the p and l. Our gross margin was low. EBIT was low.

EPS was low. Overlevered. So a lot of, you know, interest expense. So for us, we really focused on making our p and l a little bit more healthy. We obviously did not sleep on the balance sheet side of things, but, you know, if we’re doing a price increase or we’re trying to push other terms on the relationships or delivery and you’re trying to figure out AR terms, it makes it a little more complicated.

So we we’re we’re we’re, I’d say, renewed focus on balance sheet. Obviously, I’ll caveat this will be a little bit longer term because our customers are very, very big folks in general. But we think there’s enough there that we can we can improve upon. And with that, I’ll turn it over to Lynn.

Operator: Thank you, Farooq. So just to wrap up what Brooke just went through. So this is kind of a snapshot of the self help phase, as we’ll call it, that we just went through over the last four years. So you can see even with sales going down by 20%, as Farooq mentioned, from 23 to 24, the gross margins that we were able to achieve based on pricing actions we took, facility consolidations, you know, aligning pay with performance, all of those initiatives that we’ve done over the last four years has really helped to drive our gross margin and EBITDA margins up, and you can see that those were sustained even on a lower sales base. From a liquidity perspective, we did take on a fair amount of debt with the Enercon acquisition that we did in November of twenty four, but we are aggressively paying that down.

So as of the April, this was from right after our earnings call, were at $270,000,000 of debt and 65,000,000 of cash. And we do have intentions of continuing that level of pay down. So as we look forward, we’ve been talking about growth. That’s the main focus for this year and how are we going to get there. So this slide just goes through, you know, the industry that we’re in, electronic components, is an exciting space today.

So it’s not just one thing that needs to hit in order for us to grow, and this is across the whole industry. So as things get smaller, more efficient, smarter, faster, they we’re playing in all of these spaces. So electrification, AI, EV, which slow at the moment, but we do expect that to be a longer term growth driver for us. These are all areas that we participate in and we think will be additive to us over the years. For Bell specifically, as we look for the balance of 2025, The areas that we see continued strength in is, and I’ll get into these in the next slides here, A and D has been strong for us and we expect that to continue throughout the year.

Space and AI have both been emerging for us, so it was a couple million dollars a year up until ’24. They were both around that 7,000,000 to $8,000,000 range in ’24, and we’re continuing to see growth there. So small but growing and exciting end markets for us. And then if you’ve been following us over the last few years, you would have seen that networking and distribution have been soft. There’s been a lot of inventory in the channel over the last two years.

Our customers have worked through that inventory on hand. We started seeing an uptick in bookings earlier in 2025, which bodes well for the end of the year. So these are areas that we anticipate seeing some rebound in the half. The next few slides, these just go through some of the specific growth drivers that I outlined. So obviously, aerospace, we’ve been in aerospace for decades.

It’s OEM and aftermarket, as Farooq mentioned. Nice growth here. We will go as the new production of aircraft goes. So if your view on that is that it’s growing, we will grow with it. And then we do have an aftermarket exposure here as well.

On the defense side, you know, as the global security needs evolve and various countries are strengthening their defense systems, we will participate in that. So we do work with The US primes here, the Israeli primes, along with the Enercon acquisition that we did in November. So they are largely on the defense side, the Enercon business. They’re about 93% defense. And so again, this is US, Israel, and and also some some Europe on the legacy Bell side.

So we do expect this to be a large growth driver for us going forward. Space, as I mentioned, small but we have been in space for decades. So this was before it made really any money for us, we were just excited to know that our products survived up in space. So now that it’s becoming more commercialized, people are sending a lot more things up into space, we have over 200 customers in this area, some of them are the names that you read about in the news, other ones are very small startup type customers. So we believe that we’re very well positioned in this area.

As I mentioned last year it was about 8,000,000 of sales, Q1 was $2,000,000 So we do expect it to continue to grow, small but an exciting end market for us. And then on AI, this also small but growing and this is largely in our power group. So our power supplies, it’s actually the same power supplies that that we’ve been manufacturing. And if you think back to the days of Bitcoin mining a few years back, it was the same power supplies that were being sold into that end application. So it’s really more of the same power supplies, just higher volume of those supplies going into these applications.

And in this area, we are not participating with the hyperscalers here, so we’ve chosen our spots. So it’s more working with networking customers, Cisco, HP, Dell, and then also some of the smaller start up y type customers who compete more with Nvidia. So in summary, we think that we’re at a very exciting point in our journey here over the last four years. As we mentioned, it was kind of a self help story, growing margins, cleaning up our foundation, and the next chapter, you know, as we look into 2025 and into ’26 is really focusing on growth, both organic, inorganic, and then tackling not only sales but also the procurement piece. So we’re just getting started.

So it seems like a lot of times investors say, oh so you finished, That the gross margin story is finished, But we view it as we finished getting the foundation strong, so now we’re we’re gonna start the growth story. So thank you. We’ll open it up for questions. So on the gross margin side, we view ourselves as being probably in the percentile of the industry today, so we’re not going to blindly focus on increasing margins from here. I don’t think we have a desire to be a 40% gross margin company.

What we would like to do going forward is viewing it as a more of a taking a portfolio approach and adding to the top line, maintaining margins, and adding to the bottom line. So that’s more of we look at gross margin. So we’re good where we are, but we do want to drive top line and bottom line. Andy?

Faruk Twik, CEO, Belfuse: Yeah. So I I’d say maybe I’ll just give a high level here. Maybe just the question was around what are we seeing from distribution customers here. So in I think it was the third week in May, we had our biggest industry conference that happens once a year in Vegas, EDS. And, really, EDS is for distributor and and supplier companies like us, so it’s not OEM customers.

Right? And I would say the and may I I’m just expanding your question here a little bit, Hindi, is that I think the mess the body language and the message is is much more positive. I think when we look at EDS back in ’24 and ’23, I would say they were much more subdued. So I think there is a more bullish outlook on where where we’re going. So that was good to hear other people in the industry kind of echoing what we’re seeing.

And I think they’re and not too dissimilar maybe to to Belvieu’s. I think maybe some weakness in consumer, but consumer is, like, 5% of our business. It’s not really big focus. So some end markets will be a little bit more labored. But where we participate, I think there’s a much more bullish, robust language.

In terms of specifically our distribution folks, if you recall, maybe to expand on that a little bit as well, is in our earnings call, we said eight to 10,000,000 from distribution customers that was scheduled to ship in q two that was at risk given that they wanted to see what more clarity coming out over the China tariff. Obviously, the China tariff was reduced down to, let’s call it, mid fifties. So, therefore, that did lead to more of a resumption. So no pauses today. And and, you know, people are kinda back, let’s say, normal cadence.

The question is the 8 to 10,000,000 that we had called out at the April was a mix of finished goods. So things that were ready to ship that were just, you know, sitting on the dock. And, also, it was things that were scheduled to be manufactured in the quarter and shipped out. So depends on where it is in the manufacturing journey, we’ll recover. If it’s finished goods that we can ship out, yes, we we we ship it out, and we’ll be shipping it out.

There there’s a little bit of port backup because all of a sudden, everyone woke up with China says, let’s ship a bunch of things out. But so we do expect recovery part of that eight to 10, not all of it, but some of it. And then the rest of it that we don’t get to in q two will, you know, get shipped out to q three. Yeah. So so so remember, you know, they are an a and d business.

So the question is around Enercon road map here on the product side. So they are a 100% aerospace defense, 93% defense, and 7% commercial air. And these are not, let’s say, quick design cycles. Right? When we look at Enercon, 2025 is basically booked.

It’s been booked for the last few months. We’re taking orders for 2026, not not out of the gate 2026, so a little bit, you know, beyond that. So and we’ve talked about we think there’s a fair amount of revenue synergies when we did acquire Intercon, but we also said we don’t really expect anything in ’25. Right? Just it’s not the way the industry works.

So we expect some of that in ’26. But in terms of some of the tea leaves, maybe, we are seeing some cross sell opportunities. So we have fed them some opportunities. They fed us some opportunities. So we like the the the activity, let’s say, around it.

To your other question is, you know, Entercom’s always in the business of designing and going after new business. Right? It’s just it’s the question of, okay. We know you’re getting shots on goal, but when do you actually convert that? So I would say in terms of shots on goal, given what’s going on in the end market, we’re seeing a lot of shots on goal.

Right? And we’re seeing kind of robustness in, you know, both in Europe and in North America. So we like the activity around it, which was kind of our operating thesis. Right? There’s a lot of money going into this space.

Some of the things we have seen, which we don’t know if this is a little bit of a new normal, is a little bit of shortening on duration of design times. So we had a project come in in Europe where usually, let’s say, it’s this long, and they did it much quicker. Now is that a change of mindset given what’s going on there? Unclear yet, but we’ve seen some shortening of durations on design cycles. And and that was more of a ground, let’s say, vehicle.

So maybe because of that, it was a little bit quicker, but things that fly maybe not so much unclear. So TBD. Any other questions? Alright. Thank you everyone for your time.

Appreciate it. Always happy to connect offline here. Thank you.

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