Bel Fuse at Oppenheimer Conference: Strategic Evolution Underway

On Thursday, 08 May 2025, Bel Fuse (NASDAQ:BELFB) presented at the Oppenheimer 20th Annual Industrial Growth Conference, highlighting its transformative journey under CEO Guruk Taweek. The company has improved its financial health through strategic initiatives, despite facing challenges such as a sales decline in 2024 due to market over-inventory. With a focus on high-end markets like defense and aerospace, Bel Fuse aims for continued growth, leveraging its nimbleness against larger competitors.

Key Takeaways

• Bel Fuse has improved profitability through data-driven strategies and operational consolidations.
• The acquisition of Enercon bolsters the company’s position in the defense market.
• Despite a sales decline in 2024, margins have improved, showing resilience.
• New leadership hires aim to professionalize and enhance global operations.
• Potential tariff trade strikes may impact demand, but positive booking trends are noted.

Financial Results

• Initial State (Early 2021):

- Leverage was approximately 4 times.

- EBITDA margins were at 5%.

- Gross margins were in the mid-20s percentage range.

• Current State:

- Despite a decline in sales in 2024, margins have improved.

- The Enercon acquisition was made at approximately 10.5 times EBITDA, compared to similar assets trading at 15.5-16 times.

Operational Updates

• Facility Consolidations:

- Four consolidations completed by the end of 2022.

- Another consolidation announced in 2023.

• Team Restructuring:

- Entire European sales team replaced in 2022.

- New head of sales for Europe hired.

• New Hires in 2024:

- First global procurement individual, Uma, hired.

- First-ever head of global sales appointed.

Future Outlook

• Strategic Growth:

- Focus on robust organic and inorganic growth, aiming to outperform industry averages.

• Operational Goals:

- Emphasis on faster delivery times and competitive pricing.

• Revenue Goals:

- Increase exposure to air defense and the broader defense market.

• Enercon Impact:

- Expected to open new market opportunities in Israel and Europe.

• Sales Targets:

- 2025 will focus on commercial side improvements, setting the stage for future growth.

Q&A Highlights

• Defense Market Outlook:

- Potential multi-year replenishment cycle in Israel if war slowdowns occur.

- Confidence in the success of battle-proven technology.

- Shifts in global defense spending perspectives noted.

• Tariff Trade Strike Impact:

- Expected demand fluctuation between $8 million to $10 million.

- Cautious approach on distribution due to hesitancy in buying from China.

In conclusion, Bel Fuse’s strategic initiatives under Guruk Taweek’s leadership are positioning the company for future growth. Readers are encouraged to refer to the full transcript for further details.

Full transcript - Oppenheimer 20th Annual Industrial Growth Conference:

Christopher: Thanks, Tim. Appreciate the opportunity to have a chat with Guruk Taweek from Bel Fuse today. Farooq, I think well, thank you for joining, and I think we’ll get started with the high level topical question, let you run a little bit and talk about the Bell story. Kinda, you know, how you’re thinking about today, the high level journey for the company since you joined key adaptations across areas like product, pricing and contracting, operations, and, you know, commercial efforts. I I think the last one is something that is, you you know, still in in development a little bit more than the operational side, but, I’ll let you answer the question.

Guruk Taweek, Bel Fuse: I appreciate it, Christopher. Again, thanks for hosting us, at the conference here. Always enjoy the opportunity to speak to our investors, and thanks to all the participants here today, to get some time out of their their business schedules. So, Christopher, to maybe just answer a question here, I joined roughly four years ago in, February 2021. Right?

Kinda sorta a little bit in the early days of COVID, still trying to lock down. And here we are four years later. And as we look at the journey that we’ve come from, it’s really been one of change and transformation. We are not afraid of taking and have taken big swings. We will, do the right thing, as we set BellFuse on a healthier course for for the years to come.

And to put this in perspective, when we started the efforts here back in early twenty one, we’re roughly, call it, four times levered, 5% EBITDA margins, mid twenties gross margins, up and down profitability despite kind of what’s happening in the, on the revenue side of things. And we realized early on 2021 to get under the details as to kinda where the issues are. We had a lot of feelings and assumptions and and views and where things are. We still needed to before we take steps, really needed to get down to the facts of what’s going on and where the issues are. Luckily for me, July, so roughly, call it, four ish months of me joining ERP system got complete.

And I’d say the ERP system in July 2021 was really functional, but not necessarily, data analysis driven. So we spent the next few months, really dissecting the data. And we had this mantra back in 2020 called measure to manage. Right? There’s always the assumption companies are in the business of managing, but I think we realized pretty quickly we should just do a lot more measuring.

So we started looking at SKU profitabilities. We started looking at contributions and profitability where the products are being designed, which are in decent or globally. We started looking at factory profitabilities. We started looking at various KPIs on the operational side of these factories, employee productivity. As we stitch it all together coming into 2022, we realized that roughly a quarter of our backlog was negative gross margins, and this was in a time where backlogs were extremely stretched out.

So we kinda really went to work in early twenty twenty two on, start off with pricing, and then it migrated into, operational side of things. And we had launched, four facility consolidations end of twenty twenty two. It was at that time that we hired a new head of sales, for our European business, and we swapped out roughly the whole team out there as well. 2022 was busy. Heading into 2023, we announced another facility consolidation.

We continue to work on the floor that we talked about, and then we continue to push the organization on different areas of sourcing, how do we procure, getting our data continuously cleaned up a little bit as we thought around, getting our our, commission structure in place heading into 2024. ’20 ’20 ’3 was busy heading into 2024. We saw our sales obviously go down given the over inventory in the market. Despite that, we start we start we saw our margins continue to improve, which was always a question that investors had back in ’21, ’20 ’20 ’2 is how would your margins hold up in a tough environment. And I think we, for what it’s worth, came out proving our ability to kinda hang in there, and the team has done a great job, despite some of the headwind challenges in 2024.

We’re also in 2024 marked, some new addition of teammates. We hired our first global procurement individual along with our first ever head of global sales as we think about professionalizing and normalizing whole aspects. So Uma joined us in in October, and he’s been kind of heads down, analyzing the organization, understanding where the puts and takes are, where there’s improvements are going to be and need to be. And to me, that’s a very exciting part of it. You know, the market obviously wasn’t going for us in terms of sales.

Now when we talk about sales, I think we do ourselves a little bit of a disservice in the sense that it’s not like we’ve been sitting on our hands. Like I said, we swapped out the whole Europe team in 2022. We have done other things like hiring key folks, concern verticals to focus on it. We’ve moved some folks around. So it’s not like something we’ve been neglecting.

I think we’re just been more strategic versus holistic. And we’ve seen evidence of some of those activities in AI space, some of the things that we we have been talking about on our recent phone calls. So when we look at it, you know, we’ve come we’ve come a long way. The other concept is, you know, maybe just to take your question a little bit here further out, I tend to think of people, process, performance. So on the people side of things, you’re always assessing, do we have the right people around the table?

Are we missing people around the table? Do we have too many people around the table? Obviously, we’d look at this by function. And we’ve done a fair amount of people side. So the executive team with my assumption of the CEO role here, in in a few weeks with the executive team, including the CEO, there’d be one person that predated me.

Everybody else would have been a bit new, which is a big change for us. When we look at layer two and three, that’s where you can start seeing more of this change. So the fuel part of it and we hired Ooma, like I said, October, head of sales and head of strategic procurement as well and above. So we’re starting to really kinda poke at the people side of it. On the process side of it, which is what we’ve been doing in the last few years as well, is what systems are using?

What is the process in place to take an order? How do you market? How do you sell? How do you compensate? How do you reward?

How do you, gather intelligence and data to really drive and motivate, and encourage your people to perform to their best of their abilities. If you get the people side of things correct, if you get the process things correct, it should yield performance. So you need to define your KPIs. So what is it we’re shooting for, and what is it we’re aiming for? And I would say that we have done a fair amount of this work.

Specifically to your question on the commercial side, we we think, you know, that there there’s some things we need to understand in terms of other people in the right seats. Are we missing some people? And where does that need to be sitting? On the process side of things, we need to really you know, we’ve done a pretty good job with the commission structure, but we’re gonna make sure it’s more fine tuned and motivational for folks. We need to understand what is the best funneling process for our sales team.

What is the process of funneling? What does good revenue look like? What does attractive opportunities look like? We need to look at our various tools to ensure we’re not leaving margin on the table. So I’d say we’ve done a pretty good job on the process.

There’s still work to be done on the process and realignment and reshifting some of the areas that we need to go through. And then on the KPI side of it, we’re starting, like I said, seeing some performance indicators, specifically in commercial, like AI and space, defense. But we need to make sure that it’s more broad based and culturally trenched, from a growth mindset. And one kind of comment I’ll just gonna before I hear a pause, Christopher, know, a lot of investors ask us the question of you guys have been at this for four years. When do you get to the finish line?

And the way I tend to think about it is we’re really not at the finish line. We’re just getting healthier, leaner, and more, serious as we step up to the start line. So once we get everything organized and cleaned up, you’re really you’re at the start line. And the start line is growth. Right?

And what does the next three to five years look like for us? We are a long cycle design business. So for us, it’s really that getting to the start line, healthy operations, faster delivery time for our customers, competitive pricing, whether to make margin or open up new doors, and then ultimately driving for growth both organically and inorganically. Obviously, we took a shot with Enercon. It was our first, you know, big one here in a few years.

But, you know, we think of it. We’re we’re just getting ready to get off to the races here, and that’s what excites us. Can you hear me, Christopher?

Christopher: Thanks. Sorry about that. Now you talked a little bit earlier in the day about, you know, going from the start line, in terms of, you know, top of the market type opportunities like defense and medical, and then, you know, at the bottom, you know, high volume stuff, which you’ve effectively exited where, you know, you face off with China competitors and then managing risk in the middle tier where there can be a lot of that incremental strategic growth. Could could you revisit that framework a little bit?

Guruk Taweek, Bel Fuse: Yeah. Sure. So our really, we think about our business, and I think the pervasive view in our world is we are an end market driven business, and there’s reasons for that. So if we think on the high end, as I would classify it, end markets, put defense, commercial aerospace, space, rail, markets we participate in. Medical, we do a little bit of medical as well.

We’d like more of it. We don’t really do anything semi. We do random things here and there in semi, but not a not a core market. So these higher end markets tend to be low volume, medium volume, high mix, medium mix type businesses, longer design cycles, quality and performance over time is key. So brand names like Belkus and the various sub brand names that we have are critical.

Performance over time that you’ll be around to support your customers, whether it be new in June cycles or if there’s anything that kinda goes wrong, that you’ll be there, that you’ll be a reliable partner. And us being around for seventy five years carries a lot of weight to it. Then also, these customers really require and you can win in the trenches with a lot of hand to hand holding with engineering team developing. In some extreme cases in defense, we’ll chase something for five years. Ultimately, it may come to fruition or may not come to fruition.

Generally, we don’t see a lot of, Asian competition in in, in these end markets. These end markets, let’s call the high end end markets, harsh environment, we you know, it’s roughly 50% of our business today. When we look at the other end of it, extreme, which is the consumer and auto business, you know, that tends to be a big spend. Heavy Asia competition and short design cycles, big price down components, generally very high volume, and and I would say low mix. So roughly 5% of our business is consumer with a little bit of auto in there, but that’s not a core folks of ours.

There are some nice spots to be in there, but you just gotta be extremely careful where you’re playing, who you’re competing with, and and how you go about your business there. And that’s roughly 5%. So then 50% is a harsh environment, 5% consumer. 45 is is the middle, which tends to pull on both ends of those barbells. So it can be low volume, but it could be high volume.

It could be low mix, could be high mix. Price matters, but so does quality reputation over time. And in this middle market, you really gotta be smart in picking your spots. In this market, it would include things like test and measurement, automation, oil and gas, general industrial, networking, data centers, AI. Generally, we’ll see, you know, price either hold steady or generally price down concession type of environment.

So being operationally sounder is extremely critical in this part of the business. And, okay, one of our famous case studies is we used to have a $25,000,000 book of business with Meta where it was, negative gross margins. Right? So you just really wanna be careful where you’re at. So the nice thing about this middle market, or medium quality, let’s say, we with all of our operational cleanup that we have done, it allows us to be more price competitive.

It allows us to move a little bit quicker, and and participate in those markets. Right? You can’t avoid those markets, and so we’re really good at markets. We just wanted to make sure that we’re being thoughtful in our approach. So that’s how we tend to think about the world.

With Enercon, obviously, we became more on the harsh environment side of things, which and also as we think about just growth and future opportunities in M and A, I think we wanna make sure there’s parity and balance within those.

Christopher: Great. And, I I did want to get into some of the you know, how you fit, you know, by some measures, you’re, small. You know, people identify in the sector, Littelfuse, even Amphenol and Tel, you know, but the industry is also very fragmented, and in some measures, you’re big. So, you know, what what do you see as the advantages and, you know, maybe disadvantages from that from from that kinda situation where, you know, where you fit in the scale, within the overall industry?

Guruk Taweek, Bel Fuse: Yeah. We we service you know, we have three product groups, and we have different products within those product groups. So really the answer is it’s gonna you know, the grade it depends. But I think the overarching theme of where we are today, Belfuse, in the world of components, even if we look across the three segments of the markets that we participate in, There there there there’s a extremely large TAM out there. And we are, you know, I’d say maybe in some places we jump we might register on the TAM scale, but largely, we tend to be you know, we we think there’s there’s a massive runway out there.

Some of the names that you mentioned, Amphenol and and TE are great, great companies. But when you look at the TAM ownership, it starts to get thinned out pretty quickly once you bypass maybe the top three, four people in in our space. Again, I’m not talking about consumer and and the the auto folks. And you see a very, very fragmented end market. And we think that’s a good thing because it means there’s opportunity for for a lot of folks and also represents a lot of M and A opportunity, and we see that.

So in terms of us competing against some of our bigger competitors, we we lose business for them for sure. We also win business for them. So question is why why do we win? One, I’d say, factor is isn’t the scale side of things. We’re big enough to service big customers, but the dollar amount where it’s really meaningful to us could be different from some of the other competitors.

The other thing I would say is we can we can be as nimble as the smaller guys. We’re kind of a tweener, nimble as the smaller folks and and and and as as techno technologically sophisticated and competitive as the large folks. With the difference of with our size, we can care about lower dollar amount thresholds, maybe some of the other folks. But ultimately, in the you know, it’s really about brand name and engineering chops. And with our brand name being around for seventy five years, no small fee.

See many companies come and go. Companies know we’ll be there over time. We’ve proven this over time. And with our brand name and reputation, we have also shown performance over time. And especially for our customers, risk averse customers like in defense, that that’s a key key key element to it.

Our people on the engineering side are are are amazing. And, we’ve given the long cycle design business even when our sales were down in 2024 pretty meaningfully, r and d and engineering is not really something that you wanna start focusing at. And we’ve done this throughout time, even in in tougher times. We’ve always committed to all things engineering. We’ll be smart in our investment profile, right, where we need to go, we need to double down.

So we’re not shy of doubling down in in the key areas as it makes sense. So we we win for multiple reasons, like I said. And the other good thing I would point out is with our scale, you know, if we were to win, you know, $30,000,000 of new business a year, or new customers, I mean, that that that’s that’s that’s healthy for us. First, and maybe the other place at 30, maybe it might not be as interesting. So I think we have a lower base that we can just go up from.

And I think our, I think we like the trajectory that we are on here.

Christopher: Yeah. You mentioned the, my words, the amazing transformation operationally, past several years brings you to the starting line. You know, you’re not starting from a standing start today in terms of the commercial side and all the things you talked about, but it is a little early days. And I think the next year or maybe year or two be more market driven given the design and cycles. But, you know, given it’s not a standing start, how do you see the strategic growth on the organic side cycling into the cycle.

Guruk Taweek, Bel Fuse: Yeah. And, you know, we have seen where we have when we think about sales and go to market, there’s really kind of the direct key account manager folks where, when we dedicate people to really own a specific product or or a specific market, we’ve seen SuccessSpace being an example of that, and also our our big focus on AI. And also we saw that in e mobility, obviously, little bit little bit tougher times right now in e mobility. But where we’ve gone that really kind of deep approach, we’ve seen the benefits come through. And we do have, you know, the solutions are different, kind of go to market, how do you handle that channel versus kind of these key accounts.

We’ve seen that obviously in defense and commercial air. But I think we really are are gonna focus on, you know, we we do a great job on the top of the house accounts, if you will. We do a great job, probably the best distribution team in the, in the industry, obviously, biasedly here. And then we need to really mine and hunt for those tier twos, the rising stars where we can grow into and grow up into. And we’ve been hunting some of these tier twos that we’ve seen in the AI side and space side of things.

The question is, can we go more broad with it and deeper with it? And that’s gonna be, you know, kind of maybe teasing a little bit of of of our approach here. So you’re right. We’re not standing still. We were, let’s call it, situational given too much inventory in the channel that was going on.

But as we’ve seen the world heading into 2025 open up and some of the demand drive becoming more robust, and now with Uman board, the question is how do you how do you harness all of that? Ultimately, the question is what are you what are you trying to stitch here together at the end of the day? And that is kinda like our operations, which is able to perform through the cycle, whether it be the ups and downs. Right? We wanna make sure that we’re doing what we’re supposed to do when things are not good and also not getting complacent when things are good.

On the sales side, we wanna make sure that we can have enough diversity of end markets and products that can allow us to be more resilient to the the cycle ups and downs, which we which we know we will will live through as history has shown. And the question becomes is, okay. If we were to kinda close our eyes and look out beyond the next quarter. So I think 2025 will be a year where we do some cleaning up on the commercial side. So if we kind of look beyond 2025, what is it we’re aiming for?

We really need to be aiming on a robust growth business organically and inorganically. On the organic side, we talked about it. And and, you know, the question, we’ll we’ll kinda leave markers out there. But generally, we we wanna be in some of the better performing parts of our business is kind of the goal. And if the industry average is x, one wanna be a little bit north of x.

And, you know, I think the challenging thing for investors to look through is usually in companies they’ll good times, and then kinda they go through a bad time. And then in the bad time, they say, we wanna get back to what we were. While we have a lot of good in our past to point to, we wanna make sure we’re trying to break away from the past, and we’re creating a new path forward here, which does create a little bit of uncertainty. So we’re going through a little bit of a self discovery of what we wanna be. But, ultimately, when I took on this job four years ago and the new job coming up here is I I’m more convinced of our road ahead today than even now it was four years ago, quite frankly.

So we’re very much excited about that challenge of proving it out to everybody on the phone call here, where we can go with this.

Christopher: Great. And, speaking of everyone on the phone line, there is a q and a portal. Feel free to, use that, and I’ll be taking a a look at that. For wanted to switch over to the inorganic side. You know, you just acquired Enercon, a little more than doubles your air defense exposure to, I think you said it was 38% of your mix in the first quarter.

So, you know, pretty amazing. I think you paid, you know, 10 times 25 EBITDA with those margins, you know, nicely into the low thirties. Just wanted to go over how you landed so favorably and how that should inform us in understanding your capital allocation posture.

Guruk Taweek, Bel Fuse: And I agree. I mean, I think Enercon was was a great acquisition. And, you know, to put it in perspective, and if you look at the various metrics out there, there was a couple of assets that ran in industry last year, almost similar size on the EBITDA defense businesses as well that traded roughly in the 15 and a half, 16 times. And we paid roughly 10 and a half. So let’s call it a third of of a discount.

Part of why we landed so favorably here, there’s a few reasons. One is the competitors for assets, in The US tend to be a fair amount of private equity. And, obviously, private equity at this size tend to be more America focused type PE shops. So generally, their mandate would not allow them to buy a a company HQ in a in a foreign country. So that leaves you with the strategics.

And the the we know strategics, obviously, are around the hoop, and and people looked at them. There was a lot of interest in them. I think the there was, some concerns. I should say in general, also, Entercom flew a little bit under the radar because I think most American folks looked at it as, oh, it’s a company in Israel. Right?

But for those that dug in, the larger American folks kinda come in with this view of, well, we’re gonna take synergies out, or we’re gonna start pushing and pulling. And I think in the concept of we’re gonna buy a % of the business from day one. Right? So just the philosophical approach is a little bit different. When we look at the owners of Enercon, which is an Israeli based, PE shop, they tend to really focus on who’s gonna own the asset.

That’s important critical deciding factors. Israel is not a big country, and, therefore, if you’re the PE shop that sold a company to a foreign American company and everybody got fired, that becomes a very bad look. So for us, we didn’t have you know, let’s say, we didn’t need to underwrite synergies in the deal, the cost side. Right? We didn’t pay 15 times, so we gotta synergize it down to 12 or 11 or 10.

So that was kind of a big risk factors taken off. Two is from our size, having Enercon being a centerpiece where there’s opportunities for growth and visibility to the top leadership was an attractive opportunity for the PE ownership. And, also, this was a very cherished asset by the PE guys and having a 20% stake, allowing them to continue the ride once they saw our vision for the business was very enticing. So we were flexible in our deal structure to allow that 20% remaining under them. So that’s how we kind of came about it.

And another thing I should also said there was at the board level, there was some really strong connectivity to the PE folks. And we also kind of, you know, outknew them as well. So kinda the stars aligned on this one. In terms of Enercon, the asset, I tend to look at things both from the math side of things and the story side of things. And the math, how much you’re paying for it, what is due to your financial profile, what does the returns look like, what’s the accretion.

Right? The typical mess up. How much are gonna lever pro form a? How are we gonna pay for this asset? So when we look at the math piece of it, it really checked all the boxes.

Returns, accretive to all of our financial profile, accretive on day one down, kind of on a non GAAP basis, kind of out of the gate here. We didn’t stretch ourselves too much on on the leverage side. So it kind of hit all the math questions. On the story piece of it, you hit it, on the hedge, right, which is more defense commercial exposure, largely largely, you know, the vast, vast, vast majority of this business is sole source. It’s an expanding TAM.

Not a whole lot of competitors out there, and they have outperformed the industry eight out of their last ten years roughly. So and then for our perspective, it arouse opens up a new market for us in Israel where we can some sell connectivity products today. We don’t have any presence there. We do believe one plus one equals two, especially on the revenue side, especially in Europe. There’s a lot of demand for their products in Europe.

Their challenge was always they had no manufacturing in Europe. In Slovakia, we have a power factory. So the question is, can you manufacturing some goods there to service the Europeans saying that you do manufacture in Europe? And our our connectivity segment, which does sell to the defense folks in Europe, has two facilities in The UK, and they have access to all the customers. So you have customer access.

We have the power plant in Slovakia, and then Enercon has the product set of knowledge. If you marry all those three things together, it could become a real powerful play. And The US is an obvious, you know, kind of thing. We have some relationships stronger than theirs. They have relationships stronger than ours.

We’ll cross pawn it there as well. So it kinda hits on a number of the math and story themes here. And then maybe going forward, you know, we we do an intercom deal every day every day of the week, but but that’s just not the reality of the world that we live in. But I think what investors should take away from that is, one is we are gonna do m and a that’s different from the past. We want to be in a more defensible, moat driven business and technology.

And then three, we’re gonna be prudent. We’re not gonna be afraid of taking, big shots, but we need to make sure that there is multiple ways to make it work. Right? We can’t buy what I’d say one ponies where if you do this, then the deal works. And then that’s a very risky proposition.

We wanna make sure there’s a few different ways we can get to that. And our company, an example, we don’t really need any synergies to make the deal work, but we know there’s revenue synergies, and we know there’s cost synergies. All that would be gravy. And then if you zoom forward one year, Chris, right, if we look at 2025 EBITDA for this business, you’re buying the business in the singles in terms of multiples. So that’s kind of how we think about it.

You know, good end markets, defensible businesses, good profiles, margins. If not out of the gate, we can we can get there. And the investors will ask, well, would you do a turnaround? I’d say, well, it depends. Right?

On size, how sure we can get it to go. We worked really hard to get to where we are at today. So if we’re gonna take a little bit of a step backwards, there has to be a hell of a reason as to why and, you know, we can for sure get there. So that’s kind of the way we think about it.

Christopher: Couple things out in the defense market. Wanted to hit on real quick, and then we’ll have some closing questions. Entercon exposure, you know, if Israel the intensity of Israel’s defense needs right now kinda slows down from a geopolitical perspective, and, any exposure to guided weapons JDAM, which is ramping up, you know, domestically and our defense qualified trading partners.

Guruk Taweek, Bel Fuse: And so I would say, we asked ourselves this question. Remember when we started doing diligence here, it was roughly I think it was April or May. So you were very much in the thick of all things war. And as we went through diligence we announced the deal in September, things started to calm down a little bit, and I think the ceasefire happened between sign and close in November or shortly thereafter. I can’t remember exactly.

But one of our big themes was what if this all stops? And where we’ve settled on and we have proven this out in their history is coming out of the war really started with Ukraine, and then it start and then, obviously, with the with the war there in Israel. I think the global posture has changed, including we’re seeing India and Pakistan right now, Taiwan and China. Right? I think there’s there’s just a big, changing global perspective on defense spending.

We’re seeing that obviously in Europe and The US as well. Even while DOGE is taking action, we still think there’s gonna be spending in the hard weaponry. But in Israel, specifically, the conclusion there was even if the war stopped when we’re going through diligence is this is a multiyear replenishment cycle given how much drawdown there was with the with the missions and artillery there. But more interesting than that is we have seen battle proven technology succeed. And Israel’s always been one of the top 15 exporters of of defense technology globally, and we think that’s gonna actually increase.

We’re seeing I think there was an article February in the Wall Street Journal saying about how the Israeli technology proven out and the advancements, is really allowing it to become a exporter and bigger exporter ex DefenseStack. So what’s interesting now is we look, for example, Slovakia is gonna put, I think, a $500,000,000 iron dome thing there, and there’s one country in the world that knows how to do that. I think Denmark was potentially talking about that. And what’s interesting here is when we look at the Europeans, I would say, you know, there’s there’s questions around their their desire to procure American weaponry, and they’ll still buy a lot of American weaponry. But I would say they are open for a level for a business, and I think the Israelis would be primed to maybe capture some of the market share.

And all of that, I think, would be additive for us, whether the Europeans buying from the from the Israelis or or from the Americans, I think it’s all additive. So the way in a way we slice and dice it, we thought this would be a multiyear kind of ramp up on the spend side of things.

Christopher: Great. Then, you know, you put, I think, eight to 10,000,000 of exposure to demand fluctuations around tariff trade strike in the guidance. Was that speculative or, you know, related to something specific? Because we’ve generally seen companies not talk about demand disruption yet, though a few, including some very high quality companies, have a slice where it’s like, you know, okay, on hold. We’ll get the supply chain rejiggered.

Boom. Game back on. So just curious the context of that eight to ten.

Guruk Taweek, Bel Fuse: Yeah. So the eight to ten, we started seeing, as as kind of April went on a little bit here. I’d say we saw a little bit of of hesitancy specifically on the distribution side of the business. And if we think about this for a second, right, if you’re gonna buy something from China for $10 and pay a 50% tariff, just to use some round numbers here, that your cost of goods is $25. If the next day the tariff drops to 50%, your cost of goods is $15.

So in a razor thin business, you don’t wanna have a cost of goods at 25, and the next day it goes ton of 15 because you’re not gonna be able to sell the $25 and take some big write downs on that. So as a result of that, we tend to see distribution, especially when there is no customer identified, so to speak. They tend to copy each other. And so if somebody goes on pause, then a lot of people go on pause. And we kinda started seeing the snowball if I say, let’s just take a pause here for a second.

And what the way we’re at that situation is there’s inventory on the shelves, and now they’re gonna overdeplete the inventory, right, because there’s still demand. So we’re seeing a depletion at the shelf, if you will. Now the question is, when do you resume ordering? When the shelf is empty, when it gets a lot more lower, at some point, businesses will wanna generate revenue. And and we’ll turn on, you know, the distribution folks, and we’ll turn on the spigot.

The question is when and and how much? And what what we think is interesting here, there could you know, it’s not unforeseeable to potentially cause the opposite problem of over inventory, right, which is your under inventory kinda like the COVID days where people keep holding back on fulfilling their demand and ordering. And one day, if we get clarity on China, everybody turns it on very aggressively. And then all of a sudden, now your lead time is getting extended. So there is some chatter around potentially you’re heading back into shortage time, which ultimately a good thing.

The other thing I would say is on the 10,000,000, you know, we do have we’re working with our customers. Right? We wanna make sure we’re these are the times where you build good good bridges with your customers. So of that 10,000,000, we have some stuff that’s finished goods. Now we’re just holding on to it.

So in theory, right, if the floodgates open up on, let’s say, June 15 as a random date, we could ship a fair amount of it out. If it opens the last day in June, I give you a different answer. So we said, listen. This 10,000,000 roughly, there’s some question marks around it, and I think people need to under you know, are trying to understand the market. But the unfortunate part of that discussion is when we came out with the April on our earnings call, and we look everywhere else in the business, even quite frankly through April.

Right? When we look at the bookings month over month over month, we’re seeing strength over strength over strength from January to February, February to March, March to April. So we are seeing that uptick in in kind of demand, which is back to what the call we said in February where we expect growth for the year. So this 10,000,000, you know, I think is a little bit of a pause, let’s wait and see, approach. But when you even when you factor that in there, you know, we we definitely are seeing some nice things in the business, an uptick in all things bookings.

Christopher: Appreciate that. And we’re a few minutes over, so we’ll sign off. Great chatting with you. Congrats on, everything that’s been transpired in the company, and we look forward to sticking around and watching you keep it going.

Guruk Taweek, Bel Fuse: I appreciate Christopher, and I appreciate his time.

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