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BF

BEL FUSE INC /NJ (BELFA)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 2025 delivered top-line and margin expansion: net sales $152.24M (+18.9% YoY), gross margin 38.6% (+110 bps), and Adjusted EBITDA $30.91M (20.3% of sales) . EPS outperformed Street: Primary EPS 1.28 vs 0.825 consensus; revenue beat $152.24M vs $147.93M consensus (small sample) (*Values retrieved from S&P Global).
  • Mix shift to defense/aerospace and emerging AI offset softer consumer, rail and e‑mobility; A&D represented 38% of sales; AI contributed $4.6M, both up double‑digit YoY .
  • Q2 2025 outlook: net sales $145–$155M and gross margin 37–39%, explicitly trimmed by ~$8–$10M for potential China tariff impacts and lower intra‑quarter turns; management expects tariff clarity in Q2 and aims to pass exposures onward .
  • Backlog rose 4% QoQ to $395.7M; cost actions, facility consolidations, FX tailwinds and Enercon integration supported margins and cash generation ($8.15M CFO) .
  • Catalysts: tariff resolution and Q2 bookings, A&D/space momentum, AI customer ramps, networking/distribution recovery; risks: tariff persistence and commercial aerospace timing .

What Went Well and What Went Wrong

What Went Well

  • Defense/aerospace mix and AI strength: “We are pleased…benefitted from our increased exposure within the defense and commercial aerospace industries and strength in the emerging AI end market” . A&D was 38% of sales; AI revenue reached $4.6M (+double‑digit YoY) .
  • Margin expansion and EBITDA: gross margin 38.6% (+110 bps YoY) on favorable mix, cost programs and FX; Adjusted EBITDA rose to $30.91M (20.3% of sales) .
  • Backlog and operational execution: backlog increased to $395.7M (+4% QoQ); consolidations in China/Mexico and FX tailwinds improved segment margins (Connectivity +180 bps; Magnetics +870 bps YoY) .

What Went Wrong

  • Tariffs created demand uncertainty and pushed out orders: Q2 guide reduced by ~$8–$10M to reflect China‑related tariff downside and softer intra‑quarter turns . Management expects to pass tariff exposures to customers but sees near‑term pauses .
  • Segment softness: Connectivity sales -6.5% YoY (commercial air -12%); Networking down within Power in Q1, with recovery expected later in 2025 .
  • Higher interest expense from Enercon financing: interest expense rose to $4.15M (vs $0.43M in Q1‑24), reflecting revolver borrowings for acquisition .

Financial Results

Consolidated P&L and EPS

MetricQ3 2024Q4 2024Q1 2025
Net Sales ($USD Millions)$123.64 $149.86 $152.24
Gross Margin (%)36.1% 37.5% 38.6%
Operating Income ($USD Millions)$11.45 $12.37 $25.02
Net Earnings Attrib. to Bel ($USD Millions)$8.08 $(1.80) $17.87
EPS GAAP (Class B) ($)$0.65 $(0.14) $1.43
EPS Non-GAAP (Class B) ($)$0.99 $1.53 $1.35
Adjusted EBITDA ($USD Millions)$20.62 $30.33 $30.91
Adjusted EBITDA Margin (%)16.7% 20.2% 20.3%

Notes: Non-GAAP definitions for Adjusted EBITDA and EPS were revised in Q4 2024 to exclude stock-based comp, amortization of intangibles, and unrealized FX; applied to all periods shown .

Actual vs Wall Street Consensus (S&P Global)

MetricQ1 2025 ConsensusQ1 2025 Actual
Revenue ($USD Millions)$147.93*$152.24
Primary EPS ($)0.825*1.28*

Disclaimer: *Values retrieved from S&P Global. Primary EPS actual as reported by S&P Global.

Segment Breakdown (Sales and Gross Margin)

SegmentQ1 2024 Sales ($M)Q1 2025 Sales ($M)YoY %Q1 2024 GM (%)Q1 2025 GM (%)Δ (bps)
Power Solutions & Protection$60.25 $83.05 +37.9% 44.0% 42.6% -140
Connectivity Solutions$54.29 $50.73 -6.5% 36.1% 37.9% +180
Magnetic Solutions$13.56 $18.45 +36.1% 16.0% 24.7% +870
Total$128.09 $152.24 +18.9% 37.5% 38.6% +110

KPIs and Operating Metrics

KPIQ1 2025
Backlog ($USD Millions)$395.7
Cash from Operations ($USD Millions)$8.15
R&D Expense ($USD Millions)$7.22
SG&A Expense ($USD Millions)$29.51
Effective Tax Rate (%)23.0%
Net Debt ($USD Millions, Revolver Outstanding)$280.0

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Net Sales ($M)Q1 2025$144–$154 (given Feb 18, 2025) Actual: $152.2 In‑line completion
Gross Margin (%)Q1 202536–38 Actual: 38.6 Above top end
Net Sales ($M)Q2 2025n/a$145–$155Introduced; modified downward by ~$8–$10M for tariffs
Gross Margin (%)Q2 2025n/a37–39Introduced
Net Sales ($M)Q3 2025n/a$165–$180Introduced (as of Jul 24)
Gross Margin (%)Q3 2025n/a37–39Introduced
Dividends ($/sh)Q3 2025 pay date Aug 1Regular quarterlyClass A $0.06; Class B $0.07Maintained

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3 2024, Q4 2024)Current Period (Q1 2025)Trend
AI initiativesLimited disclosure; focus on bookings green shoots in networking/distribution AI revenue $4.6M; double‑digit YoY; largely to next‑gen GPU makers; base case excludes indirect AI via networking Improving
Tariffs/macroNo specific tariff detail; cost actions and consolidations discussed Q2 guide lowered by ~$8–$10M for China tariffs; ~25% of sales potentially subject; plan to pass exposures to customers; expect clarity in Q2 Deteriorating near‑term; potential stabilization
Supply chain/footprintFuse consolidation in China; consolidations planned Active shift of at‑risk revenue from China to India (facility acquired in 2021); plumbing for dynamic cross‑facility moves Accelerating diversification
A&D/space exposureEnercon closing expected; A&D becoming key market A&D = 38% of sales; space sales up; Enercon performing ahead of expectations Strengthening
Commercial aerospace (Connectivity)Segment growth in Q4 2024 Commercial air ‑12% YoY; expected to recover as output ramps Mixed; near‑term softness
Networking recovery“Green shoots” in bookings into 2025 Networking down in Q1; bookings improving; recovery expected in 2H Improving 2H
R&D executionOngoing R&D $7.2M, boosted by Enercon; expected to align with Q1 run‑rate Stable/higher investment

Management Commentary

  • Strategy and mix: “We are pleased with our first quarter results, which benefitted from our increased exposure within the defense and commercial aerospace industries and strength in the emerging AI end market” — Daniel Bernstein, CEO .
  • Tariffs and guidance: “Approximately 75% of our global sales are not currently subject to the recent U.S. tariffs… GAAP net sales in Q2 are projected to be $145–$155M… modified downward to take into account approximately $8–10M of… potential downside impact from China‑related tariffs and a lower expected volume of intraquarter turns” — Farouq Tuweiq, CFO .
  • Passing costs and resilience: “The bottom line is, we will be looking to pass all tariff exposures onward… we are better prepared… as we have built a more nimble and resilient organization… starting to move some products from China into our India operations mid to late last year” — Farouq Tuweiq .
  • Enercon: “It is at a minimum as advertised, but it’s roughly ahead for us… excellent team, technology, alignment with customers… we see upside” — Farouq Tuweiq and Daniel Bernstein .

Q&A Highlights

  • Tariff impact by segment: Connectivity largely unimpacted; ~60% of Power and ~60% of Magnetics not subject to U.S. tariffs; DR products subject to 10% currently .
  • Connectivity decline drivers: Commercial air down 12% YoY; expected recovery as industry outputs ramp and union issues resolve .
  • AI customer profile: Revenue largely to next‑gen GPU manufacturers (private, U.S.‑focused); Bel co‑develops with customers; base AI figure excludes indirect AI via networking .
  • Manufacturing relocation and capacity: More at‑risk revenue shifting from China to India; customer audits/approvals required; India seen as friendly trade partner .
  • Networking outlook: Down in Q1 within Power, bookings improving; recovery later in 2025 .

Estimates Context

  • Q1 2025 revenue beat consensus ($152.24M vs $147.93M*); Primary EPS beat (1.28* vs 0.825*). Street may raise 2025 estimates for defense/space and AI contributions, offsetting connectivity/commercial air timing and tariff uncertainty (*Values retrieved from S&P Global).
  • Sample sizes were small (Revenue # of estimates = 5; EPS # of estimates = 2), suggesting limited coverage and potentially higher revision volatility (*Values retrieved from S&P Global).

Key Takeaways for Investors

  • Mix shift to A&D/space and AI is driving margin resilience and revenue growth; backlog and bookings indicate improving demand into 2H 2025 .
  • Near‑term tariff uncertainty is the primary headwind; management is passing costs, diversifying sourcing (India), and expects Q2 to bear the brunt before clarity improves .
  • Connectivity/commercial aerospace weakness looks transitory; management expects recovery as industry outputs ramp, which could re‑accelerate segment growth in H2 .
  • Enercon integration is ahead of expectations and deepens exposure to structurally stronger defense programs, supporting multi‑year earnings quality .
  • Margin levers (facility consolidations, FX tailwinds, procurement analytics) are sustaining ~20% EBITDA margins; watch sustainability if tariffs persist .
  • Balance sheet: revolver at $280M and interest expense stepped up post‑Enercon; cash generation ($8.15M CFO) and planned debt paydown support deleveraging in Q2–Q3 .
  • Trading setup: Q2 guide already embeds tariff downside; upside catalysts include tariff clarity, Q2/Q3 bookings, and AI/A&D ramps; downside risk is prolonged tariff uncertainty and commercial aerospace timing .