Q4 2023 Summary
Published Feb 18, 2025, 5:23 PM UTC- Bel Fuse is experiencing higher gross margins than historically seen at these revenue levels, indicating improved profitability due to restructuring efforts and operational efficiencies.
- The company's eMobility sales grew by 40% year-over-year, focusing on niche markets like school buses, heavy-duty equipment, and marine equipment, which are less affected by challenges faced by the broader EV industry. This positions Bel Fuse well for continued growth in eMobility.
- Bel Fuse is investing in growth initiatives, including expanding into new markets like space, and is seeing early signs of success with significant orders, particularly in their Connectivity segment, which supports future top-line growth.
- Delays in eMobility Investment: Bel Fuse's investment in the eMobility sector is facing delays, with key milestones pushed from the end of 2024 to a base case of 2025. This is due to customer challenges and start-ups facing capital raising issues, which could hinder growth prospects in this segment. ,
- Continued Weakness in the Magnetics Segment: The over-inventory situation is leading to decreased demand in the Magnetics segment. Management expects inventory digestion to carry through into Q2 of 2024, and they are uncertain about the exact timing of a rebound, which could negatively impact revenues in the near term. ,
- Potential Margin Pressure from Normalizing Lead Times: As lead times come down, there is a historical trend of increased price pressure, which the company has not yet faced but anticipates. This could result in lower margins as the market returns to normal ordering patterns.
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$25 Million Share Buyback
Q: How will you execute the $25 million buyback?
A: The company announced a $25 million share buyback, its first since 2012. They plan to execute it programmatically over the next few quarters, being mindful of average daily float and market conditions. -
eMobility Market Position
Q: How are you positioned in the eMobility market amid EV challenges?
A: Bel Fuse focuses on niche eMobility markets like school buses, heavy-duty equipment, and marine equipment, avoiding high-volume passenger vehicles. They continue to see growth in these areas despite broader EV market headwinds. -
Gross Margin Outlook
Q: How should we think about gross margins given Q1 guidance?
A: For Q1, margins are expected to hold at full-year 2023 levels, which is a step down from Q4 due to lower sales volumes and seasonality from Chinese New Year. Margins are anticipated to normalize in later quarters. -
Growth Initiatives and New Products
Q: Any early results from reemphasis on growth and new products?
A: The company is seeing positive signs, especially in Europe where they've expanded their direct sales force. They're focusing on emerging markets like space within Connectivity and capitalizing on AI investments in Power, though sales cycles are taking longer. -
Magnetics Demand Improvement
Q: Is there actual improvement in Magnetics demand expected in Q2?
A: Due to inventory overhang and extended Chinese New Year shutdowns, they don't expect full inventory digestion by Q2 but align with industry expectations of a recovery over two quarters. -
Power Solutions Demand
Q: How is demand in the Power Solutions segment?
A: Demand is mixed, with weaknesses in distribution and fuses but strengths in industrial, rail, and eMobility. The Power business has performed well despite not operating at full capacity. -
Second Half Rebound
Q: Which areas might rebound earlier in the second half?
A: They anticipate softness lasting one to three quarters based on historical patterns and are optimistic for second-half growth, though specific areas weren't detailed. -
Backlog Normalization
Q: When will backlog orders return to normal levels?
A: Backlog remains elevated at $373 million. They don't expect a return to pre-COVID levels due to changes in ordering behavior, and normalization timing is uncertain. -
Pricing Environment in 2024
Q: What is the outlook for pricing in 2024?
A: Historically, decreasing lead times lead to price pressure, but they haven't seen significant price pressure yet and don't anticipate immediate changes. -
Investment in Electric
Q: Any updates on Bel Fuse's investment in Electric?
A: Significant developments are now expected in 2025 rather than 2024 due to delays in product development and customer challenges. They continue to work closely with Electric.