BEL FUSE INC /NJ

Bel Fuse Inc. designs, manufactures and markets a broad array of products that power, protect and connect electronic circuits, primarily used in the defense, commercial aerospace, networking, telecommunications, computing, general industrial, high-speed data transmission, transportation and eMobility industries, with additional application in the automotive, medical, broadcasting and consumer electronics markets. The Company operates facilities in North America, Europe and the Middle East (EMEA), and Asia, and has been in operation for more than 75 years. The industry is highly competitive, with numerous independent companies and divisions of major companies manufacturing competitive products, and competition is based on product performance, quality, reliability, depth of product line, customer service, technological innovation, design, delivery time and price.

The Company's ability to compete depends on several factors including product performance, quality, reliability, depth of product line, customer service, technological innovation, design, delivery time and price, with overall financial stability and global presence giving a favorable position relative to some competitors. Management intends to maintain a strong competitive posture through continued expansion of product lines and ongoing investment in research, development and manufacturing resources. The filing does not name specific primary competitors or provide market share data.

The Company primarily generates revenue through the sale of its products, with no direct customers accounting for more than 10% of consolidated net sales in 2025. Sales are made through three channels: strategic account managers or regional sales managers working directly with customers, regional sales managers working with independent sales representative organizations, or authorized distributors. The Company has written agreements with all sales representative organizations and most major distributors, terminable on short notice by either party.

Power Solutions and Protection products accounted for 53% of net sales in 2025. This segment includes front-end power supplies, board-mount power products, industrial and transportation power products, military, aerospace and defense products, external power products, and circuit protection products, used in aerospace, defense, servers, storage, networking, transportation, harsh environment, consumer, medical and industrial markets. Brands sold under this group include Bel Power Solutions & Protection, Melcher, CUI, EOS, Enercon, and MilPower. Connectivity Solutions products accounted for 34% of net sales in 2025, offering high speed and harsh environment copper and optical fiber connectors and integrated assemblies for commercial aerospace, military communications, defense, network infrastructure, structured building cabling and industrial applications, under brands including Stratos, Fibreco, Cinch, Johnson, Trompeter, Midwest Microwave, Semflex, and Stewart Connector.

Magnetic Solutions products accounted for 13% of net sales in 2025, offering integrated connector modules (ICMs), power transformers, signal SMD power inductors and SMPS transformers, and discrete components, used in networking, industrial, alarm, security, motion control, elevator, medical, automotive and consumer electronics applications, under brands including Bel, TRP Connector, and MagJack. The Company's product groups include Power Solutions and Protection (front-end, board-mount, industrial and transportation power products, module products and circuit protection), Connectivity Solutions (expanded beam fiber optic, copper-based, RF and RJ connectors and cable assemblies), and Magnetic Solutions (integrated connector modules, power transformers, power inductors and discrete components).

On November 14, 2024, the Company closed on the acquisition of its majority 80% stake in Enercon Technologies, Ltd., paying an aggregate of approximately $325.6 million ¹ in cash for the cash purchase price, funded through cash on hand of approximately $85.6 million ² and approximately $240 million ³ provided through incremental borrowings under the Company's revolving credit facility. The Company may acquire the remaining 20% stake in Enercon and has the current intention to purchase such remaining interest by early 2027 ⁴. On February 1, 2023, Bel closed on an €8.0 million ⁵ (approximately $8.8 million ⁶ as of the February 2023 closing) noncontrolling (one-third) investment in innolectric AG. In November 2025, the Company recorded a pre-tax impairment charge of $13.1 million ⁷ representing the full impairment and write-down of its investment in innolectric and the related notes receivable. During 2025, the Company initiated a restructuring initiative within its Magnetic segment related to the transition of manufacturing from Bel's Pingguo, PRC facility to an outside subcontractor, incurring $1.6 million ⁸ of restructuring costs. The Company also recognized gains on sales of assets totaling $5.7 million ⁹, primarily attributable to the sale of multiple buildings in Zhongshan, PRC and the sale of property in Glen Rock, Pennsylvania. On May 2, 2025, Bel entered into a Fourth Amendment to its Credit Agreement, increasing the maximum revolving amount from $325 million ¹⁰ to $400 million ¹¹ and extending the commitment period to September 1, 2028 ¹².

Net sales for the year ended December 31, 2025 were $675,455,000 ¹³, compared to $534,792,000 ¹⁴ in 2024 and $639,813,000 ¹⁵ in 2023. Gross profit was $264,418,000 ¹⁶ in 2025, compared to $202,358,000 ¹⁷ in 2024 and $215,849,000 ¹⁸ in 2023. Net earnings available to common shareholders were $74,111,000 ¹⁹ in 2025, compared to $49,192,000 ²⁰ in 2024 and $73,831,000 ²¹ in 2023. Net earnings attributable to Bel Fuse shareholders were $61,536,000 ²² in 2025, $40,960,000 ²³ in 2024, and $73,831,000 ²⁴ in 2023. Diluted earnings per Class B common share were $4.90 ²⁵ in 2025, $3.28 ²⁶ in 2024, and $5.83 ²⁷ in 2023.

A primary growth vector is the Enercon acquisition, which contributed $136.6 million ²⁸ of incremental revenue in 2025 within the Power Solutions and Protection segment, representing a new end market for Bel's Power segment through aerospace and defense applications. The Company has the current intention to purchase the remaining 20% stake in Enercon by early 2027 ²⁹ in accordance with the terms of the shareholders' agreement. Another growth vector is the increased demand from networking and datacenter applications, with front-end power product sales increasing by $18.3 million ³⁰ (32.9% ³¹) in 2025, and increased demand from commercial aerospace and defense customers driving a $13.5 million ³² (23.7% ³³) increase in Connectivity Solutions sales to the commercial aerospace end market.

The Magnetic Solutions segment is a growth vector, with sales increasing by $17.5 million ³⁴ (25.4% ³⁵) in 2025 compared to 2024, primarily driven by higher demand from networking customers. The backlog of orders totaled $439.1 million ³⁶ at December 31, 2025, representing an increase of $57.5 million ³⁷, or 15.1% ³⁸, from December 31, 2024, with increases across all three segments driven by demand in defense, networking, commercial aerospace, and industrial end markets. The Company also sees growth potential in the eMobility market through its strategic alliance with innolectric, though the investment was fully impaired in 2025.

Gross margin improved to 39.1% ³⁹ in 2025 from 37.8% ⁴⁰ in 2024 and 33.7% ⁴¹ in 2023, driven by increased sales volume, favorable product mix from the Enercon acquisition, operational efficiencies from facility consolidations, and favorable exchange rate fluctuations. Labor costs as a percentage of sales decreased slightly to 7.7% ⁴² of sales in 2025 from 7.8% ⁴³ of sales in 2024. Minimum wage increases were enacted in Slovakia, the PRC, the Dominican Republic, and Mexico, increasing annual labor costs by approximately $1.8 million ⁴⁴ in the aggregate. The Company expects upward pressure on labor costs and profit margins from these and any future wage increases.

The Company initiated a restructuring initiative in late 2025 within its Magnetic segment related to the transition of manufacturing from Bel's Pingguo, PRC facility to an outside subcontractor, incurring $1.6 million ⁴⁵ of restructuring costs during 2025. The Company will continue to review its operations to optimize its business, which may result in restructuring costs being recognized in future periods. The Company also recorded $0.4 million ⁴⁶ in charges related to the transition of certain manufacturing operations from Glen Rock, Pennsylvania to other existing Bel sites, partially offset by a $3.2 million ⁴⁷ reversal from a non-cash settlement of liabilities associated with a prior consolidation.

Capital expenditures for property, plant and equipment were $12.0 million ⁴⁸ in 2025, compared to $14.1 million ⁴⁹ in 2024 and $12.1 million ⁵⁰ in 2023. The Company has a $25.0 million ⁵¹ share repurchase program authorized in February 2024, with $9.0 million ⁵² of authorized repurchases remaining unexecuted as of December 31, 2025. The Company declared dividends on a quarterly basis at a rate of $0.06 ⁵³ per Class A share and $0.07 ⁵⁴ per Class B share, totaling $3.5 million ⁵⁵ in each of 2025, 2024, and 2023. R&D expenses were $30.9 million ⁵⁶ in 2025, $23.6 million ⁵⁷ in 2024, and $22.5 million ⁵⁸ in 2023.

The Company faces headwinds from global tariffs, with approximately 25% ⁵⁹ of consolidated global sales estimated to have been subject to recently-enacted U.S. tariffs based on information available and sales patterns as of February 2025. The imposition of tariffs on U.S. imports could result in reduced demand for products and/or higher material costs. The Company also faces headwinds from rising commodity prices for Gold (Au), Silver (Ag), and Copper (Cu), which continue to impact cost structures and supplier pricing, and from increased lead-times for certain integrated circuits driven by AI and supporting infrastructure.

The Company faces constraints from labor availability in the PRC, which is cyclical and significantly affected by the migration of workers in relation to the annual Lunar New Year holiday, historically resulting in first quarter sales being the lowest of the year. The Company also faces risks from its substantial manufacturing operations in the PRC, where 42% ⁶⁰ of associates, 56% ⁶¹ of owned or leased manufacturing facilities (by square footage), and 10% ⁶² of the Company's tangible assets were located as of December 31, 2025. Additionally, the Company faces risks related to conducting business in Israel following the Enercon acquisition, including political and economic instability, military activity, and potential disruptions from employee military service obligations.

The Company faces material risks from its substantial manufacturing operations in the PRC, where 42% ⁶³ of associates, 56% ⁶⁴ of manufacturing facilities (by square footage), and 10% ⁶⁵ of tangible assets were located as of December 31, 2025, exposing it to foreign currency exchange risk, labor shortages, and potential disruptions from trade restrictions or geopolitical tensions. Following the Enercon acquisition, the Company is subject to risks related to conducting business in Israel, including political and economic instability, military activity, and potential disruptions from employee military service obligations, with Enercon having approximately 321 ⁶⁶ employees located in Israel. The Company's level of indebtedness is significant, with $197.5 million ⁶⁷ outstanding at December 31, 2025 and a Leverage Ratio of 1.4x ⁶⁸ Consolidated EBITDA, and the Credit Agreement requires the Leverage Ratio not to exceed 3.50 to 1.00 ⁶⁹. The Company also faces risks from the imposition of new or increased tariffs, with approximately 25% ⁷⁰ of consolidated global sales estimated to have been subject to recently-enacted U.S. tariffs, which could increase operating costs, reduce demand, and disrupt the supply chain. Additionally, the Company may not realize the anticipated strategic and revenue opportunities from the Enercon acquisition, and the intended acquisition of the remaining 20% stake by early 2027 ⁷¹ may not be completed, with the redemption value of the redeemable noncontrolling interest at $93.2 million ⁷² as of December 31, 2025.

Management's message emphasizes the successful integration of the Enercon acquisition, which contributed a full year of sales in 2025 and introduced a new end market in aerospace and defense for the Power segment. The tone is forward-looking, highlighting strong demand across defense, commercial aerospace, and networking end markets, with backlog increasing 15.1% ⁷³ to $439.1 million ⁷⁴ at December 31, 2025. Key strategic priorities include continued expansion of product lines and ongoing investment in research, development and manufacturing resources to maintain a strong competitive posture, as well as the intention to purchase the remaining 20% stake in Enercon by early 2027 ⁷⁵ in accordance with the shareholders' agreement. Management also emphasizes disciplined working capital management, with days sales outstanding improving to 64 days ⁷⁶ at December 31, 2025 from 68 days ⁷⁷ at December 31, 2024, and inventory turns improving to 2.5 times ⁷⁸ in 2025 from 2.1 times ⁷⁹ in 2024.