Bel Reports First Quarter 2018 Results

Bel Fuse Inc (NASDAQ:BELFA and BELFB) announced preliminary financial results for the quarter of 2018. The company designs, manufactures and markets a broad array of products that power, protect and connect electronic circuits.

As quoted in the press release:

First Quarter 2018 Highlights

• Net sales of $118.3 million, representing year-over-year growth of 4.0%
• $178.3 million in backlog represents gain of $31.8 million, or 22%, from December 31, 2017
• GAAP net loss of $1.3 million compared to net earnings of $0.7 million in first quarter 2017
• Adjusted EBITDA of $5.3 million, or 4.5% of sales, versus $7.9 million, or 6.9% of sales, in first quarter 2017
• First quarter 2018 book-to-bill ratio of 1.27

Daniel Bernstein, President and CEO, said, “While first quarter sales showed modest growth from the same period last year, we are more encouraged by the continued growth in our backlog with heightened activity across all of our major product groups and within each of our major end markets.  Since year-end, we saw a 33% increase in the backlog at Connectivity Solutions, driven by recent awards on key military programs, and a 25% increase at Magnetic Solutions, driven by demand for our multi-gig variants of ICMs from our key networking customers. Our Power Solutions and Protection backlog grew by 12%, led by higher demand for our power supplies in the industrial and rail industries, and orders from new customers within the E-Mobility, Internet of Things and Blockchain segments.

“The majority of the sales growth in the first quarter related to strong demand for our Magnetic Solutions products, particularly our integrated connector modules within industrial, Ethernet and server markets.  Sales of our Connectivity Solutions products were also higher in the first quarter of 2018 with an increase in demand related to various military programs and within the industrial market for oil and gas, test and measurement, and broadcasting applications.  Our Power Solutions and Protection group, excluding the effects of our divested NPS business, also contributed to our year-over-year sales growth.

Financial Summary

All comparative percentages are on a year-over-year basis, unless otherwise noted.

First Quarter 2018 Results

Net Sales
Net sales were $118.3 million, up 4.0% from last year’s first quarter.

• By geographic segment, Europe was up by 15.8%, Asia was up by 7.8%, and North America was down by 1.6%.
• By product group, Magnetic Solutions sales were up by 9.3%, Connectivity Solutions sales were 3.0% higher and Power Solutions and Protection sales was up slightly by 0.2%.
• During the first quarter of 2018, 36% of our sales related to our Connectivity Solutions products (versus 37% in 2017), 32% related to our Magnetic products (versus 31% in 2017) and 32% related to our Power Solutions and Protection products (versus 32% in 2017).

On a consolidated basis, sales increased by $4.6 million in the first quarter of 2018 compared to the same period of 2017, despite a $1.6 million decline in sales related to the winding down of our NPS product sales within the Power Solutions Business.

Gross Profit
Gross profit margin decreased to 17.9%, from 20.6% in the first quarter of 2017, primarily due to unfavorable foreign currency fluctuations, as the Chinese Renminbi and Mexican Peso each appreciated by approximately 8% against the U.S. Dollar in the first quarter of 2018 compared to the first quarter of 2017.  Approximately 70% of the Company’s associates and contract labor are located in the PRC and paid in Renminbi and an additional 8% is located in Mexico and paid in Pesos.  Effective February 1, 2018, the PRC also issued an increase to the minimum wage in a region where one of Bel’s factories is located.  We anticipate this increase in minimum wage to result in higher labor costs of approximately $1.0 million – $1.4 million per year at this facility going forward.

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