Bel Fuse Inc.

 

The information in this Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) should be read in conjunction with the Company’s condensed consolidated financial statements and the related notes set forth in Item 1 of Part I of this Quarterly Report on Form 10-Q, our MD&A set forth in Item 7 of Part II of our 2025 Annual Report on Form 10-K and our consolidated financial statements and related notes set forth in Item 8 of Part II of our 2025 Annual Report on Form 10-K. See Part II, Item 1A, “Risk Factors,” below and “Cautionary Notice Regarding Forward-Looking Information,” above, and the information referenced therein, for a description of risks that we face and important factors that we believe could cause actual results to differ materially from those in our Forward-Looking Statements. All amounts and percentages are approximate due to rounding and all dollars in the text are in millions, except per share amounts or where otherwise noted. When we cross-reference to a “Note,” we are referring to our “Notes to Condensed Consolidated Financial Statements” included in Part I, Item 1, of this Quarterly Report on Form 10-Q, unless the context indicates otherwise.  All amounts noted within the tables are in thousands and amounts and percentages are approximate due to rounding.

 

Overview

 

Our Company

 

We design, manufacture, and market critical electronic components, systems and solutions for customers in aerospace, defense, industrial, and data-driven markets. Understanding that our customers face increasingly complex technical challenges, Bel delivers a comprehensive portfolio of solutions including power systems, high-reliability connectors and cable assemblies, circuit protection, and networking products that enable Original Equipment Manufacturers (OEMs) to bring their innovations to market. Bel partners closely with customers to deliver both customized and standard solutions tailored to their specific applications and performance requirements. With manufacturing facilities and technical support teams worldwide, Bel serves as a strategic partner to customers who require proven reliability in demanding end markets.

 

Effective March 31, 2026, we realigned our organizational and reporting structure and changed the reportable segment views used by the Chief Operating Decision Maker to evaluate operating performance and allocate resources. As a result, we now operate and report results through the following two reportable segments:

 

●	Aerospace, Defense & Rugged Solutions, which serves customers in aerospace, defense, space, and other ruggedized applications; and

●	Industrial Technology & Data Solutions, which serves customers in industrial, networking, and data infrastructure markets.

 

Our product portfolio includes power solutions, connectors and cable assemblies, circuit protection devices, and networking products. We sell standard products and provide customized solutions to meet customer specifications. We maintain manufacturing operations and engineering support capabilities in multiple geographic regions and sell our products globally. We did not incur material restructuring charges as a result of this realignment.

 

For comparability, prior‑period segment information has been recast to conform to the current period presentation.

 

In the three months ended March 31, 2026, 56% of our revenues were derived from Aerospace, Defense & Rugged Solutions and 44% from Industrial Technology & Data Solutions.

 

Our operating expenses are driven principally by the cost of labor where the factories that we use are located, the cost of the materials that we use and our ability to effectively and efficiently manage overhead costs. As labor and material costs vary by product line and region, any significant shift in product mix can have an associated impact on our costs of sales. Costs are recorded as incurred for all products manufactured. Such amounts are determined based upon the estimated stage of production and include materials, labor cost and fringes and related allocations of factory overhead. Our products are manufactured at various facilities in the United States, Mexico, Dominican Republic, United Kingdom, Slovakia, Israel, India and the People’s Republic of China.

 

We have little visibility into the ordering habits of our customers and we can be subjected to large and unpredictable variations in demand for our products. Accordingly, we must continually recruit and train new workers to replace those lost to attrition and be able to address peaks in demand that may occur from time to time. These recruiting and training efforts and related inefficiencies, and overtime required in order to meet any increase in demand, can add volatility to the labor costs incurred by us.

 

 

Key Factors Affecting our Business 

 

We believe that in addition to recent global tariffs and inflationary pressures on the costs of goods and services in general, as well as ongoing conflicts/political unrest including in or near the countries in which Bel operates, the key factors affecting and/or potentially affecting our results for the three months ended March 31, 2026 and/or future results include the following:

 

•

Acquisition of dataMate – In March 2026, we acquired dataMate, as further disclosed in Note 2, "Acquisitions." As a result, our Industrial Technology & Data Solutions segment will include dataMate’s net sales and results of operations from the date of acquisition. dataMate provides Ethernet and broadband connectivity solutions, and its results of operations may vary based on factors such as demand in industrial networking and data infrastructure markets, customer purchasing patterns, and general market conditions.

 

•

Backlog – Our backlog of orders amounted to $531.3 million at March 31, 2026, an increase of $92.2 million, or 21.0%, from December 31, 2025. From December 31, 2025 to March 31, 2026, we experienced a 17.0% increase in backlog within our Aerospace, Defense & Rugged Solutions segment and a 27.3% increase within our Industrial Technology & Data Solutions segment. Factors that could cause us to fail to ship all such orders include unanticipated supply difficulties, changes in customer demand, and new customer designs. Due to these factors, backlog may not be a reliable indicator of the timing or amount of future sales.

  

•

Product Mix – Material and labor costs vary by product line, and any significant shift in product mix between higher- and lower-margin products will have a corresponding impact on our gross margin. In general, products within our Aerospace, Defense & Rugged Solutions segment have historically generated higher contribution margins due to a product mix that serves harsh-environment and high-reliability applications and end markets, which may be partially offset by higher-cost bills of materials. Our Industrial Technology & Data Solutions segment includes products that have historically generated strong contribution margins, as well as products that are more labor-intensive and therefore may be more sensitive to wage rate changes and foreign currency fluctuations, including movements between the U.S. dollar and the Chinese renminbi. Fluctuations in revenue volume and product mix between our reportable segments and product lines will have a corresponding impact on our profit margins. See "Results of Operations - Summary by Operating Segment - Revenue and Gross Margin."

 

•

Pricing and Availability of Materials – Prices for commodities that are key inputs to our products, including gold (Au), silver (Ag) and copper (Cu), have increased as market prices for these metals have risen. In addition, lead times for certain integrated circuits (“ICs”) have increased, which we believe is driven in part by demand related to AI-enabled applications and the supporting infrastructure. Regulatory developments, including trade restrictions and other measures affecting suppliers in the PRC, have previously disrupted, and could in the future disrupt, our supply chain. These disruptions could result in limited access to certain components or suppliers, increased costs, extended lead times, shortages, or other adverse impacts on our business and results of operations. Additionally, tariffs or other duties imposed by the U.S. or foreign governments on imports or exports could increase our costs, reduce margins, or require price increases, which could in turn reduce customer demand. See "Global Tariffs" below.

 

 

•

Global Tariffs – On April 5, 2025, the U.S. government announced the implementation of reciprocal tariffs on imports into the United States from certain countries in which our manufacturing facilities and/or suppliers are located. On February 20, 2026, the Supreme Court of the United States issued its decision in Learning Resources, Inc. v. Trump, holding that the International Emergency Economic Powers Act (“IEEPA”) does not authorize the imposition of tariffs. While this decision invalidated certain tariffs previously imposed under IEEPA, the broader implications of the ruling remain uncertain. We continue to monitor developments in U.S. trade policy, including potential legislative or executive actions that could result in the imposition of tariffs under alternative statutory authorities. Imports into the United States from Mexico are currently exempt from tariffs under the United States–Mexico–Canada Agreement (“USMCA”), as currently in force. During the three months ended March 31, 2026, tariffs did not have a material impact on our results of operations. We continue to monitor potential impacts from changes in trade policy and may implement mitigation actions, including supply chain adjustments and pricing actions, as appropriate. The imposition or reinstatement of tariffs on imports into the United States could increase costs, disrupt supply chains, and/or reduce demand for our products, which could adversely affect future results of operations, including net sales and gross margins.

 

•

Labor Costs – Labor costs represented 7.9% of revenue during the first quarter of 2026, compared to 8.4% of revenue during the first quarter of 2025. The decrease primarily reflects operating leverage on higher sales volumes (net sales increased 17.2%), automation-driven productivity improvements, and the late-2025 transition of certain manufacturing activities from the Company’s Pingguo, PRC facility to an outside subcontractor, which shifted a portion of costs from direct labor to materials.

 

•

Inflationary Pressures - Inflationary pressures could continue to result in higher input costs, including those related to our raw materials, labor, freight, utilities, healthcare and other expenses. Our future operating results will depend, in part, on our continued ability to manage these fluctuations through pricing actions, cost savings initiatives and sourcing decisions. The ongoing armed conflict involving Iran and the Gulf states was the primary driver of the increased energy prices and resulting inflation in our various regions of operations in the first quarter of 2026. The conflict has led, and may continue to lead, to, among other things, increased volatility and higher prices for commodities, such as energy products and freight on input material costs, increased inflation in various countries where we and/or our suppliers or customers operate, and disruptions to global trade and supply chains, including key energy transit routes. Actual or threatened disruptions to maritime shipping lanes and other escalating security tensions have also increased insurance, financing and transportation costs. While the impact on us has not been material, prolonged or expanded hostilities could have a material adverse effect in future periods.

 

•

Impact of Foreign Currency – During the three months ended March 31, 2026, labor and overhead costs increased by approximately $2.3 million compared to the same period in 2025, primarily due to unfavorable foreign exchange rates involving the Israeli shekel, the Chinese renminbi, the euro, and the Mexican peso. Specifically, the appreciation of the Israeli shekel, Chinese renminbi and euro against the U.S. dollar resulted in higher labor and overhead costs of $1.1 million, $0.9 million and $0.3 million, respectively. We recognized a foreign exchange transactional loss of $3.2 million during this period, mainly due to currency spot rate fluctuations when translating balance sheet accounts as of March 31, 2026, versus December 31, 2025. As a U.S.-domiciled company, our foreign currency-denominated financial results are translated into U.S. dollars, and exchange rate fluctuations can impact our consolidated statements of operations and cash flows. We continuously monitor foreign currency movements and may utilize forward contracts or implement pricing actions to mitigate the impact of currency fluctuations on our operating results. T

 

•

Effective Tax Rate – Our effective tax rate will fluctuate based on the geographic regions in which our pretax profits are earned. Of the geographic regions in which we operate, the U.S. and Europe’s tax rates are generally comparable while Asia has the lowest tax rates of our three geographical regions. See Note 11, “Income Taxes.”

 

 

Results of Operations - Summary by Operating Segment

 

Revenue and Gross Margin 

 

Our revenue and gross margin by operating segment for the three months ended March 31, 2026 and 2025 were as follows:

 

	Three Months Ended
	March 31,
	Revenue								Gross Margin
	2026				2025				2026				2025
Aerospace, Defense & Rugged Solutions	$	99,821			$	83,122				41.5	%			40.1	%
Industrial Technology & Data Solutions		78,670				69,116				36.6	%			37.3	%
	$	178,491			$	152,238				39.0	%			38.6	%

  

Aerospace, Defense & Rugged Solutions: 

 

Net sales increased by $16.7 million, or 20.1%, for the three months ended March 31, 2026, compared to the three months ended March 31, 2025. The increase was primarily driven by higher sales volumes in defense applications, which rose by $9.4 million (18.7%), and in commercial aerospace applications, which rose by $4.2 million (21.4%). Sales into rugged industrial applications also increased by $3.1 million (23.2%).

 

Gross margin improved from the prior-year period, mainly due to a more favorable product mix and stronger operational efficiencies tied to facility consolidation initiatives. These benefits were partially offset by an unfavorable impact from foreign currency movements, primarily due to the weakening of the U.S. dollar against the Israeli shekel and Mexican peso.

 

Industrial Technology & Data Solutions

 

Net sales increased by $9.6 million, or 13.8%, for the three months ended March 31, 2026, compared to the prior-year period. The increase was driven by growth in data solutions applications, which rose by $9.5 million (30.4%), and in industrial applications, which rose by $4.3 million (16.7%). This growth was partially offset by a decline in transportation applications, which decreased by $4.2 million (33.3%).

 

Gross margin decreased compared to the prior-year period, primarily due to an unfavorable product mix and the unfavorable impact of foreign currency exchange rate movements, principally related to the Chinese renminbi relative to the U.S. dollar.

 

 

Cost of Sales

 

Cost of sales as a percentage of revenue for the three months ended March 31, 2026 and 2025 consisted of the following:

 

	Three Months Ended
	March 31,
	2026				2025
Material costs		30.2	%			29.4	%
Labor costs		7.9	%			8.4	%
Other expenses		22.9	%			23.6	%
Total cost of sales		61.0	%			61.4	%

  

As a percentage of sales, material costs increased to 30.2% in 2026 from 29.4% in 2025. The increase in material cost as a percentage of sales was primarily due to a shift in product and production mix toward power products in the Aerospace, Defense & Rugged Solutions segment and the Industrial Technology & Data Solutions segment, which generally have higher material content.

 

As a percentage of sales, labor costs decreased to 7.9% in 2026 from 8.4% in 2025, primarily reflecting higher sales volume and product mix with less labor-intensive products manufactured by outside manufacturers. This benefit was partially offset by unfavorable foreign currency movements, including the Israeli shekel and, Chinese renminbi which increased labor-related costs when translated into U.S. dollars.

 

For the three months ended March 31, 2026, overhead and other manufacturing costs were 22.9% of sales, compared to 23.6% of sales for the three months ended March 31, 2025. Although these costs increased in absolute dollars year over year, the improvement as a percentage of sales was primarily driven by higher sales volumes in 2026, which resulted in more favorable absorption of largely fixed manufacturing costs, including support labor and related benefits, depreciation and amortization, and facility-related costs (rent, utilities, and insurance).

 

Research and Development Expense

 

Research and development (“R&D”) expenses totaled $8.5 million for the three months ended March 31, 2026, an increase of $1.3 million from $7.2 million for the three months ended March 31, 2025. The increase was primarily attributable to higher R&D personnel costs, including approximately $0.5 million of higher labor and fringe benefits, and approximately $0.5 million of higher bonus expense related to the Company’s company-wide incentive program. The increase in R&D expense was broad-based across both Aerospace, Defense & Rugged Solutions and Industrial Technology & Data Solutions.

 

Selling, General and Administrative Expense 

 

Selling, general and administrative (“SG&A”) expenses totaled $36.7 million for the three months ended March 31, 2026, an increase of $7.2 million from $29.5 million for the three months ended March 31, 2025. The increase reflected non-recurring items, including $1.4 million of acquisition-related costs associated with the acquisition of dataMate and approximately $1.0 million of onboarding and overlapping salary and benefit costs related to the CEO and segment President positions, $0.7 in higher stock compensation expense. Other factors driving the year over year increase include higher commissions, an increase and overlap in audit fees, higher IT system costs and the annual salary increase which took effect on March 1, 2026. Additionally, bonus expense was $1.3 million higher during the first quarter of 2026 as there was a bonus reversal in the first quarter of 2025 which did not recur in the 2026 period.

 

Interest Expense

 

Interest expense was $2.5 million for the three months ended March 31, 2026, compared to $4.2 million for the three months that ended March 31, 2025, representing a decrease of $1.7 million. The decrease was primarily due to lower average outstanding borrowings under the Company’s credit facilities during the 2026 period compared to the prior-year period. For further information on the Company's outstanding debt, see "Liquidity and Capital Resources" below and Note 10, "Debt."

 

Interest Income

 

Interest income for the three months ended March 31, 2026 was $0.2 million, down from $0.3 million for the same period in 2025. 

 

 

Other (Expense) Income, Net

 

Other expense, net was $3.5 million for the three months ended March 31, 2026, compared to other income, net of $2.6 million for the three months ended March 31, 2025. The year-over-year change was primarily driven by unfavorable foreign exchange impacts, resulting in a foreign exchange loss of $3.2 million from fluctuations in spot exchange rates of certain currencies against the U.S. dollar when translating and remeasuring balance sheet accounts at period end compared to foreign exchange transactional gain of $4.3 million during the three-month periods ended March 31, 2025. SERP investments resulted in a loss of $0.4 million in the first quarter of 2026 versus a gain of $0.3 million in the first quarter of 2025. Additionally, the Company recorded income of $0.3 million associated with its investment in innolectric during the first quarter of 2025.

 

Provision for Income Taxes

 

The Company’s effective tax rate will fluctuate based on the geographic regions in which the pretax profits are earned. Tax rates in the U.S. and Europe are generally comparable, while Asia generally has lower statutory. See Note 11, “Income Taxes”.

 

For the three months ended March 31, 2026, the provision for income taxes was $2.8 million, compared to $5.5 million for the same period in 2025. Earnings before income taxes for the three months ended March 31, 2026, decreased by $6.0 million compared to the same period in 2025, primarily due to lower income worldwide. The Company’s effective tax rate for the three months ended March 31, 2026, was 15.8%, compared to 23.0% for the same period in 2025. The decrease in the effective tax rate was primarily driven by a benefit from restricted stock vesting, partially offset by changes in the mix of jurisdictional earnings and foreign valuation allowances on net operating losses. See Note 11, “Income Taxes.”

 

Liquidity and Capital Resources

 

Our principal sources of liquidity include $59.4 million of cash and cash equivalents at March 31, 2026, cash provided by operating activities and borrowings available under our credit facility. We expect to use this liquidity for operating expenses, investments in working capital, capital expenditures, interest, taxes, lease and purchase obligations, pension benefit obligations, dividends, purchases of common stock under our Repurchase Program, and debt obligations and other long-term liabilities. Our liquidity may also be utilized to fund potential acquisitions in future periods, as well as potential future cash requirements related to the Enercon acquisition, including the potential 2026 Earnout Payment that may become due and the put-call options under the Enercon shareholders’ agreement, pursuant to which Bel has the current intention to purchase the remaining 20% interest by early 2027. See the discussion “Liquidity and Capital Resources” appearing in Item 7, and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2025. We believe that our current liquidity position and future cash flows from operations will enable us to fund our operations, both in the next twelve months and in the longer term.

 

 

Cash Flow Summary

 

During the three months ended March 31, 2026, our cash and cash equivalents increased by $1.6 million. This increase was primarily due to the following:

 

•	net cash provided by operating activities of $13.8 million;
•	net borrowings of long-term debt of $7 million; partially offset by
•	a payment for the acquisition of dataMate of $15.2 million
•	purchases of property, plant and equipment of $2.6 million; and
•	dividend payments of $0.8 million;

 

Net cash provided by operating activities was favorably impacted by changes in working capital during the three months ending March 31, 2026, primarily due to an increase in accounts payable of $9.7 million and decreases in accounts receivable of $3.8 million and unbilled receivables of $1.0 million. Days sales outstanding (“DSO”) improved to 61 days on March 31, 2026 from 64 days on December 31, 2025, which is consistent with improved cash conversion and the Company’s ongoing focus on receivables management. These benefits were partially offset by an increase in inventories of $12.2 million, primarily due to higher levels of raw materials, work in process, and finished goods. The inventory increase was driven by strong customer demand and increased purchasing and production activity to support order requirements and manage lead times, as well as the impact of higher material costs that increased the dollar value of on-hand inventory. The working capital benefit was also partially offset by decreases in accrued expenses of $6.6 million, accrued restructuring costs of $0.3 million, and income taxes payable of $0.4 million, which primarily reflect cash payments and the timing of settlements of previously accrued obligations. Changes in other current assets and other assets also affected operating cash flows, with other current assets increasing by $0.5 million and other assets decreasing by $1.0 million during the quarter.

 

Inventory turns were 2.4 on March 31, 2026, compared to 2.5 on December 31, 2025. While demand remained strong, the modest decline in turns reflects the higher average inventory balance during the quarter, including additional inventory being held to support customer delivery schedules, lead-time requirements, and higher material costs.

 

Cash and cash equivalents, and accounts receivable comprised approximately 18.9% and 19.2% of our total assets as of March 31, 2026 and at December 31, 2025, respectively. Our current ratio (i.e., the ratio of current assets to current liabilities) was 3.2 to 1 as of March 31, 2026 and 3.0 to 1 as of December 31, 2025. At March 31, 2026 and December 31, 2025, $47.3 million and $43.4 million, respectively (or 79% and 75%, respectively), of our cash and cash equivalents was held by our foreign subsidiaries. We repatriated $3.0 million of funds from outside of the U.S. during the three months ended March 31, 2026. We continue to analyze our global working capital and cash requirements and the potential tax liabilities attributable to further repatriation, and we have yet to make any further determination regarding repatriation of funds from outside the U.S. to fund our U.S. operations in the future. In the event these funds were needed for our U.S. operations, we would be required to accrue and pay U.S. state taxes and any applicable foreign withholding taxes to repatriate these funds.

 

Future Cash Requirements

 

We expect foreseeable liquidity and capital resource requirements in the ordinary course to be met through existing cash and cash equivalents and anticipated cash flows from operations, as well as borrowings available under our revolving credit facility, if needed. Our material cash requirements arising in the normal course of business are outlined in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2025. There were no material changes to our future cash requirements during the three months ended March 31, 2026.

 

Credit Facility

 

The Company had $195.5 million of available borrowings under its revolving credit facility at March 31, 2026. See Note 10, "Debt." There are no mandatory principal payments due on the credit facility borrowings during 2026. The current balance of $204.5 million is due upon expiration of the credit facility on September 1, 2028. Anticipated interest payments due amount to $25.9 million, of which $8.7 million is expected to be paid in 2026 based on our debt balance and interest rate in place as of March 31, 2026. As of March 31, 2026, we were in compliance with our debt covenants, including the most restrictive covenant, the Fixed Charge Coverage Ratio. The unused credit available under the credit facility as of March 31, 2026 was $195.5 million, all of which we had the ability to borrow without violating our Leverage Ratio covenant based on our existing consolidated EBITDA.

 

Critical Accounting Policies and Estimates

 

Our condensed consolidated financial statements include certain amounts that are based on management's best estimates and judgments. We base our estimates on historical experience and on various other assumptions, including in some cases future projections, that are believed to be reasonable under the circumstances. The results of these estimates form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. Different assumptions and judgments could change the estimates used in the preparation of the condensed consolidated financial statements, which, in turn, could change the results from those reported. Management evaluates its estimates, assumptions and judgments on an ongoing basis.

 

Based on the above, we have determined that our most critical accounting estimates are those related to business combinations, inventory valuation, goodwill and other indefinite-lived intangible assets, and those related to our pension benefit obligations. For a detailed discussion of our critical accounting estimates, refer to “Critical Accounting Estimates” in Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2025. There have been no material changes in our critical accounting policies, judgments and estimates, including assumptions or estimation techniques utilized, as compared to those disclosed in our 2025 Annual Report on Form 10-K.

 

 

Recent Accounting Pronouncements

 

The discussion of new financial accounting standards applicable to our Company is incorporated herein by reference to Note 1, “Basis of Presentation and Accounting Policies”.