Good day, and welcome to the Bel Fuse Inc. Fourth Quarter 2020 Results Conference Call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Dan Bernstein, President and Chief Executive Officer. Please go ahead.

Thank you, James. I would like to welcome everybody to our fourth quarter year-end financial results today. Before I begin, we hope you and your family stay safe during these difficult times. On the call today is Craig Brochu, our Vice President of Finance; Lynn Hutkin, our Director of Financial Reporting. And I would like to introduce our new Chief Financial Officer, Farouq Tuweiq, who came on board this week. While working with Bank of Montreal in the past, we have developed a strong relationship with Farouq. During this time, we have been overly impressed with his knowledge of our industry, work experience, interpersonal skills and most importantly, his ability to solve problems in a timely manner. His number one goal at Bel, simply put, will be to increase Bel's overall value to our shareholders. But I believe there is a substantial valuation gap between Bel's share price and our current breakout value. Farouq has a broad mandate to work with team members, to examine various pathways to increase top line growth, margin improvement, simplify our operations while driving growth through M&A. When searching for our first CFO in the company's history, he was the best candidate and we feel fortunate that he joined Bel to offer us his fresh perspective. Welcome aboard, Farouq.

Thank you, Dan, for the introduction. I am very excited to be joining the Bel family and team here.

Okay. Lynn, can you please go over the safe harbor statement?

Sure. Thank you, Dan. Good morning, everybody. Before we start, I'd like to read the following safe harbor statement. Except for historical information contained on this call, the matters discussed on this call, such as statements regarding the potential rebound of Bel's Magnetic Solutions business and overall product sales, anticipated impact of global cost reduction program on Bel’s positioning for further margin expansion, anticipated cost savings resulting from the closing on the sale of the Switzerland facility and other restructuring actions, potential benefits to Bel’s margins resulting from the recovery of demand in Bel's end markets, the anticipated impact of the RMS Connectors acquisition included on Bel’s EBITDA, anticipated impact of the EOS power acquisition, including the timing and closing thereof and factors that may impact Bel's organic growth for 2021, including continuing visibility -- limited visibility as a result of COVID and long lead times for semiconductors and certain components, are all forward-looking statements, as described under the Private Securities Litigation Reform Act of 1995, and that involve risks and uncertainties. Actual results could differ materially from Bel's projections. Among the factors that could cause actual results to differ materially from such statements are: the market concerns facing our customers, the continuing viability of sectors that rely on our products; the impact of public health crisis, such as the governmental, social and economic effects of COVID-19, the effects of business and economic conditions; difficulties associated with integrating recently acquired companies, capacity and supply constraints or difficulties; product development, commercialization or technological difficulties; the regulatory and trade environment; risks associated with foreign currencies, uncertainties associated with legal proceedings; the market's acceptance of the company's new products and competitive responses to those new products; the impact of changes to US trade and tariff policies and the risk factors detailed from time to time in the company's SEC reports. In light of the risks and uncertainties, there can be no assurance that any forward-looking statement will, in fact, prove to be correct. We undertake no obligation to update or revise any forward-looking statements. We may also discuss non-GAAP results during this call and reconciliations of our GAAP results to non-GAAP results have been included in our release. I would now like to turn the call back to Dan for a general business update.

Thank you, Lynn. First, I'd like to provide an update on COVID-19 and how it impacted our facilities. Overall, I'm pleased to report that all our manufacturing sites globally continue to be operational for the majority of the fourth quarter. There were two facilities that needed to be closed for about a week during the quarter in response to the infection, but we're still able to service our customers during this time. While the number of COVID-19 cases appears to be moving in the right direction and vaccine distribution is now underway, the situation still remains fluid. We continue to operate our facilities with all preventive measures in place and ensuring ongoing compliance with local regulations to mitigate our risk. I would again like to acknowledge our production managers and manufacturing associates who work day to day under difficult conditions. Their continued dedication to Bel and our customers is truly appreciated. Now turning to our results. We saw our improved margins on relatively flat sales as compared to last year's fourth quarter. While there was a minimal change in overall sales balance, the composition of our sales has changed quite a bit since last year's fourth quarter. Sales within our Power Solutions and Protection Group were up $16.2 million or 44.8% from the fourth quarter of 2019. Our acquisition of CUI in December 2019 contributed $11 million incremental sales to the fourth quarter of 2020, and this brings us to run at a higher margin. Other areas within our power segment that were strong as well, our products sold into fast-growing e-mobility markets were up $2.5 million, a 200% increase from the 2019 quarter and fuse sales were up $1.3 million, an increase of over 40% from last year's fourth quarter. These areas of growth were offset by the elimination of low-margin products within this group. Within our Connectivity Solutions segment, sales were down $6.8 million or 16.6% in the fourth quarter of 2020 versus the same quarter of 2019. We continue to be impacted by the depressed commercial aerospace industry, where sales were down $7 million or 80% from last year's fourth quarter. The connectivity segment was also impacted by the lower sales of product into premise wiring applications as new construction projects stalled in 2020 due to COVID. We were able to shift our production lines to support our growing military backlog, which enabled us to capture a 60% increase in military sales, partially offsetting the commercial decline. Sales within our Magnetic Solutions business was down $8.4 million or 22.1% from the fourth quarter of 2019 as one of our largest OEM end customers paused ordering as they work through their inventory on hand. On a positive note, magnetic bookings have since rebounded and we can see the sales tick back up in the first quarter of 2021. Overall, margins have improved by 420 basis points and are trending in the right direction. This can be attributed to a combination of product mix as discussed previously and our ongoing cost reduction program. On the acquisition front, we have been digging over these past few months as we recently announced our purchase of two companies, RMS Connectors and EOS. To help close on the acquisition of RMS Connectors in January, we enabled us to expand our market share within the commercial aerospace business, which will benefit us and the industry's stock to rebound later in 2021. We also signed an agreement to acquire EOS Power, which is based in India. The acquisition of EOS will not only expand our product portfolio in the low to mid range but will importantly provide us the manufacturing capability outside China. Both these acquisitions fit within our strategy, increasing market share while diversifying our product portfolios and geographic footprint. Looking to 2021, we have seen some recovery in certain of our server markets. We would expect demand for military customers in e-mobility to remain a driver for sales throughout 2021. We additionally see signs of certain additional markets, such as premise wiring, rail, and commercial aerospace, potentially recovering throughout the year as COVID conditions improve. While our competitive position remains stronger than ever, with the COVID situation still with us and uncertainty regarding some semiconductors and components that might be in supply, give us limited visibility into the future. In the meantime, the management team remains focused on bottom line growth from integrating the announced acquisitions and actively working on other strategies to better position Bel for the future. And with that, I'd like to turn the call over to Craig for the financial update. Craig?

Thank you, Dan. Sales by product segment for the fourth quarter of 2020 were as follows. Power Solutions and Protection sales were $52.3 million, up 44.8% from last year's fourth quarter. Connectivity Solutions sales were $34.2 million, a decline of 16.6%. And Magnetic Solutions sales were $29.6 million, down 22.1% from last year's fourth quarter. Gross margin by product segment for the fourth quarter of 2020 was as follows. Power Solutions and Protection had a gross margin of 27.8% in the fourth quarter of 2020, up from 19.7% in last year's fourth quarter. Connectivity Solutions gross margin was 24%, down from 24.5% in the 2019 quarter. And Magnetic Solutions gross margin was 23.3%, up from 19.1% in last year's fourth quarter. On a consolidated basis, gross profit margin increased to 25.3% in the fourth quarter of 2020 as compared with 21.1% in the fourth quarter of 2019, the result of a combination of factors. Overhead and indirect labor costs were $1 million lower during the fourth quarter of 2020, primarily due to restructuring measures implemented during late 2019 and a reduction in the cost structure for our Cinch Connectivity Solutions segment to align with current sales volumes within that segment. A portion of the margin improvement in the fourth quarter of 2020 related to the elimination of certain low margin power products from our portfolio. Research and development costs were $5.7 million during the fourth quarter of 2020, a decline of $1 million from the fourth quarter of 2019, primarily due to restructuring efforts implemented during the latter part of 2019. Our selling, general and administrative expenses were $19.6 million or 16.8% of sales, flat from the fourth quarter of 2019. Lower travel expenses of $613,000 and savings from other cost containment efforts fully offset the $1.1 million of incremental SG&A expenses associated with the CUI business acquired in December of 2019. On a go-forward basis, we would expect SG&A to run between $19 million and $20 million per quarter in the near-term as we expect our T&E spend will continue to be lower than normal for at least the first half of 2021. During the fourth quarter of 2020, we closed on the sale of our facility in Switzerland. This transaction resulted in a gain of $1.9 million, which is included in our fourth quarter results. These factors resulted in income from operations of $5.6 million in the fourth quarter of 2020 as compared to the loss from operations of $2.9 million in the fourth quarter of 2019. Other expense net was $395,000 for the fourth quarter of 2020 as compared to $1.7 million during the fourth quarter of 2019. An increase in foreign exchange losses of $700,000 in the fourth quarter of 2020 was offset by a larger gain on the company's SERP investments, which are now included in this line item, the expense in the fourth quarter of 2019 largely related to a $2.1 million loss on the liquidation of foreign subsidiaries. Interest expense was $900,000 in the fourth quarter of 2020, down from $1.3 million in the same quarter last year as a result of decreases in the LIBOR rate, the company's spread on its credit facility, driven by EBITDA improvements and the overall reduction in our outstanding debt balance. We had a provision for income taxes of $774,000 in the fourth quarter of 2020 compared to a provision of $392,000 during last year's fourth quarter. Earnings per share for the Class A common shares was earnings of $0.27 per share in the fourth quarter of 2020 as compared with a loss of $0.50 per share in the fourth quarter of 2019. Earnings per share for the Class B common shares was earnings of $0.29 per share in the fourth quarter of 2020 as compared with a loss of $0.52 per share in the fourth quarter of 2019. On a non-GAAP basis, which excludes certain unusual and other nonrecurring items, EPS for Class A shares was earnings of $0.18 per share in the fourth quarter of 2020 as compared with a loss of $0.30 per share in the fourth quarter of 2019. On a non-GAAP basis, EPS for Class B shares was $0.20 per share in the fourth quarter of 2020 as compared with a loss of $0.30 per share in the fourth quarter of 2019. And now I'd like to go through some balance sheet and cash flow items. Our cash and cash equivalents balance at December 31, 2020 was $84.9 million, an increase of $12.7 million from December 31, 2019. During 2020, we generated cash flows from operating expense activities of $46.1 million and received $4 million in proceeds from the sale of property. We made net payments of $28.2 million towards our outstanding debt balance and used cash for capital expenditures of $5.5 million, dividend payments of $3.4 million and interest payments of $4.1 million. Accounts receivable were $71.4 million at December 31, 2020 as compared with $76.1 million at December 31, 2019. Day sales outstanding decreased to 57 days at December 31, 2020, as compared to 60 days at December 31, 2019. The decrease in accounts receivable balance was largely due to lower sales in Asia, where payment terms tend to be the longest. Inventories were $100.1 million at December 31, 2020, down $7.1 million from December 31, 2019. The decline you're seeing in raw materials due to reduced material intake in anticipation of slower fourth quarter. Accounts payable were $39.8 million at December 31, 2020, down $4.4 million from its level at December 31, 2019, primarily due to lower purchases of raw materials during the fourth quarter of 2020. Bel’s total outstanding debt balance was $115.6 million as of December 31, 2020, net of deferred financing costs, a decrease of $28.1 million since the 2019 year end balance. This primarily reflects voluntary debt repayments of $28 million made during 2020. Book value per share, which is calculated as stockholders' equity divided by our combined A and B classes of common stock outstanding, was $15.04 per share at December 31, 2020, as compared to $13.69 per share at December 31, 2019. And with that, I'll turn the call back over to Dan.

Thank you, Craig. At this time, James, can we open up the call for questions.

[Operator Instructions] And we'll take our first question today from James Ricchiuti with Needham & Company.

I’m wondering if you could speak a little bit more about RMS Connectors and the EOS acquisition. Share with us, perhaps, if you could, just any details on their financial contribution or just the impact that we would anticipate in 2021. Thanks a lot.

Before I have Craig to go over the numbers with you, but just to give you insight to both those companies. EOS, again, we've been private labeling their product for over three years. We have a very strong relationship with them. We know the people. It was a market, that's a low-to-medium market, mostly in the medical area and industrial area, which we felt we could grow with a proper pricing structure and product portfolio. So we've been pursuing them for many years and their interest has been the same. So we're very excited that, again, we could put this deal together and close on March 31st. So on that deal, as I said -- and the key for us is that we are overly dependent on manufacturing in China and this gives us another area where we can have low-cost manufacturing. And in addition to that, we do believe the India market should be a substantially stronger market for Bel moving forward. The other acquisition, RMS, when Cinch was a Boeing supplier for the 737 connectors, Boeing suggested very strongly that we approve a second source, and that company was RMS. And over the past 10 years, we've contacted them every year to see if they would be interested in selling because of the price pressures we’re feeling from the aerospace companies out there. Because their medical sales were growing so fast, this wasn't a strategic product line for them any longer. So they allowed us to buy them and we came up with a very strong deal, almost close to book value and book value is a lot of automated high-end equipment that we didn't have in-house. So besides eliminating a good competitor, we were able to pick up some state-of-the-art equipment. So we think that also is going to be a successful acquisition. We do think it's going to become profitable once we move it into our facility, which will take three or four months. And once Boeing starts ordering again, we think this will be one of our most successful acquisitions. Craig, can you go a little more into the financials how you see both companies?

Yes, starting with RMS. Obviously, they play in that commercial aerospace segment. So their revenues have been depressed over the last 12 months, with the pause in manufacturing and also the aftermarket impacts. So for the coming 12 months, we're kind of expecting an incremental revenue, maybe $5 million to $8 million related to that. And once we get back to a normal run rate then obviously that revenue would certainly tick up. And because we're moving that entire production facility into one of our existing facilities, there's no incremental G&A and we've been able to leverage our internal overhead structure. And so we expect that business to be fairly profitable. On the EOS acquisition, they've been obviously impacted by COVID like the rest of the industry. They've been running at an approximate $12 million revenue run rate over the past seven, eight months now. So once they come on board, we expect that the incremental revenue, assuming a March close, would be approximately $8 million to $9 million for 2021. Margins there are similar to our other power margins so we expect that business to be accretive right out of the gate. Does that answer your question, Jim?

It does…

I guess just one clarification, Craig, the margins will be more in line with the Bel Power and not like CUI.

Yes, that's correct. The traditional Bel Power margin, right.

Again, may sound like nice acquisitions. So congrats. I wonder if you can also, to the extent we can, elaborate a little bit more on the impact of some of the component supply chain issues on the business. Are you seeing any impact or is this just a case of monitoring the situation in terms of whether it gets worse?

No, again, we're very fortunate because we do have long-term relationships with our semiconductor companies we deal with and the component people we do deal with. So again, they came to us, for example, and said, hey, if you won't support this year, you have to sign up for a yearly non-cancellable order and then I can lock in the deliveries. Also, I think we do a good job of seeing ahead of the situation because of our relationships we have in the industry. So we tend to know about shortages before they come. So again, the major problem is that we won't have any pricing pressure during this period, and we have seen some pricing increases during the shortage period. But I don't think it will affect our delivery but it might impact how we price going forward, and whether we have to increase pricing or not to our customers.

And just last question for me. Just in general, the level of activity you're seeing across your markets. It sounds like with the exception, obviously, commercial aerospace and potentially a couple of situations with one of your larger OEMs. Is it fair to say that the level of business activity you're seeing is picking up?

Well, in comparing to last year when we were in the middle of COVID and had China shutdown, I think going over that bar is not too high…

Well, I think more into as you're entering the year versus Q4, obviously, year-over-year compares…

I wish I could. I still think we just had limited visibility. I think there's still so much uncertainty out there with COVID, how the new government can affect policy. And I still think it's still a little bit more positive than last year overall. However, I still think there's still a substantial amount of uncertainty where people, again, for this term are cautiously optimistic but I don't see anybody opening up the champagne yet, how about that?

Next, we'll hear from Theodore O'Neill with Litchfield Hills Research.

Two questions for you. First, on the margins, which continue to show improvement. Last quarter, there was $900,000 Chinese subsidy in there. Were there any one-time items like that in this quarter?

Craig or Lynn, can you address it?

We did have a similar amount in Q4 this year related to those subsidies that was $835,000 in the fourth quarter.

And again, this may or may not continue into the next year?

We believe that it will continue.

My other question is about the EOS acquisition. So just from a branding perspective, will you continue to private label and sell under the EOS brand or will you move that to the Bel brand?

That is one of the big questions we're debating constantly. And I’ll tell you how crazy in the situation we have, we private label EOS under the Bel brand the company we acquired last year, CUI private labels under EOS product under their brand and then EOS uses that brand. So we are marking, it's the number one thing our marketing group is working on is how do we brand EOS but how we brand Bel with so many different companies that we acquired over the past couple of years.

We’ll now hear from Hendi Susanto with Gabelli.

Dan, can you talk about your M&A pipeline now that you have Farouq in your team?

I'll let Farouq speak about our M&A pipeline. Farouq?

So coming from the industry, there is a good amount of activity that we expect to occur a little bit in more frequency in 2021, especially as the work is sort of co-worked on COVID. So our expectation is we will see more and expect to have a robust pipeline and obviously, we with the team at Bel here and now in addition to myself, will be trying to cultivate our own proprietary side of the house, not to be similar to the deals that I've done. So I would say it's definitely out there and we just need to figure out where we want to be spending time and going after it.

And I think with the value also, Farouq brings besides knowing so many of our competitors or companies in the industrial market, which we have anticipated, I think how we deal with the banks going forward where historically not because we haven't borrowed money in the past and the financing terms and so forth, I think that's key for us. It's great that we want to buy a company, but the question is can we get the proper financing from our lenders. And I think with Farouq aboard, it’s going to be a major benefit that he brings to the product inside his acquisition knowledge.

Dan, I would like to repeat it -- long lead times, there's been one -- I don't know whether you talk about this or not. There's been talk about inventories in the channel and inventory that OEMs are lower than optimal. And therefore, they would rotate more and then build the inventories. Do you see the same trends among your customers or that doesn't apply in your area?

Again, I think the initial concern you have, we have long lead times. If someone has to wait nine months for a semiconductor and is going to need a fuse in two months, are they going to push back your deliveries for the last item? Generally, we never see that. What we see generally when there are long lead times, we always feel it's beneficial to the business. Because most of our customers are more concerned about delivery than they are about pricing. And at some point, they're willing to pay the premium for pricing. So we think -- even though we do think it's beneficial again for all of us when we have long lead times and how we prepare ourselves properly for it. And I think historically, our processing group has always kept our front lines open with product and because of the long-term relationship we have with our suppliers. So again, I feel with these lead times, we are somewhat confident that we can manage it properly. And if we do face increased pricing that we can offset it with our pricing to our customers.

And then with the addition of EOS and the RMS Connector, what should be our expectation for operating expenses?

Yes. For rms, there should be very little incremental OpEx because we're basically bringing a manufacturing facility into our own and we are not bringing any incremental SG&A along with that. On the EOS piece, the OpEx would be probably traditional about 13% to 15% of revenue, maybe with some synergy there and we're not anticipating significant amounts.

And then Farouq, can you share what kind of absolute dollars of SG&A we should expect?

That would be revenue on an annualized basis of, say, $12 million to $15 million. So I'd say 13% to 15% of that.

And then I think starting from Q1, you would see some benefit in R&D and then some closures also?

On a comparative basis, you should see a positive comparison for R&D in rms.

Are you asking about the consolidated business?

Yes, the consolidated business, yes. I think months ago, there was discussion that SG&A may run between like $20 million to $30 million…

So for the consolidated business, we will see incremental cost savings in Q1 of about $1.3 million. The majority of that will be in R&D, about $750,000 related to the Switzerland closure and then the rest will be split between SG&A and COGS.

We'll now hear from Steve Kohl with Mangrove.

I had a few quick questions. First off, on magnetics, I know you mentioned one of the large OEMs is kind of sitting tight and now starting to come back. Can you give a little bit more color on what else is happening there that gives you comfort that the order patterns are coming back, are you seeing more strength outside of that…

We're using our backlog to make that judgment call and the backlog has increased nicely in the fourth quarter on the magnetic side of the business.

And turning down to the rms business, I know you talked about the 5% to 8% bump in incremental revenues. If we kind of go back and look at what a more normalized world will look like on the commercial aerospace side. What is the expectation of where rms could ultimately be if you look out a longer view? So if we don't look at this year, but we look out…

So I think the key is where Boeing planes are going to do. They were leasing before COVID and before the 737 problems, they were looking at 49 to 51 planes a month. And that I think we have 5,000 connected per plane. So those are substantial values in RMS versus second source at Boeing and to their suppliers. And now I think, Craig, I was hoping to get to '21 soon, right?

Yes, it's going to be -- expected to be a slower ramp-up in their build schedule. So it's going to take a couple of years until they get back up to that run rate that we were anticipating earlier…

So again, if you look at, I think the point for us is we could look at Boeing with back to normal saying 42, 43 planes, we believe by RMS would probably be maybe 2 to 3 times what we pay for it today. So we feel very fortunate. We did take a big risk; if the 737 doesn't come back, this is not the best acquisition we ever have had. But even the fact that we picked up state-of-the-art equipment that we needed anyway in our facilities, we're really pleased again with the acquisition besides Boeing the aftermarket and how it strengthens our relationship with some of our key aerospace distributors. So for us -- again, it typically takes eight to nine years, sending Christmas cards to the President of the company before he finally responded. And I thought he signed up thank you for my Christmas card and then as I say -- by the way. And so again, it's probably the best investment Bel Fuse has ever made, $20 of Christmas cards.

That's a pretty good deal. And that's probably $20 for a whole package. So not as in the individual one. So that's even…

And well maybe also exciting, we were able to complete this deal in a roughly two month period, less than eight weeks, working closely with them. And I think that's a good sign. When we do deal with a lot of acquisitions with Farouq going forward, I don't think there are many companies out there said that they can close a deal in that sort of timeframe. So our philosophy, what we say, we've done a lot of divestitures with billion-dollar companies. And I think if you look at it, TE and Safran some of the other companies we deal with, I think the decide to go with Bel Fuse, not because we pay the highest dollar, it's because of ease of transaction and how we treat the customers and their associates. So I think we have the competitive edge against some of our competitors; we have a really good track record. We can do a deal, we're going to do a fair deal and a quick deal. So that's going to help us look a lot in his pursuit.

I guess, one quick…

I just want to quickly add that if we look back a couple of years, pre COVID pre grounding, the RMS business was running around $15 million to $16 million a year in revenue and that compares to where they were in 2020, which was around $8 million. So just to give you some perspective of where they were under…

And Lynn do you have their profitability?

Yes. So before all of this in normal conditions, their EBITDA margin was around 20% whereas right now they've been running around 5%, so definitely room for improvement as conditions improve.

I would think under Bel without their overhead and without their building and so forth, and we should be able to substantially improve those margins.

And this is going to seem like an off-the-lock question, I'm sure you hear this one, too. But the world, you talked about, obviously, T&E is down for everybody now. But how do you -- when we look longer term in terms of how you're doing business. Would you expect a structural change in T&E and things like this going forward in terms of how do you view that…

I think we're going through a revolution and maybe I'm wrong, but I think the revolution would have taken maybe four or five years, but I think the revolution is going to take 18 months or sooner. I mean, the role of salespeople and people working from home, how can you call on a customer at 50%, 60% of the people working from home going forward, and how do you connect with these people. And that's why we made a major effort over the last three or four months to consolidate our sales force. Historically, we had a salesperson for each company. So we had a salesperson at CUI, a salesperson for Bel Power Solutions, a salesperson for Signal Transformer, possibly all calling on the same customer. We consolidated that into four people that cover the country. In addition to that, we are pushing our digital sales group substantially to add people on, so how do we connect to the engineers through LinkedIn, through YouTube, through Twitter. And really, again, if you're dealing with young people, as you know, I don't think they like to use phone calls and they don't think they like to talk to people and they want the information quickly. They want it fast and they don't want BS. And so we clearly understand that and hopefully, we're moving quick enough to address the new as it is. And for us, that's key. I mean, for us to be successful, we have to be able to work with engineers before they design the product. If we come in as the second supplier or third supplier, it makes it extremely difficult. But if we come in when the engineers are designing a product, we can help them, we can guide them in a system to use our product in the proper way and that hopefully eliminates some of our competitors. So it's definitely an exciting time we live in and definitely believe things are changing rapidly.

Let me hit with one last question, it was kind of your opening that brought a warm feeling to my heart. So you mentioned about pointing out the valuation disparity between the sum of the pieces in the current marketplace. I guess, obviously, Farouq is coming on and I guess the best thing to do is throw him right into this task of how do we narrow that. So obviously, you've been successful to varying degrees on acquisitions as you've alluded to and running the company efficiently. But how do we narrow -- I'm still a little confused on how do we do that. So how do you get us to a price on the public [Multiple Speakers] using that approach?

Farouq, you want to earn your salary right now and explain how you're going to do it?

Yes. I got to start somewhere on day three here. So when I was on the other side of the table looking at Bel and kind of seeing the same formation that you're looking at, I would say you develop certain expectations and perspectives on the business and being slightly under the covers here on the other side. I would echo Dan's sentiment now that we're peeling back the onion. I'd also say, though, when the seat that I was sitting at on the other side of the table on the sell side, Bel represents a unique opportunity from a size, reach, and global positioning, quite frankly, with varying degrees, whether it be the connectivity side or the power side and the magnetic side. So when I see what I'm looking at, I see a great base for us to build upon and drive growth faster, both, I would emphasize, inorganically and organically. So one of the benefits, from my perspective, is to bring a fresh set of eyes and asking questions for us to look at how Bel is conducting business today and where should we be, and what do we want to do down the road? So to your question is, well, how do we bridge the gap? I think there's a consistency in kind of performance and the way we do business that we need to address. So we kind of have a feeling have, again, sitting in your shoes, talking to investors and I would say that Dan had alluded to it earlier, whether it be on the margin side, the way we just do business is simplifying and positioning ourselves for longer-term sustainable growth. So it is a tough question, but I think we know the answers and we need to just figure out how to get there.

We have a follow-up from Jim Ricchiuti with Needham & Company.

Just looking at the commercial aircraft market. I think comparisons actually get much, much easier for you when Q3, is that when the business really started to come down sharply?

So on the commercial aerospace, I guess, it was actually in the second quarter of 2020 is when we saw the largest drop off. So there will be some incremental pressure on Q1 sales related to that but then we should be in a more normalized position from Q2.

And then I'm just looking at a comment in your press release, I just want to make sure I'm not misinterpreting it. You talk about an additional $4.4 million of cost savings in 2021. And I just want to make sure I'm not confusing that with some of the other savings you highlighted this morning.

So the $4.4 million that will be incremental in 2021. That is looking at full year 2020 costs versus 2021. So like of that, $2 million related to the Switzerland facility closure. We had $1 million of backlog savings realized in 2020 at the tail end of the year here and the other $2 million will be realized in 2021. Other actions that we had done throughout the year, the Germany sales office closing, our North America sales reorganization. And we had a couple of other actions that were implemented in Q4 with moving some functions in Asia that will result in another $1 million help savings in 2021. So that $4.4 million is incremental, and I do have the detail of it by quarter, if that would be helpful.

Sure. Thank you. Yes.

So again, these are year-over-year incremental savings. So in Q1, it's $1.3 million versus if you're looking at Q1 '20. Q2, it's almost $1.4 million. In Q3, it's $1.1 million. And in Q4, it's about $600,000.

And Jim, just to add some more color on that. We still believe that we've still got ways to go before we finalize our cost savings program. One of the key things was the implementation of our new software and now is they're having many different ROI systems. We got it down to two, one for Cinch people and one for the Bel group. So we can look at consolidating many functions because we're all on one system now. Also, our manufacturing footprint in China, we have three operations in China that we have to look at consolidating down either to one or maybe two. So we still think there's good opportunity to improve on our savings over the next year to two years. So we still got a ways to go, and we're still focused on it.

[Operator Instructions] And that will conclude today's question-and-answer session. I will now turn the conference over to Mr. Bernstein for any additional closing remarks.

Thank you, James. Thank you for joining our call today. And we're looking forward to speaking to you in April. Have a good day.

That will conclude today's conference. Thank you for your participation. You may now disconnect.