Good morning, ladies and gentlemen. Welcome to the Bel Fuse Second Quarter 2022 Earnings Conference Call. As a reminder, this conference is being recorded. I would now like to turn the call over to Jean Marie Young with Three Part Advisors. Please go ahead, Jean.

Thank you, Vikram, and good morning, everyone. Before we begin, I’d like to remind everyone that this conference call contains certain forward-looking statements regarding the company’s expected operating and financial performance for future periods. These statements are based on the company’s current expectations. Actual results may differ materially from those expressed or implied by these forward-looking statements due to a number of risks and other factors. Additional information about factors that could potentially impact our financial results is included in yesterday’s press release and is discussed in our filings with the Securities and Exchange Commission, including our most recent annual report on Form 10-K and our subsequent quarterly reports and other filings with the SEC from time to time. 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 press release. Our press release and our SEC filings are all available at the IR section of our website. Joining me on the call today is Dan Bernstein, President and CEO; Farouq Tuweiq, CFO; and Lynn Hutkin, Director of Financial Reporting. With that, I’d like to turn the call over to Dan. Dan?

Thank you, Jean. And thanks to everyone for joining our call today. I’m delighted to report we achieved record-breaking results for the second quarter in many categories. Revenue, adjusted EBITDA, bookings and backlog were all at the highest level in Bel’s history, and you would have to look back to 2015 to see comparative adjusted EBITDA results. This new milestone for Bel was delivered by our entire team in all three of our product groups. Commercial aerospace continued to rebound with $7.8 million in sales, up 43% for the same period last year and up 26% sequentially. The EV end market sales were up $6.7 million or 89% from the same period last year and up 13% sequentially. Power and magnetics continue to perform well, and with margin improvement due to the strategic initiatives we implemented over the past year. Revenue generated from our distributor partners grew $10.8 million or 23% over the same period last year. Connectivity margins are currently compressed due to the initial costs associated with ramping commercial air. Additionally, we had $9 million of revenue related to raw material expedite fees this quarter, where the overwhelming majority came from our power segment. Although this is largely a pass-through with minimum administrative markup, this does have a negative impact on our margin. While this is an unusual source of revenue, we do expect this to continue in the near term until the supply issues are stabilized. The supply chain continues to be constrained, impacting raw material availability, freight and logistics, but that seems to be the new normal that every business is having to deal with. I’m very proud of our team and their contributions that drove this record-breaking performance, and I’m confident that we will continue our momentum throughout the remainder of the year. I would like now to turn the call over to Lynn to provide a fuller financial update. Lynn?

Thank you, Dan. As Dan mentioned, Q2 was very strong with year-over-year growth seen across each of our product groups. Overall, second quarter sales were $170 million, an increase of 23% from the second quarter of 2021. Gross margin for the quarter increased to 26.6% as compared to 24.7% a year prior, primarily due to our efforts on pricing over the past year. By product group, Power Solutions and Protection sales were $71 million, up 28% from last year’s second quarter. In addition to Dan’s commentary on EV sales and expedite fee invoicing, the power group also benefited from strong sales in our CUI business, which posted an increase of $1.8 million or 13% from Q2 2021. Our EOS business acquired in Q1 last year also saw growth of $1.1 million or 30% from last year’s second quarter. Gross margin for this group was 28.2% for the second quarter, a 230 basis point improvement from Q2 2021, largely driven by the benefits of pricing actions taken over the last year. Our Power Solutions and Protection group had a book-to-bill ratio of 1.9 during the second quarter of 2022 and a backlog of orders of $338 million, an increase of 41% from the 2021 year-end. Turning to our Connectivity Solutions Group, sales were $46.1 million, an increase of 7% from last year’s second quarter, mostly due to the continued rebound of the commercial aerospace end market and higher sales of our passive connector and cabling products. Military sales continued to be challenged this past quarter, resulting in a 7% year-over-year decrease in the defense end market. Gross margin for this group came in at 27.6% for the second quarter of 2022, down from 30% in the second quarter of 2021. Much of the margin pressure relates to incremental training and overhead costs at the factories as we’ve been quickly scaling operations back up to accommodate the higher demand in commercial aerospace. The Connectivity Solutions group had a book-to-bill ratio of 1.2 during the second quarter of 2022 and a backlog of orders of $103 million at June 30, an increase of 21% from December 31. Lastly, our Magnetic Solutions group had Q2 sales of $53.5 million, up 33% from last year’s second quarter, led by increasing demand for our integrated connector modules that are used in next-generation switching applications. Gross margin for this group improved significantly to 28.2% in the second quarter of 2022 from 23.2% a year prior. Margins for this group benefited from the higher sales volume and also a favorable shift in exchange rate of Chinese renminbi versus the U.S. dollar, which lowered our labor cost in China versus the 2021 period. Our Magnetic Solutions group had a book-to-bill ratio of 0.7 during the second quarter of 2022 and finished the quarter with $140 million of orders, down slightly from the 2021 year-end level. Our selling, general and administrative expenses were $24 million or 14% of sales, up from $21.8 million in the second quarter last year, but down as a percentage of total sales. Within SG&A, the primary increases were related to salaries, rep commissions, travel and advertising costs. Turning to balance sheet and cash flow items. We ended the quarter with a cash balance of $65.8 million, an increase of $4.1 million from December 31. Our working capital increased by $15.3 million from the 2021 year-end. We saw a $12.7 million increase in our accounts receivable balance, offset by a $5 million reduction in our unbilled receivable balance at June 30 compared to the December 31 balances. Our DSO were 53 days at June 30, 2022, compared to 54 days at December 31, 2021. Inventories increased by $25.3 million from year-end, which is largely seen in work in progress as we continue to accommodate the increase in demand from our customers. In addition to changes in working capital, other items impacting cash flow for the first half of 2022 included capital expenditures of $3.5 million and our continued dividend program, where we made payments of $1.6 million. Cash paid during the first half of 2022 for income taxes was $4.6 million and interest payments totaled $1.1 million. I’ll now turn the call over to Farouq for additional color, outlook and expectations. Farouq?

Thank you, Lynn. As we have spoken about the last few quarters, the initial plan was to build sequentially upon our progress in future quarters, and that is precisely what we are doing. We are proud to report our sixth consecutive quarter of year-over-year sales growth and margin improvement. 2015, as Dan mentioned, was the last time we experienced similar margins, and we’re delivering these results in a very challenging environment. Excluding the negative impact of our revenue, our margins would have looked even more impressive as a percentage of sales. Although we have started to see the fruits of our efforts, we’re still on a journey and remain laser-focused on continuous improvements. Looking towards the third quarter, we expect year-over-year top line growth in the high single digits and gross margins higher year-over-year and more in line with the second quarter of 2022. Power and magnetics will see better year-over-year improvement while connectivity will be slow to follow until year-end as contracts come up for negotiations. Our backlog continues to look robust with continuously improving gross margins that gets us excited about our future prospects. Thinking beyond the third quarter to the balance of 2022, we see continued demand, demonstrated by our strong backlog of orders. While the economic concerns of 2023 have dominated the airwaves, we have not seen any meaningful signs of a slowdown. Some softening could occur over time, but we remain highly confident overall in the business. From an operational efficiency perspective, there are still several internal initiatives underway, and additional details will be shared in the near future to update you on our progress. Our executive team had an offsite in May that resulted in some very exciting takeaways that give us confidence in our ability to drive further long-term shareholder value as we execute on our strategic plan and vision. We have identified diverse and numerous opportunities for continued margin improvement and are excited about the journey. The diversity of contribution gives us optionality to see where our improvement will be coming from. While these results are impressive, our work is not done, and it is on multiple fronts. We will celebrate this quarter with our teammates and quickly pivot back to the bigger task at hand. And with that, I’ll turn the call back over to Dan.

Thank you, Farouq. At this time, we would like to open up the call for any questions you might have.

We have a first question from the line of Theodore O’Neill with Litchfield Hills Research.

Congratulations on a good quarter. Dan, in your prepared remarks, you talked about, if I got this right, $9 million in expedite fees that you were able to bill your customers. Did I hear that correctly?

Yes.

And was that across all segments, or one in particular?

Mainly focused on power products and bringing in semiconductors.

Okay. Great. You’re having some good success here in terms of growth rate in the e-mobility sector, which you’ve cited here has continued to see good growth in the quarter. How diverse is the customer base there? And is this share gain related? Or is this some particularly good product fit?

I think it’s more of a good product fit. It’s new technology. Most of our designs are currently single source, so it’s very engineering-derivative. How many non-disclosures do we have, Farouq?

I think we have over 250 nondisclosures, which range from anywhere, kind of startups, all the way to big main staple names in the industry. And as Dan noted, this is still an emerging field. We had a first mover’s advantage. We’ve been in this business for roughly 10 years when it early started, and now we’re starting to see the fruits of that labor and investment.

Our focus tends to be on niche markets, not the high-volume automobile market. So for example, trucks, transportation for the Post Office, mining trucks, things in that nature.

Okay. And are you seeing any changes in the dynamics between terms of product flowing between the distribution channel and your direct channel?

Distribution has been and is substantially stronger than the OEM market at this point in time, and that flows back and forth. But we do see the market in distribution; they are a lot more aggressive in buying material.

We have next question from the line of Jim Ricchiuti with Needham & Company.

It’s actually Chris Grenga on for Jim. Congrats on the great quarter. Last quarter, you had referenced roughly $30 million or $40 million of sales pushed out due to customer rescheduling. Has that trend improved, stayed the same, or expanded?

So that trend has continued. The number currently is about $34 million of orders that were scheduled to ship in the second quarter that did not. So it’s a very similar number to where it was last quarter.

And maybe just to add some color on that. That’s not all on us. Partially, it may be our material challenges as Dan has spoken about, but also on our customer side where we may have finished goods and products and ready to ship, but they’re not ready as they are waiting in other parts of the system, so to speak. So it’s a little bit of a mix of both.

Got it. And anywhere you’re starting to see any demand deterioration? Or any areas in a business, product group or market vertical that might be precursors to softening in consumer demand?

We are tremendously concerned about the recession concerns that we hear throughout the country. But at this time, we monitor our cancellations daily, and we haven’t seen anything to give us any concern.

Excellent. And maybe one more for me. But you had alluded a little bit to it, but where do you stand with the strategy refresh? And could you provide a sense for maybe where margins could go from here once those initiatives are fully implemented?

Yes. No. So I’d say we understand that there’s a lot of work ahead of us. And there are a lot of internal projects going on across all three segments. And these kind of range from sizes and scales from big things to smaller things. So it is coming from all ends in terms of our strategy. We think that we have healthy room to go yet on the margin front. And we don’t obviously put on any forward guidance, but we understand that we’re still kind of climbing the stairs here early on. So going to leave it at that here.

Thank you. We have a next question from the line of Hendi Susanto with Gabelli Funds.

Congratulations on the strong results. Farouq, I would like to ask about the pricing actions. How much benefit from the pricing actions at Bel Fuse was generated in the June quarter? Can you provide more detail on this? I assume there will be more benefits in the future, but I'm unsure about the timing. Perhaps you can help clarify the expected magnitude.

Yes, I appreciate the question here, Hendi. On the pricing side, when we initially started this, it was really a little bit a combination of reactionary to the increased input cost, logistics, freight, everything that goes into producing these products. As we looked at some of these products last year, some of our components have increased, we got price increases to the tune of 10x. The other part of it is we need to, in addition to recovery, look at what is a healthy and acceptable margin for us. And that answer is going to look a little bit different based on product, the competitive set, the customer and where we are. So it’s not a straight line across the bow here; it’s a really nuanced and surgical approach to it. But we are not done in the sense that we’re still seeing challenges in the supply chain. So as cost increases and go up or change, we need to stay on top of that. So it’s a continuous game. So the difficulty of answering your question here is twofold. One is it’s ongoing. So if we’re looking at Q2, for example, it happened a number of times. So we’re not putting a number out there yet. But I would say, while pricing has obviously got a big amount of airplay here, I want to also emphasize that we are taking market share, we are winning new business, and we are getting into new designs. So as we are going after these newer opportunities, we’re pricing things a little bit more appropriately for a company that meets our shareholder expectations and what we expect for ourselves. So I’ll leave it at that. But what encourages me as we look out, and part of my bullish view here, is the diversity of it. So we’re not seeing kind of just, again, one customer or one end market that this is going, but we have a ways to go. So I’ll leave it at that.

I see. And then may I ask about the commercial aerospace revenue? It is great to see the rebound. And then if I remember correctly, the run rate pre-COVID is somewhat close to $40 million. Should we expect the rebound to go further closer to the $40 million run rate any time soon?

Our commercial aerospace sales for the second quarter were $7.8 million, increasing from $5.5 million in the same quarter last year. As Dan previously mentioned, the combined Cinch and recently acquired rms businesses accounted for around $40 million to $45 million before COVID. Farouq, do you have any comments on this?

So yes, I would say if we kind of go back to pre-COVID, pre-kind of cutting back on spending in the industry and kind of grounding and all that news, we were roughly run rating in the mid-40s. Obviously, that end market is coming back roaring and we’re seeing all the headlights; we think that will be a multiyear opportunity. So $45 million is kind of the previous normal. The new normal should be well north of that. So I think that’s our answer. So we’re early on in the game of recovery. We’ve got a long way to go to get back to, at a minimum, the old normal, but definitely the new normal.

I see. And then can you give some puts and takes on gross margin and OpEx? I’m wondering how sustainable gross margin at 25% to 26%. And OpEx, I saw that R&D dropped to $4.7 million. I’m wondering whether we would see a rebound in R&D.

Yes, the research and development is somewhat similar to what Lynn mentioned earlier about our wages in the magnetics group, with a slight positive impact from foreign exchange. Overall, foreign exchange effects across our businesses were nearly $1 million for the quarter. In the short term, considering the current economic landscape, we expect the dollar to either strengthen further or remain stable against other currencies. This is likely a short-term advantage for us. However, it's not something we are relying on as we aim to maintain a very efficient operation. Regarding sustainability, we have been clear about our ongoing progress. This includes both pricing strategies and revenue growth, starting with our customers and product offerings, and also focuses on the product niches we are exploring that provide a stronger competitive advantage. Moreover, as we assess our business practices, we aim to share some developments over time. I want to emphasize that our approach to sustainability and growth is multifaceted, and we feel confident about our trajectory due to the range of options available to us.

Thank you. Ladies and gentlemen, we have reached the end of the question-and-answer session. And I’d like to turn the call back to Dan Bernstein for closing remarks. Over to you, sir.

Thank you for joining us today. We appreciate your time. And we’re looking forward to presenting our next results.

Thank you. Ladies and gentlemen, this concludes today’s conference call. You may disconnect your lines at this time. Thank you for your participation.