Good morning, and welcome to Bel Fuse's Fourth Quarter and Full Year 2023 Earnings Call. As a reminder, this conference call is being recorded. I would now like to turn the call over to Jean Marie Young with Three Part Advisors. Please go ahead, Jean.

...that will be considered forward-looking statements under federal securities laws, such as statements regarding the company's expected operating and financial performance for future periods, including guidance for 2024. These statements are based on the company's current expectations and reflect the company's views only as of today and should not be considered representative of the company's views as of any subsequent date. The company disclaims any obligation to update any forward-looking statements or outlook. Actual results for future periods may differ materially from those projected due to various risks, uncertainties, and other factors. These material risks are summarized in the press release we issued after the market closed yesterday. Additional information about the material risks and other important factors that could impact our financial performance and cause actual results to differ materially from our expectations is discussed in our filings with the Securities and Exchange Commission, including our most recent annual report on Form 10-K for the fiscal year ended December 31, 2022, and our quarterly reports and other documents that we have filed or may file 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, Vice President of Financial Reporting and Investor Relations. With that, I'd like to turn the call over to Dan.

Thank you, Jean, and good morning, and thank you for joining our call of Q4 and '22-'23 year-end. Last month, Bel celebrated its 75th year of being in business. This is no easy feat in the electronic components business and a testament to the generation of great assertions, customers and partners that we have the privilege to work with. Over the years, we have instilled the four principles of Father Bernstein when he first started the company in 1949. We worked closely with our customer and product development teams, the benefits of collaboration will enable the company to stay relevant and on the cutting edge of technology. Two, establish and maintain relationships with quality suppliers; three, provide value to our shareholders. This is always central in our priorities and made possible for building and operating successful businesses; and finally, attract and retain talented associates. Bel has successfully navigated the challenges faced over the years and has stood the test of time by relying on these four principles. 2023, on many accounts, was a challenging year for our initiative. Bel was able to perform better than most due to diversity in our end markets and our unrelenting dedication to continuous improvement by our global teams. It was also a transformative year for us as we consolidated four manufacturing sites, sold one of our non-core Czech operations and divested our former headquarters building, focusing on optimizing production and business processes. We finished 2023 with non-GAAP adjusted net sales, which excluded expedited fees slightly up from 2022 levels with significantly improved profitability. It's also a year of record cash flow generation. This enabled us to explore broadly ways to invest in the business and return capital to our shareholders. As announced in our earnings release, the Board of Directors has authorized a new program for the repurchase of up to $25 million of the company's outstanding shares in the open market, privately negotiated or block transactions or otherwise in accordance with applicable laws and regulations of the SEC, including Rule 10b-18 of the Exchange Act. Additional details regarding the stock repurchase program are contained in the 8-K that was filed yesterday. Despite the many wins of 2023, we're not able to be as acquisitive as we had hoped, given the limited availability of viable targets. As we look to 2024, I'm excited about the road ahead. While it's expected that the year will be off to a slower start, as consistent with the Board assessment throughout our industry, we do believe the second half of the year looks promising, assuming inventory levels in the channel normalize. With our previously announced facility consolidations behind us, we entered 2024 with a much more efficient cost structure, which will serve us well, especially with the current sales level of our Magnetics business. Turning to the management team. We announced last month that Steve Dawson will be taking the helm of Bel Power Group upon Dennis Ackerman's retirement in July. Steve came to Bel through its acquisition of Power-One from ABB in 2014 as an integral part of our turnaround story over the Power segment in recent years. I've worked side by side with Dennis and the team for the past decade, coupled with his technical background and industry experience. Steve brings the right mix of continuity and fresh perspective to the role. I'm very excited to have him stepping up this summer as part of our going-forward executive team. And with that, I'll turn over the call to Lynn to give us a financial update.

Thank you, Dan. From a financial perspective, sales came in at $140 million for the fourth quarter and $640 million for the full year of 2023. On a non-GAAP basis, our adjusted net sales, which exclude expedited fee revenue, were down 12% in the fourth quarter of 2023 versus Q4 '22, but were up 1% for the full year 2023 over 2022. Consistent with prior quarters, there were large offsetting movements within our product segments, with pockets of strength within Connectivity and Power helping to mitigate the significant declines in Magnetics sales throughout 2023. Gross margin continued to increase on a year-over-year basis for the ninth consecutive quarter and reached 36.6% in the fourth quarter of 2023 as compared to 31% in Q4 '22. Looking at the full year, gross margin was up by 570 basis points in 2023 as compared to 2022. Margin improvement continued to be led by a favorable product mix and the successful execution of a variety of cost reduction and efficiency programs. Before getting into the product segment discussion, there is one item to note which impacts our fourth-quarter segment margins. Historically, and including the 2023 year, we have accrued our global incentive compensation expense in the corporate segment throughout the year and pushed down the appropriate annual allocation to the product segments in the fourth quarter. Due to a shift in our incentive compensation program to a calendar year basis, there were five quarters of this expense pushed down to our segments in the fourth quarter of 2023. Aside from this, the year-over-year periods disclosed in our earnings release are generally comparable. However, there is a larger disconnect if looking at segment margins on a sequential basis from Q3 '23 to Q4 '23. Now turning to our product groups. Sales of our Power Solutions and Protection products in Q4 '23 amounted to $69 million, a 16% decline from the previous year's fourth quarter. On a full-year basis, 2023 showed an increase of 9% compared to 2022, reaching $314 million in sales. The growth for the full year was mainly driven by higher demand for front and power products, which serve our networking end market. Sales of our eMobility and rail products also remained strong and helped us offset declines in circuit protection and distribution sales. For full-year 2023, sales of eMobility products amounted to $27.8 million, an increase of approximately 40% from the 2022 level. Products sold into rail applications totaled $30.1 million for full-year 2023, up 33% from 2022. The gross margin for the Power segment was 40.2% for the fourth quarter of 2023, representing a 720 basis point improvement from Q4 '22. On a full-year basis, the gross margin increased by 760 basis points to 38.1% in 2023 as compared to 30.5% for 2022. These increases were primarily driven by a favorable shift in product mix, cost reduction efforts and favorable effects from the Chinese remedy. Our Connectivity Solutions group achieved sales of $50.6 million in the fourth quarter of 2023, an increase of 7.5% compared to Q4 '22. On a full-year basis, 2023 Connectivity sales amounted to $211 million, an increase of almost 13% versus 2022. This improvement was due to the continued growth in the defense and aerospace industry, partially offset by softer demand from our premise wiring customers. For full-year 2023, sales of products into the commercial aerospace end market amounted to $53.3 million, an increase of 72% from the 2022 level of $31 million. Products sold into defense applications totaled $44.7 million for full-year 2023, up 25% from the $35.9 million in 2022. The gross margin for this group was 29.3% in the fourth quarter of 2023, up from 23.6% in the same quarter of 2022. On a full-year basis, the gross margin improved by 830 basis points to 34.2% compared to 25.9% in 2022. Gross margins for the 2023 periods were favorably impacted by the higher overall sales volume, multiyear contract renewals and operational efficiencies implemented during 2023, partially offset by higher wage rates in Mexico and an unfavorable fluctuation in exchange rates between the U.S. dollar and Mexican peso in 2023 as compared to 2022. Lastly, our Magnetic Solutions group sales declined by 49% from Q4 '22 levels to $20.5 million in the fourth quarter of 2023. This resulted in full-year 2023 sales for the Magnetic segment of $115.1 million as compared to $178.8 million in 2022. This segment has a large concentration of sales in the networking end market and is largely tied to the ordering patterns and end demand of certain large customers within that space. The trends on the top line in this segment is a continuation and further deterioration of what we saw in the second and third quarters of 2023. With lead times being down and new orders being shipped in the same quarter, this segment does not have the same visibility as for other segments. The intra-quarter sales that were expected in November and December simply did not trend prior and have become evident that the rebound in this space will take longer than originally anticipated. The gross margin for the Magnetic segment was 17.1% for Q4 '23 as compared to 29.5% in Q4 '22. On a full-year basis, Magnetic gross margin was 22% in 2023 as compared to 27.6% in 2022. The lower sales volume and dual cost structure in place throughout much of 2023 were the primary drivers of gross margin reduction for the Magnetic segment compared with 2022. These factors were partially offset by favorable exchange rates with the Chinese renminbi versus the U.S. dollar. On positive developments in the Magnetics group, we can confirm at this time that our large facility consolidation projects in China that will benefit this segment is complete. The leaner, more efficient operations and elimination of the dual cost structure should aid the margins of this group going forward. At the consolidated level across all product segments, our backlog of orders totaled $373 million at December 31, 2023, a level we still consider to be high based on our history. The selling, general and administrative expenses for the fourth quarter of 2023 were $24.9 million, down slightly from the $25.1 million in Q4 '22. This reduction was primarily due to lower sales commissions and the reduction in progression fees. On a year-to-date basis, SG&A increased by $6.7 million during 2023, mainly due to higher sovereign and fringe benefits in 2023, in addition to the MPS litigation block incurred earlier in 2023. Turning to our balance sheet and cash flow. We closed the quarter with $127 million in cash and securities, a significant increase from the $70 million we had at the end of 2022. During the fourth quarter of 2023, we generated cash flows from operating activities of $27.4 million, a 69% improvement from Q4 '22. Looking at the full year of 2023, we generated cash flows from operating activities of $108.8 million, an improvement of 170% from 2022. Capital expenditures amounted to $2.5 million in the fourth quarter of 2023 and $12.1 million for the full year of 2023. We continue to make progress on reducing our inventory levels and have achieved a $33.6 million reduction in inventory since the end of 2022. From a debt perspective, our outstanding balance remains at $60 million and is effectively subject to a fixed interest rate of 2.5% through our swap agreements that are in place through 2026. I'll now turn the call over to Farouq for additional commentary.

Thank you, Lynn, and good morning, everyone. As Dan mentioned, 2023 was a solid year for us in terms of holding our revenue base and seeing significant improvement in profitability and cash flow generation. I wanted to take this opportunity to thank our global team for their tremendous efforts, creativity, and ingenuity this past year as we push for continuous improvements in all areas of the business, and our team answered the call and delivered above expectations. The priority of 2023 was to strengthen Bel's foundation, and this was achieved with much of the housekeeping efforts now behind us, the focus of 2024 will be threefold. First is top-line growth. This includes investing in customer relationships, identifying new sales strategies, determining which end markets and geographies to double down in, and, most importantly, the development of new products to support Bel's growth in the future. A quick comment here on the sales team. We've done a lot of work on that in 2023. We've added some new team members across the globe. We also rolled out a brand-new compensation and incentive structure that went live as of January. The intention there is to really reward success and delivery with direct alignment and motivation to our associates. Second is further leaning out the way we do business. While we have accomplished a number of items, we still have a few projects we are working on. For example, we just kicked off a new project in the Connectivity side where we're streamlining our operations there for our passive connector business, transitioning the manufacturing out of Pennsylvania into other existing Bel facilities. This new initiative is expected to be completed by the end of 2024 and is anticipated to yield incremental annual cost savings in 2024 to the tune of $1 million. Third is capital deployment. It is evident, as Dan noted, that we are building up cash and securities at a respectable pace, and we want to be good stewards of this capital. As such, and as Dan noted, we launched our first stock repurchase program since 2012. This authorization is a proud moment for the Board and management team as we look to return cash to our shareholders. This was done at a time when our stock was discovering new milestones. To be clear, M&A is a top priority for us and must be aligned strategically and financially with our long-term goals. We'll also look to reinvest in the business to support organic growth. Increased investments in R&D to bolster new product introductions will be key. Additionally, another year of most likely elevated CapEx spend is expected in 2024 as we continue to upgrade aging equipment while introducing more automation to our manufacturing processes, again, the backdrop of rising wages globally. Now pivoting to 2024 and looking at that, as Dan mentioned and noted in our release, we expect a slow start to the year with a potential rebound in the second half. For the first quarter of 2024, based on currently available information and taking into account various financial and economic indicators, including what we see in our backlog and what we are hearing from our customers, we expect sales to be in the range of $125 million to $135 million. Aside from the anomaly we saw in Q1 last year, 2023, there is a typical step down in sales from Q4 to Q1 due to the Chinese New Year shutdowns that do occur in this quarter, and this historical trend is expected to continue this year. When looking at Q1 2023, there are a few items to keep in mind as we bridge from the $172 million that was last year to the expected range of Q1 '24. I'll run you through these items to keep in mind. First, our first quarter '23 sales included $7 million in expedited fee revenues that is not expected to recur in Q1 '24. These sales previously benefited our Power segment. Second, if you recall, we divested our Connectivity business in the Czech Republic during mid-2023, which contributed around annual sales of around $5 million. Third, we announced during Q3 '23 that we walked away from roughly $9 million in annual sales within the Magnetic segment due to their low margin profile. Fourth, Q1 '23 was one of our Power segment's strongest quarters as they were finally able to ship orders that had been past due due to the raw material shortages of 2022 easing by early 2023. These 'catch-up orders' from Q1 '23 and Q2 '23 largely tapered off during the second half of 2023, as expected, and these heightened volumes are not expected to repeat in Q1 '24. We estimate that there were approximately $10 million of these catch-up sales in Power in Q1 '23 that will not happen. Fifth, on the differential between Q1 '23 actuals and Q1 '24 projections, we're estimating that Magnetic sales will trend down further in Q1 due to typical seasonality weakness and, while accounting for the over inventory in the channel, we expect to account for approximately a $20 million decline compared to Q1 '23. Lastly, due to the overall weaker demand within our industry right now, Bel's factories in China will be taking an extended Chinese New Year holiday for a few additional days. While this is being done as a cost containment measure, it does result in a few manufacturing and shipping days. I would also like to point out that we're seeing our suppliers and customers taking a longer Chinese New Year than compared to last year. The industry-wide phenomenon is hitting Bel a little more than we anticipated on the Magnetic side, but we do see a light at the end of the tunnel here in the second quarter. Obviously, this is a very fluid situation that we are monitoring. The trends on the Magnetic side are something we're keeping an eye on, and while the ordering patterns have changed, we are working through our backlog. We are confident in our ability to manage through this period, and we'll be well-positioned when the industry does rebound. Taking a big step back, we remain excited and optimistic about some of our other resilient end markets such as commercial air, defense, rail, EV, niche industrial, and, more recently, space. We do expect a recovery in our distribution business, which accounts for almost 30% of our revenue with very healthy gross margins. During these softer times of inventory in the last two years, the engineering resources at our customers and industry were more focused on fulfillment and finding alternative sources for production. Now, with the inventory situation, we're seeing our customer engineering resources pivoting towards more new product introductions and growth-oriented projects involving next-generation technology. We are excited to embrace the challenges and opportunities of 2024 and are not deterred by this near-term bump in the road. We are on a journey, and our focus continues to be on growth and progress for the long-term betterment of Bel. With that, I'll turn the call back over to Dan.

Thank you very much, Farouq. At this time, we'd like to open up the call for questions.

Our first question is from Jim Ricchiuti with Needham and Company. Please proceed.

Hi, good morning. Thanks. I wanted to revisit the comment regarding potential improvement in Magnetics for Q2. Is this mainly due to the extended shutdowns following the Chinese New Year, leading to increased business in Q2, or are we seeing actual signs of improvement in demand?

Yes. So Jim, thank you for the question. Taking, again, a step back here with the over inventory, obviously, demand is down. So when we look at our suppliers and also our customers, they're taking this extended or longer maybe than usual time off for Chinese New Year to kind of address the situation. Obviously, the hope there is to contain cost and result in some inventory digestion. Do we expect that to digest through all that inventory? I don't think so. That's why we expect it will be a little bit carrying through into Q2. The other thing I would note, and as you know, in our specifically kind of networking Magnetic side here, we've seen some of these press releases come out in the last month or so where this is pretty well documented on the inventory side and the various public statements out there also said roughly 2 quarters. We, I think, align on that here internally as well.

Okay. And just turning to the Power Solutions portion of the business, how would you characterize the overall demand level? I mean it was a bit of a weaker showing. You're still seeing signs, I think, of strength in some of the major end markets, including networking. But I wonder if you could just give some color on that. And Lynn, I don't know if it's possible, if you gave it, I may have missed it, you gave some breakdown on e-mobility for the year. What was it for the quarter, same thing on commercial air, if you would? And then I'll drop back in the queue. Thank you.

So maybe I'll take the first part of that, Jim. As we look at power and overall business, when we look at 2023, Q1 last year was our strongest quarter, and you followed our stock for a long time in our company, and I'm not sure that's ever happened. Part of that, specifically on Power, is there were these catch-up orders in Q1 and Q2. Obviously, we saw a little bit of a step-down, but still strength in performance and impressive margins coming out of our Power group. When we overall assess the Power group, I would say we see pockets of strength, but also pockets of weakness. When we look at, for example, distribution in power, that is a pocket weakness and has been, I think, probably for the majority of last year. We also see some weakness in that segment within our fuses business. But we also see some strength, as talked about, in terms of industrial, rail, and e-mobility. So stated differently, our Power business has been able to perform despite not humming along on all cylinders here, which I think is a testament to the work that's being done on the operational side of that segment. Then I'll turn over to Lynn on the eMobility.

Yes, sure. So just to quote some fourth-quarter sales numbers for some of these end markets. Commercial air Q4 '23 sales were $11.4 million. Military, which is just dry there, was $10.8 million for the fourth quarter. eMobility was $5.7 million, and rail was $8.9 million. Those are all fourth-quarter '23 numbers.

Got it. Thank you. I'll jump back in the queue.

Our next question is from Bobby Brooks with Northland Capital Markets. Please proceed.

Hey, good morning, guys. Thank you for taking my question. You know, obviously, a positive note coming out of the quarter was this $25 million buyback announcement. And I was just curious if you could help us frame how you expect executing that going forward. Reading the 8-K, I know that there's no expiration date on it. So maybe just some color on how you guys are thinking of using that as an additional capital return to shareholders?

Yes. Thanks, Bobby, for the question. As noted, as a company that's been on a journey of transformation, this is the first time where we will be out in the market doing a formalized buyback since 2012, so a better part of the decade. Our approach here is, I'm sure we'll kind of see how it goes and learn a little bit, but we do need to be mindful as we execute the buyback of our average daily flow. So as we think about how do we do it in a fair manner is to kind of execute it in a more programmatic setting. We will be doing that on the programmatic side. The lack of expiration dates, if you will, I would kind of phrase it this way, our intention is to not elongate this thing. But we need to be able to do purchases within the parameters of the program, but we do expect that to be, I'd say, relatively in a handful of quarters to be through that, pending market conditions, obviously.

Got it. I find the shift in your press release and during this call towards focusing on growth to be intriguing. You mentioned identifying new sales strategies, developing new products, and determining the geographical areas to concentrate that growth. We are about two months into the first quarter; could you share any early results or trends you've noticed from this renewed focus on top-line growth? Additionally, which product verticals are you aiming to develop new products in, and what is driving this focus on those new products? I assume it aligns with current market demand?

Yes. Taking a step back, Bobby, you're correct that we collaborate with our customers to create new products. Over the past couple of years, our customer engineers have been focused on finding alternative product sources and qualifying new components due to supply chain challenges in order to meet fulfillment needs. As the supply chain has improved and inventory levels have increased, those engineering resources are now shifting their attention back to the next generation of technology. We are actively involved in these discussions with our customers. Despite the guidance we provided, we're witnessing positive developments across our portfolio. For instance, in connectivity, we are encountering challenges like on-premise wiring, but there is strength in commercial air and defense sectors. In terms of new markets, we see space as a growing area where we have been making progress, leading to significant orders. On the power side, while there is some weakness, we’re observing promising developments in traditional industries like rail, particularly around AI investments, which is crucial for our power-hungry units that support overall infrastructure. We are also seeing increased discussions in this area. Furthermore, in eMobility, we are investigating additional opportunities and noticing growth in Magnetics. However, sales cycles in a down market can take longer. The revenue outlook for Bel Fuse in Q4 and our guidance for Q1 reflects the positive trends we have. One point to note is that we have a concentration of a few key customers in our networking sector, which can create some limitations. I’ll pass it to Dan for more details.

I think, Bobby, when you look at new opportunities, when we really have tried to focus over the last two years on how we address the new young engineers. Our focus was, if you go back 10, 20 years ago, most engineers were dealt with people who knocked on their door, either a rep company that would work for commission or a traditional sales approach. As times changed, nobody asked them to talk to people; they want to get on the Internet and get their components as fast as possible, the Amazon model. There are two leading companies that are leading this charge: DigiKey and Mouser, which is owned by Berkshire Hathaway. Both companies are multibillion-dollar companies focused on how to get products to the engineering community a lot faster than they have done in the past. Over the past two or three years, we made a significant effort to build our relationship with those two key e-commerce distributors. With that in mind, when we acquired CUI, people said to you, did you buy CUI because it was a power company? We bought CUI because of its digital marketing capabilities and the relationship they have with DigiKey. With the addition of CUI to our product portfolio, we're now ranked number 15 at DigiKey, which has over 5,000 suppliers. The same thing with Mouser; we made tremendous inroads with Mouser, where our salesperson was voted salesperson of the year four years in a row at Mouser. I think there's only three people that obtained that goal. Our focus is, as the world changes, we have to change with it. We really have to entrench ourselves with these e-commerce distributors moving forward. I'll give you the best example. At Cisco, we have two direct salespeople at Cisco. We have two engineers with badges, and we also use two rep companies. So at any point a day, we probably have 10 people calling at Cisco on Bel's behalf. However, we did receive a fuse order a while back, and we called our rep company, we called our direct salespeople. We called our FAEs to see where it came from, and it came from DigiKey. This is what we see more and more that engineers are working through them to get components quickly. We have spent a tremendous amount of time in this regard moving forward. I'll give you the best example. At Cisco, we have two direct people, salespeople at Cisco. We have two engineers with badges like Cisco, and we also use two rep companies. So at any point a day, we probably have 10 people calling at Cisco on Bel's behalf. However, we did receive a fuse order a while back, and we called our rep company, we called our direct salespeople. We called our FAEs, and we called our salespeople at Cisco to see where it came from, and it came from DigiKey. This is what we see more and more that engineers are working through them to get components quickly. This is the area we have spent a tremendous amount of time and will see a lot more success as we keep planting more seeds.

That's great information on the new product growth going forward. Do you have any early insights on the growth initiatives planned for the first quarter, particularly regarding any geographic areas you intend to focus on?

I think the area that we felt was underdeveloped for us was Europe. We have hired a salesperson who knows the market very well. Our focus was, guys, we need a lot more people in the territory to be successful. She hired a whole new team of people, and they all have very strong backgrounds. I think now we're represented with a direct person in every part of Europe. However, for all products on how we sell, it takes us about six months to a year on the Magnetic side and on the Power side to get approvals. On the Connector side, you're talking a minimum of two years to get products approved. What we're using now is seeing how Europe works with a more direct sales force, more involvement, and compare that to what we have throughout the world today. I'm hoping by summer that we can bear some fruit. For example, we have two fuse opportunities in Europe, each worth $1 million, and one we already received approval for. To receive a $1 million fuse order, we think we get maybe one every 10 years. We are seeing substantial opportunities that we haven't seen in the past.

Got it. I’ll return to the queue. Thank you, guys.

Thank you, Bobby.

Our next question is from Theodore O'Neill with Litchfield Hills Research. Please proceed.

Thank you. I want to follow up on the e-mobility side of the business. You can't miss the bad press that's coming out on the EV side with Rivian and Lucent reporting recently. Are you positioned sort of better in that space because you've got a greater focus on charging infrastructure and commercial vehicles? I just wonder if you could give us some...

I don't think, again, we've tried to keep away from the Teslas on the power side or anything that's high volume, what you're concerned about. So when we look at Rivian and Lucent or Tesla, we're more in the circuit protection side of that business, where we feel that it's more feasible and you're not going to get killed if there's a down market. Our focus is more in niche markets, for example, school buses, heavy-duty equipment, and marine equipment. So we're not really looking at high volume of our EV business.

I think we're taking a step back to consider that the products we are developing are focused on niche applications, which involve a significant amount of software and firmware. There are considerable demand requirements for what we do, so we are not targeting high-volume commodity passenger vehicles. Our customer base in this area includes both new companies exploring innovative ideas and well-established household names. We believe this trend is here to stay, and we see the current market situation as temporary.

Okay. Thanks very much.

Our next question is from Hendi Susanto with Gabelli Funds. Please proceed.

Good morning, Dan, Farouq, and Lynn.

Good morning.

My first question is about the possible rebound in the second half. Do you have any anticipation which areas will rebound earlier versus later?

We haven't heard anything in the marketplace stating that at all. I think everybody is saying the second half of this year. So no, I don't think we're ready to jump back on yet.

I see. And then, Dan, what is the likelihood that the rebound will take place in Q4 instead of Q3?

If I do that, I wouldn't be working at Bel Fuse.

Taking a step back, we see that historically, during periods of softness, the norm is typically one to three quarters, possibly extending to four quarters. The industry began experiencing this softness around Q4 '22. If that's the case, we're currently five quarters in and approaching the sixth quarter, which is a bit longer than usual. Conversations with our customers, including distributors and OEMs, along with various industry reports and point-of-sale data, indicate that demand on the shelves is not being replenished. This leads us to a best guess assessment of growth in the second half, with the first half being a period of digestion. We hope to exit this phase around the same time as our customers, provided our forecasts align.

Okay. And then, Farouq, the backlog order, I believe, is the $373 million. You indicated that it's still considered to be relatively high based on our history. What backlog order level should we think when you will feel it's somewhat like closer to normal to history?

Maybe I can take this one. Sorry to jump in. I think post-COVID, I don't know if there's ever going to be a normal again for us. Before COVID, we used to get quarterly quotes. We used to bid on our products every quarter. The average purchasing person would give us four different purchase orders for a part number. Since COVID, that stretch has become very old, every 24 months. So that's coming back a little bit. If I'm a head of a purchasing department, I ask myself, why do I want to order four times a year when I can order once a year and cancel a product down the road? I think that's still filtering out where it's going to be, but I don't think we're going to get back to $150 million level, which was our pre-COVID level.

Correct. To build on Dan's point, historically, this has been about a quarter. During the extended periods, it was roughly four quarters, maybe slightly less. If the bookings are one and four, we don't anticipate reverting completely back to one. We believe there are new ordering behaviors and methodologies emerging. People have encountered challenging times and there is some lasting impact. However, we are uncertain about where the situation will stabilize. Therefore, we maintain that currently, it remains elevated. We think the magnetics sector has likely normalized, power is somewhat elevated, and connectivity might be in a mixed to elevated state.

Okay. Yes. And then any insight into the pricing environment in 2024?

Historically, again, going back historically, as lead times come down, we do see more price pressure. But at this point in time, we haven't faced an abundance of price pressure. Again, I don't know if things are going to change or not, but historically, we do face a little more price pressure. We have not seen that yet to date.

The opposite situation is, if I’m correct, Dan, when lead times decrease, it indicates a return to the standard ordering pattern, which means volumes stabilize. Typically, there is often a slight price concession to increase volume. Therefore, I believe we have not reached that normal cycle yet.

I see. And then last question. Do you have updates on Bel Fuse investment in electric in terms of what activities are planned for 2024, whether there are some milestones in 2024?

I think, again, we took a minority position in it. We're running, I think, at this point a year late.

I'd say our bullish case was maybe we see something transacted at the end of 2024, but now we're thinking probably more on our base case, which is a 2025 event. There's a lot of development going on regarding second-generation products and also in their first-generation products, some of the challenges that we talked about on our eMobility business, they're seeing a little bit of that. So, when we kind of put the second-generation products with the challenges they're having in the first generation in terms of their customers' challenges, we don't foresee any milestones in terms of triggers on calls or anything like that in 2024. We think 2025 is probably kind of our base case at some point.

But we are working with them very closely. Our sales team, our purchasing team, how we manufacture. We are truly aligned; if they hit the target they set when we merge, that we're two organizations working closely together. I'm pleased by the relationship we have today.

Thank you, Dan, Farouq, and Lynn.

Our next question is a follow-up from Jim Ricchiuti with Needham and Company. Please proceed.

Thanks. Going back over the past year and continuing now, you guys have done quite a bit of work in terms of restructuring, and it's been evident in the gross margins. So I'm wondering, just given the guidance we're looking at for Q1, how should we be thinking about gross margins in terms of the puts and takes for that? These are obviously lower levels of revenue, but you've also been restructuring the business.

So Jim, I think for Q1, what we had mentioned in the earnings release was that from a margin perspective, we expect to hold with the full year '23 margins. So it is a step down from Q4 margin levels. A lot of that has to do with the lower sales volume we're seeing in addition to the typical lower margin quarter for us due to Chinese New Year. Looking beyond Q1, we would expect those margins to normalize a bit back to where the 2023 later quarters had been running, but we do see a step down there in Q1.

Great. And that's helpful, Lynn, because that's also where I was going with that as we start potentially seeing some improvement in Q2 and hopefully in the back half of the year, you're actually starting off with a higher level of margins than we've seen historically with these kind of revenue levels. Okay. Thank you.

You're welcome.

We have reached the end of our question-and-answer session. I would like to turn the conference back over to Dan Bernstein for closing remarks.

Once again, we appreciate everybody joining the call and say thank you very much. We look forward to improved results as we move along in the year. Thank you.

Thank you. This will conclude today's conference. You may disconnect your lines at this time, and thank you for your participation.