Bel Fuse Inc (NASDAQ:BELFA) Q4 2016 Earnings Conference Call - Final Transcript

Feb 17, 2017 • 11:00 am ET

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Bel Fuse Inc (NASDAQ:BELFA) Q4 2016 Earnings Conference Call - Final Transcript

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Presentation
Operator
operator

Welcome to the Bel Fuse Inc. Fourth Quarter and Full Year 2016 Results Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Mr. Dan Bernstein, President and CEO. Please, go ahead, sir.

Executive
Dan Bernstein

Thank you, Sheila [ph]. Joining me on the call today is Colin Dunn, VP, Finance; Craig Brosious, our Director of Finance; and Lynn Hutkin, our Manager of External Reporting. Before we begin the call, I'd like to ask them to go over the Safe Harbor statement. Lynn?

Executive
Lynn Hutkin

Good morning, everybody. Before we start, I'd like to read the following Safe Harbor statement. (Forward-Looking Cautionary Statement)

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.

Executive
Dan Bernstein

Before we go into the financials, I want to provide a brief update on how the businesses did from the operations standpoint this quarter and what we see, going forward. As you see from the numbers we released this morning, the fourth quarter continued to be challenging on the top line across all our product groups.

On a positive note, we started to see an upturn in our backlog since year-end, which is giving us some hope that the worst might be behind us. We are pleased with our ability to contain costs through the cost-saving measures implemented over the past two years, which allowed us to maintain our margins. On the Power side, this continues to be the group with the largest potential for revenue growth.

In addition to general market weakness that affected all our products, this group suffered from a decline in revenue due to missed design cycles, which run from 18 months to 24 months. So while it takes a significant amount of time to get our product back in the cycle, we are finally seeing some of earlier design wins from 2016 entering our backlog for shipment in 2017.

Much of our focus has been on the data center markets in the area of e-Mobility, with the commercial construction industrial customers, which is expected to continue to our sales value beginning in late 2017 and early 2018. The growth will be, as said, by the phase at our network power solution product line, which was sold to Unipower in 2015. And we have been working under a two-year manufacturing agreement with the buyer.

Sales to Unipower totaled $16 million in 2016. And while sales volume related to these products will most likely phase out by the end of the second quarter of 2017, this was a low-margin arrangement, so it should be positive from a gross margin perspective in 2017. The quality improvement implemented our Power Solution factors have resulted in tangible cost savings of approximately $900,000 from reduced scrap, lower warranty claims, and a significant reduction in both internal and outsourcing repair costs.

The 2017 sales forecast