Good day and welcome to the Bel Fuse Inc First Quarter 2017 Results Conference. Please note that today's conference is being recorded. At this time, I would like to turn the conference over to Dan Bernstein, President and Chief Executive Officer. Please go ahead sir.

Thank you, Emilia. Thank you for joining us today. On the call is Colin Dunn, our Vice President of Finance; Craig Brosious, our Director of Finance, who on May 23 will be taking over for Colin Dunn; and Lynn Hutkin, our Manager of External Reporting. Before we begin this call, I like to ask Lynn to go over the Safe Harbor statement. Lynn?

Thank you, Dan. Good morning, everybody. Before we start, I like to read the following Safe Harbor statements. Except for historical information contained on this call, the matters discussed on this call, such as statements regarding sales growth, and the eMobility and circuit protection segments of the market; the potential impact of the Avnet agreement; and future sales through broad line distributors are forward-looking statements as described under the Private Securities Litigation Reform Act of 1995 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 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; 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 also may 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. Before going to the financials, I would like to provide a brief update on how the businesses did from operational standpoint for this quarter, and what we see going forward. Overall, despite the downward trend in sales that continue into the first quarter, our gross margin dollars were up slightly from the fourth quarter 2016. The decline in sales from the fourth quarter was expected, as the first quarter is typically our lowest sales quarter of the year, due to fewer productions days in the month of February coupled with a Chinese New Year Holiday. We did see improvement in March sales for the first two months of the quarter. Last quarter, we mentioned that we saw an uptick in our backlog and that trend has continued in the first quarter 2017. Our Power Solution group and Cinch Connectivity business each had the strongest backlog since 2014. We review this as an indication of our efforts on the sales both restructuring our goal on the sales teams and the work we have done on a global distribution agreement is beginning to pay off. Our Connectivity Solution Group was still down year-over-year had a 7.7 increase in sales since the fourth quarter of 2016. The primary part of this group to Cinch Connectivity business was also slightly up on a year-over-year basis. The part where we saw a decline from the first quarter of 2016 was in our Stewart Connector business due to a customer consolidation and general weakness in the structured cabling sales, which is obviously tied to construction spend. There have been signs of general market improvement within the Connectivity Group during the first quarter 2017, particularly with our military and distribution customers. On the aerospace side, we anticipate increased orders beginning the second quarter as…

Thank you Dan, good morning everybody. Starting with sales, our first quarter sales were $113.7 million, down 6.2%, as compared with the first quarter of 2016. On a product basis, sales of our connectivity solutions products were $41.8 million in the first quarter of 2017, a decrease of 3.7% as compared to the first quarter of 2016. Sales from our Power Solutions and Protection Products were 36.2 million in the first quarter of 2017, a decrease of 14.4%, compared with the first quarter of 2016. Sales of our magnetic solutions products were $35.7 million in the first quarter of 2017, an increase of 0.5% as compared with the first quarter of 2016. On a regional basis, sales in North America decreased $5.9 million or 8.9% in the first quarter of 2017, as compared with the same quarter of last year. Sales in Europe were down by $1.7 million or 8.9% and sales in Asia were up by $50,000 or 0.1%. Gross profit margin increased to 20.5% in the first quarter of 2017, as compared with 19% in the first quarter of 2016, due to several factors. The shift in product mix towards higher margin connector products had a favorable impact on our margins during the first quarter of 2017. Operational enhancements and cost reduction activity we completed in 2016 also contributed to our margin expansion, as did the strengthening of the US dollar compared to the Mexican peso and Chinese Renminbi, which served to our outlay an overhead cost paid in those local currencies. Our selling, general and administrative expenses were $21.2 million or 18.6% of sales, as compared to $17.7 million of 14.6% in the first quarter of 2016. In the first quarter of 2016, SG&A benefited from a reversal of certain value-added and business tax items recorded in…

Thanks Colin. Our cash and cash equivalents balance at March 31, 2017 was $72.3 million, a decrease of $1.1 million from December 31, 2016. During the quarter, we used cash for capital expenditures of $1 million, dividend payments of $800,000, and interest payments of $1.1 million. This was partially offset by net debt borrowings of $1.5 million during the first quarter of 2017. Accounts receivable was $72.7 million at March 31, 2017, as compared with $74.4 million at December 31, 2016. Day sales outstanding increased to 58 days as of March 31, 2017. Inventories were $101.7 million at March 31, 2017, up $2.8 million from December 31, 2016. The increase was seen mostly in raw materials and work in progress to accommodate the recent increase in bookings and in anticipation of higher sales in the second quarter and the latter half of this year. Accounts payable was $46.6 million at March 31, 2017, down $600,000 for December 31, 2016, due to timing of payments. Sales outstanding debt as of March 31, 2017 was $145.3 million, excluding deferred financing cost. This represents a net increase of $1.5 million from our year-end debt level. Book value per share, which is calculated as stockholder's equity divided by our combined A and B Classes of common stock outstanding was $13.39 per share at March 31, 2017, up slightly from $13.17 per share at December 31, 2016. And now, I would like to turn the call back to Dan and we will open the call for questions. Dan?

Thank you. Emilia, can you open up the call for questions please?

Absolutely. [Operator Instructions] And we will go first to Harsh Kumar from Stephens. Please go ahead.

Hi, good morning Dan. I had a quick question, you mentioned that your backlog is going up, I was wondering, you talked a little bit about drivers, I was wondering what specifically are you seeing as any class of customers or type of customers that is driving it or is it broad based and also what is your visibility typically like into that sort of a backlog, is it a 60 day visibility or beyond or anything like that, and then I had a quick question on cost.

I think what we're seeing now, I think it is due to a lot by the IC people and the memory people, so generally we are seeing lead times being stretched in those products up to 16 to 20 weeks and we see it in a ray of different products. The only thing that we’re concerned about with this stretched out lead time is that our backlog is going up. We have one or two customers that are pushing back orders a little bit because they can't get the memory in time quick enough. So there is no point bringing our component, who are working on a 12-week lead time in the memory they are looking for is out to 24-weeks. So you see some push back on that. But overall, we see even now capacitors and some resistance are getting pushed out and I just think it is here from the phones to HEV vehicles, very broad based of what the components write-down the marketplace.

Got it. And then Dan can I ask you on China factory, you mentioned that you are doing some stuff and you have been doing some stuff there to cut cost, do you see the benefit later, what specifically is involved and what are we talking about against the material or nonmaterial?

Okay, so again as we mentioned in the press release, when we acquired Emerson, they had a group in Shanghai which has tended to be our high cost area for manufacturing. What we have done is consolidated that into one of our own factories in Southern China and just maintained a small group of engineers and keep people in Shanghai, and we are projected, and we saw protection on cost savings in there.

The cost savings on an annual basis is about $2 million, once it is all fully realized and about half of that will be in cost and the other half in SG&A.

We are going to pay for our new software, we are implementing over the next two years, for three years.

Thanks Dan. Thank you.

Thank you.

[Operator Instructions] And we will go next to Sean Hannan from Needham & Company. Please go ahead.

Yes, thanks good morning. Thanks for taking my question here. I wanted to see if I could follow-up on some of the announcements you guys have made in recent months around some of the distribution partnerships that you've formed our expanded, can you elaborate at this point in time your strategy in leveraging the broad line distributors, and how you see that really kind of playing into being able to drive growth and overall, kind of, your approach to the market in leveraging these relationships? Thanks.

Okay. I think, if you just go back a little bit, I don't think distribution historically before we had these recent acquisitions, we were generally top 20 customers, 80% of our sales type of focus. With the addition of the Cinch line, and mostly the Emerson line, a good portion of that sales are going through distribution, anywhere from 40% to 50%, depending on the product group. With that when be dealt with the Arrow and Avnet, even though we did substantiate dollars with them, they weren't that great compared to other suppliers they had. With the addition of the Emerson Group and the Power one group our dollars are substantially greater than we ever had. Almost, I would say more than double that Arrow and Avnet, which has given a tremendous amount of visibility at those distributors. So before even though we had Arrow and Avnet for North America, they weren’t too motivated to go any further with us because we really were not a primary supplier. Now that we are a primary supplier because of the dollars, and also I think we would help immensely by appointing Vinnie Vellucci, who is the Senior Vice President of Arrow and knows everybody in the industry very well. We are much more tuned of what Arrow and Avnet are seeking in their agreements. So it allows us to sign these worldwide agreements, so now when we have our people who can go into Arrow, in Japan, Korea, all these countries where we have regional distributors but not world distributors. And it really gave us entry into a bunch of customers that we never had entry into before. And also because of the dollars we are doing, it feeds of the greater visibility. So that has really helped that. In addition to that, the relationship we have with Digi-Key and mouse or the catalogue houses that are doing small prototype runs for the engineering community, which empties in three hours in Avnet has helped us also. So, we just think that that business continues to grow. We continue to support it. We continue to add people to it. So it is really over the last 18 months, I think what in-roads we made, that is a 180-degree improvement and the dollars are backing it up.

That’s very helpful. And then perhaps an SG&A question going back to some of the commentary in the prepared remarks, the SG&A levels, should we interpret this as kind of a, I think I got the impression that the level we had in March should be considered as a general run rate moving forward, was that the right interpretation, how do I modify that or think about that?

Well firstly, I would rather have Colin Dunn to answer all these questions because he's not going to be on the next call. So, we can blame him for anything he says. But I think he wants to offer the load to Lynn for this question.

So Sean on the SG&A, I thing that the Q1 run rate is fairly indicative, there might be a little bit on the high side because there is about 500,000 of FX loss built into that number. So depending on where the exchange rates go in future quarters that will certainly be a factor, but it will be a higher run rate versus the 2016 normalized look, primarily due to the ERP implementation, which has Colin mentioned both run about 500,000 additional per quarter at least through the remainder of 2017 and that it may start catering off a little bit from there.

Okay, the FX, was that 500,000 or 200,000?

It was 500,000 in the quarter, which represented a - it was a $200,000 increase in FX loss versus last year's first quarter.

I understand, okay.

Yes. So Q1 of 2016 had a $300,000 loss built-in and Q1 2017 had a $500,000 loss built-in.

Got you. Okay. Alright, and then last question here, in terms of the connectivity solutions business wanted to see if I could get a little bit more insight in terms of the nature of those customers, you’ve referenced orders for RF and environmental optical products for military distribution customers here and over in Europe as well, can we get a little bit more color on that and the nature of the cycles when we start to see those types of booking increases? Thanks.

The cycles is again so long in military, I think historically when it comes to military and aerospace, we can look at 3 years to 5 years design in cycles, but we are working with all the Raytheon’s, the Thales', the Honeywell’s, all the major people out there. And these programs come, you know they use network. So these programs come in and out all the time, and again the way it was going on with the government, one day we get 10% increase in military spending and we are running around jumping up and down and the next week we don't know if it is going to be there or not. What we are very positive about is the Boeing and our presence on the 737. We do know that Boeing is going to go from 42 jets to 48 jets. And we know that backlog should increase to represent that, and as you know Boeing is our second largest customer. So that should be very beneficial.

Okay, alright and that was helpful. The military, I think you guys have called out, when we get into commercial aerospace, that’s a really nice supportive market to be supplying especially with booking uptrend, so thanks very much for that color.

[Operator Instructions] And we will go next to Hendi Susanto from Gabelli & Company. Please go ahead.

Good morning.

Hi Hendi.

Hi. Dan there were some talks about market weaknesses in optical, how will that impact you?

The question?

Market weaknesses in optical.

Did you say market weakness in optical?

Yes.

[Indiscernible] gentle industry talk about the market?.

To be honest, we are such a small player in the markets we are participating. We now like to any user phase, someone would like throw some into the market. So even there is ups and downs, we are giving with very specific custom jobs, so it is not like we have a broad catalogue portfolio of products, we show optical. So then we just work with very selective key customers on fiber optics, opportunities. And to be honest, the company we acquired Fibreco, we probably had our strongest quarter over the past six months in the past year with them. And it has probably been our strongest product group of all our product groups. You know the sales don't count for much, but the profits are definitely very strong and the sales are growing very nicely.

Okay. And then Dan you mentioned about a short supply of memory, when do you see memory supply to improve?

I think that is beyond me, to be honest. The problem you have in our industry is if you increase production by 20% that means you probably have to cut your pricing by 50%. So generally there is not much motivation for people to increase memory. What people say in the industry that they think it is going to clear up by the summertime, but I can't say and I don't know.

I see. And then looking at the revenue trend by geographies, or revenue was down in Europe and North America in Q1 when do you say that you are somewhat optimistic about Q2 or Q3 and Q4, do you imply that we may see positive growth in North America and Europe and Asia, as far as the Q2?

The thing that’s really killing our sales is the MPS business of power and the overall power business. And that again is in Europe and in North America. And again we are doing everything we can to turn the tide and again we are back to that total available market where we only represent 120 million and a 5 million market where we think we can participate very quickly in. So again for us, if I have been saying this for again for three years now that power is really the growth engine of this company, and hopefully at some point when it does kick in it should kick in consistently going forward. So again I don't think, we don't think the economy in Europe and the economy in America really affects the power business. What affects our power business is being out of design cycles for 24 months based on the previous management and now getting into those design cycles and really are when they are going to places those orders.

Got it. Thank you.

Thank you.

We have no further questions in the queue. I would like to turn it back over to Dan Bernstein for any additional or closing remarks.

Again as you know, Colin is stepping down. On behalf of Bel, we want to appreciate Colin for the job he has done for 26 years and if you do to speak to Colin hopefully you can give your wishes down the road.

Thank you Dan, and thanks everybody. It’s been very good. I appreciated all the correspondence and efforts over the years.

Alright, and looking forward to speaking to you in July. Thank you.

Ladies and gentlemen that does conclude our conference for today. Thank you so much for your participation may now disconnect.