Good morning, ladies and gentlemen. Welcome to the Bel Fuse Second Quarter 2022 Earnings Conference Call. [Operator Instructions] 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 when -- 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 3 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 -- through power -- 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…

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 DPP 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 as to 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 which resulted in some very exciting takeaways that give us the 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.

[Operator Instructions] We have a first question from the line of Theodore O’Neill with Litchfield Hills Research. Theodore O’Neill: 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. Is it -- did I hear that correctly?

Yes. Theodore O’Neill: And what -- was that across all segments, or one in particular?

Mainly focused -- I was -- majority of it’s in power products and bringing in semiconductors. Theodore O’Neill: 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 -- it’s good product fit. It’s new technology. Most of all our designs, we’re a single source at this point in time. So it’s very engineering-derivative. How many non-disclosures do we have, Farouq?

I think we have over 250 kind of nondisclosures, which ranges from anywhere kind of startups, all the way to kind of 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 on. And now we’re starting to see the fruits of that labor and investment.

And our focus tends to be on niche markets, not the high-volume automobile market. So for example, trucks, post -- transportation for the Post Office, mining trucks, things but -- in that nature. Theodore O’Neill: Okay. And are you seeing any changes in the dynamics between -- in terms of product flowing between 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 was 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 is maybe our material challenges as Dan has spoken about, but also on our customer side where we may have finished goods and products and ready 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 of that.

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 are -- we understand that there’s a lot of work ahead of us. And there’s a lot of internal projects going on across all 3 segments. And these kind of range from sizes and scale from kind of big things to smaller things. So it is coming from all ends in terms of our strategy. We think that we have a 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.

Congrats on strong results. Farouq, I would like to ask questions about the pricing action. So how much of the benefit of pricing action of Bel Fuse generated in the June quarter? And I’m wondering whether you can give more colors, like how much more? And then I assume more will come. And -- but I don’t know what kind of timing. And then maybe you can help us figuring out, what 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 kind of that goes into producing these products. As we looked at some of these products last year, some of our components have gone up, we got price increases 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 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 changes, 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 -- and as we are going after these newer opportunities, we’re pricing things a little bit more appropriate for a company that meets our kind of 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?

So the -- I’ll answer the first part of that question, Hendi. So our commercial aerospace sales for the second quarter were $7.8 million. And to put that in perspective, that’s up from $5.5 million in Q2 last year. So as Dan had mentioned previously, commercial aerospace, if you take the Cinch business plus the recently acquired rms business, it was around $40 million, $45 million pre-COVID. So I think -- Farouq, I don’t know if you want to comment...

So yes, I would say -- so 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 kind of stuff that was in the 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 like 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 like a rebound in R&D.

Yes. So the R&D, kind of similar to the commentary that Lynn made earlier on our wages of the magnetics group, there was a little bit of an FX favor in there. And I would say, across all of our businesses, FX in multiple lines was close to $1 million for the quarter. So I think in the near term, with the economic world view, we think the dollar will probably continue to strengthen or maybe stay kind of where it is in relation to some of these other currencies. So I would say, we -- it is a benefit for us, probably around maybe for the near term. But it’s not necessarily something we’re planning on as we look at our operations to make sure we’re running a very lean operation over here. So that’s kind of the benefit that came from there. In terms of sustainability, I think we’ve been very public in terms of saying that we’re continuing the climb. And that’s going to come both on the pricing and revenue and begin with the customers and the SKUs and all that kind of good stuff, but also goes directly to where we develop and what kind of product niches we’re trying to get into a little bit more that gives a little bit more of a defensible moat. But the third leg of that stool is also going to be, as we think about just how we do business. And that’s going to -- hopefully, some of these things we’ll be sharing as time goes on. So I want to just highlight that it is a multipronged approach to both sustainability and increase and gives us comfort that we will get there because of the diversity of the optionality in front of us here.

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.