Bel Fuse (BELFA) - 2022 Q3 - Quarterly Report

Revenue Growth - The company's revenues for the first nine months of 2022 increased by $88.7 million, or 22.4$9.9 million (24.5%) and $18.6 million (15.3$4.7 million (10.2%) and $23.1 million (20.0$16.2 million (26.7%) in Q3 2022 and $46.9 million (29.5$582.8 million at September 30, 2022, reflecting a 25% increase from December 31, 2021, with a 48% increase in the Power Solutions and Protection business [98]. - The company experienced a 22% decrease in the backlog for Magnetic Solutions products due to the ordering pattern of a large networking customer [98]. Cost Management - Material costs as a percentage of revenue were 45.9% during the first nine months of 2022, down from 46.6% in the same period of 2021, attributed to a favorable shift in product mix and recent pricing actions [101]. - Labor costs represented 8.4% of revenue in the first nine months of 2022, a decrease from 9.0% in the same period of 2021, influenced by pricing actions and favorable exchange rate fluctuations [102]. - Inflationary pressures are anticipated to impact input costs, including raw materials, labor, and freight, necessitating effective management through pricing actions and cost-saving initiatives [103]. - The company incurred restructuring costs of approximately $9 million related to consolidating Magnetics sites in China, with$3.6 million recognized in the third quarter of 2022 [104]. - The company expects to realize annualized cost savings of approximately $3 million from restructuring initiatives in China, beginning in the fourth quarter of 2023 [104]. Financial Position - The company has a strong cash balance of$70.9 million as of September 30, 2022, compared to $61.8 million at December 31, 2021, with additional borrowing capacity of$65.0 million under its revolving credit facility [96]. - The company reported a cash increase of $9.1 million during the nine months ended September 30, 2022, primarily due to net cash provided by operating activities of$24.1 million [123]. - The current ratio was 2.8 to 1 at September 30, 2022, compared to 2.9 to 1 at December 31, 2021 [124]. - The unused credit available under the credit facility was 65.0 million at September 30, 2022, with compliance to all debt covenants [126]. Accounting Estimates and Policies - The Company has determined that its most critical accounting estimates relate to business combinations, inventory valuation, goodwill, and pension benefit obligations [128]. - There have been no material changes in the Company's critical accounting policies, judgments, and estimates compared to those disclosed in the Company's 2021 Annual Report [128]. - The Company is classified as a "smaller reporting company" and is not required to provide quantitative and qualitative disclosures about market risk [130]. Expenses - R&D expenses decreased to 4.9 million in Q3 2022 from $5.9 million in Q3 2021, and to$14.4 million from 16.3 million for the nine months [115]. - SG&A expenses increased to 22.2 million in Q3 2022 from $21.2 million in Q3 2021, and to$67.2 million from $64.8 million for the nine months [116][117]. Gross Margin and Cost of Sales - Gross margin for Connectivity Solutions was 26.1$0.5 million during the nine months ended September 30, 2022, due to favorable currency fluctuations [105].