BELFB Bel Fuse Inc /Nj - 10-K

Item 1A.  Risk Factors

The risks described below should be carefully considered before making an investment decision. These are the risk factors that we consider to be material, but they are not the only risk factors that should be considered in making an investment decision. This Form 10-K also contains Forward-Looking Statements that involve risks and uncertainties. See the "Cautionary Notice Regarding Forward-Looking Information," above. Our business, consolidated financial condition and consolidated results of operations could be materially adversely affected by any of the risk factors described below, under "Cautionary Notice Regarding Forward-Looking Information" or with respect to specific Forward-Looking Statements presented herein. The trading price of our securities could decline due to any of these risks, and investors in our securities may lose all or part of their investment. Additional risks and uncertainties not presently known to us or that we currently believe to be immaterial may also materially adversely affect our business in the future. Except as required by the federal securities law, we undertake no obligation to update or revise any risk factor, whether as a result of new information, future events or otherwise.

STRATEGIC RISKS

We conduct business in a highly competitive industry.

Our business operates in a globally competitive industry, with relatively low barriers to entry. We compete principally on the basis of product performance, quality, reliability, depth of product line, customer service, technological innovation, design, delivery time and price. The industry in which we operate has become increasingly concentrated and globalized in recent years and our major competitors, many of which are larger than Bel, have significant financial resources and technological capabilities.

Our intellectual property rights may not be adequately protected under the current state of the law.

Our efforts to protect our intellectual property rights through patent, copyright, trademark and trade secret laws in the United States and in other countries may not prevent misappropriation, and our failure or inability to protect our proprietary rights could materially adversely affect our business, financial condition, operating results and future prospects. A third party could, without authorization, copy or otherwise appropriate our proprietary information. Our agreements with employees and others who participate in development activities could be breached, we may not have adequate remedies for any breach, and our trade secrets may otherwise become known or independently developed by competitors.

Our acquisitions may not produce the anticipated results.

A significant portion of our growth has been attributable to acquisitions. We cannot assure that we will identify or successfully complete transactions with suitable acquisition candidates in the future. If an acquired business fails to operate as anticipated or cannot be successfully integrated with our other businesses, our results of operations, enterprise value, market value and prospects could all be materially and adversely affected. Integration of new acquisitions into our consolidated operations may result in lower average operating results for the group as a whole, and may divert management's focus from the ongoing operations of the Company during the integration period.

Our strategy also focuses on the reduction of selling, general and administrative expenses through the integration or elimination of redundant sales facilities and administrative functions at acquired companies. If we are unable to achieve our expectations with respect to our acquisitions, such inability could have a material and adverse effect on our results of operations. If the acquisitions fail to perform up to our expectations, or if there is a weakening of economic conditions, we could be required to record impairment charges on the goodwill and/or other assets associated with our acquisitions. In November 2025, we concluded that an impairment charge was required in connection with our noncontrolling minority investment in innolectric, a Germany-based e-Mobility technology company, and related party notes receivable, recording in Q4-25 a pre-tax impairment charge of $13.1 million representing the full impairment  and write-down of our investment in innolectric and the related notes receivable, with no value attributable to such items reflected on our consolidated balance sheet as of December 31, 2025. The impairment was determined based on indicators of impairment including the cessation of financial support from the majority owner, recent financial performance, changes in market conditions, and other relevant factors affecting innolectric’s business. The future course and full impact of innolectric’s insolvency proceeding remains uncertain, including the impact thereof upon our investment in innolectric and related notes receivable, which may include potential full loss of our investment and related notes receivable. However, we currently do not expect any future recovery through innolectric’s insolvency process. Our business, including in connection with any future acquisitions or investments, may experience similar challenges from time to time, and which could have a material adverse effect on our financial position and results of operations.

We may not realize the anticipated strategic and revenue opportunities from our November 2024 acquisition of our 80%-owned Enercon subsidiary within the expected time period (if at all), and our business may be disrupted if our intended acquisition of the remaining 20% stake in Enercon is not completed for any reason.

In November 2024, we completed our acquisition of an 80% interest in Enercon. Over time since the Enercon closing to date, although we believe the integration efforts have proceeded positively, and we have established a foundation for collaboration across both organizations, we may still encounter unanticipated difficulties if we are unable to fully integrate the Enercon business successfully. At this stage, we believe the primary risks in this area relate to the timing and magnitude of strategic and revenue opportunities arising from the acquisition, and whether such opportunities will be achieved on such timing and at such levels as expected, if at all. While we continue to pursue anticipated growth, synergies, and expansion, there is uncertainty as to when and to what extent these opportunities will materialize. Actual results may differ from expectations, and the benefits may be less significant or take longer to achieve than anticipated. Our ability to maximize value from the Enercon acquisition depends on continued successful integration, sustained customer and supplier relationships, and effective execution of our strategic initiatives.

In addition, our business may be disrupted if our intended acquisition of the remaining 20% stake in Enercon is not completed for any reason.

Pursuant to the transaction documents governing the Enercon acquisition, we may acquire the remaining 20% stake in Enercon and we have the current intention to so purchase such remaining interest by early 2027 in accordance with the terms and subject to the conditions of the shareholders’ agreement, which was entered into at the November 14, 2024 closing on the initial 80% interest. The purchase of the remaining 20% interest in Enercon is subject to the put-call mechanism set forth in the shareholders’ agreement and the other terms and conditions thereof. There can be no assurances that we will complete the acquisition of the remaining 20% interest in Enercon by early 2027 as intended, or at all. Any failure to complete our intended acquisition of the remaining 20% interest may disrupt our plans, operations, and relationships with customers, suppliers, distributors, business partners and regulators, can cause potential difficulties in employee retention, and can have a material adverse effect on our business and results of operations.

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We are dependent on our ability to develop new products.

Our future operating results are dependent, in part, on our ability to develop, produce and market new and more technologically advanced products. There are numerous risks inherent in this process, including the risks that we will be unable to anticipate the direction of technological change or that we will be unable to timely develop and bring to market new products and applications to meet customers' changing needs.

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OPERATIONAL RISKS

We may experience labor unrest.

As we periodically implement transfers of certain of our operations, we may experience strikes or other types of labor unrest as a result of lay-offs or termination of employees in higher labor cost countries. Our manufacturing facilities in the United Kingdom and Mexico are represented by labor unions and substantially all of our factory workers in the PRC are represented by government-sponsored unions.

We may experience labor shortages.

Government, economic, social and labor policies in the PRC may cause shortages of factory labor in areas where we have some of our products manufactured. Further, availability of labor in the PRC is cyclical and is significantly affected by the migration of workers in relation to the annual Lunar New Year holiday. If we are required to manufacture more of these products outside of the PRC as a result of such shortages, our margins will likely be materially adversely affected.

A shortage of availability or an increase in the cost of raw materials, components and other resources may adversely impact our ability to procure these items at cost effective prices and thus may negatively impact profit margins. Our access to parts or materials, and our ability to contract with suppliers, may be limited or prohibited from time to time by trade restrictions or other legal or regulatory enactments. Additionally, inflationary pressures could result in higher input costs and materially adversely affect our financial results.

Our results of operations may be materially adversely impacted by difficulties in obtaining raw materials, supplies, power, labor, natural resources and any other items needed for the production of our products, as well as by the effects of quality deviations in raw materials and the effects of significant fluctuations in the prices of existing inventories and purchase commitments for these materials. Many of these materials and components are produced by a limited number of suppliers and their availability to us may be constrained by supplier capacity. Any material disruption could materially adversely affect our financial results.

Additionally, our access to parts or materials, and our ability to contract with suppliers utilized previously, may be limited or prohibited from time to time by trade restrictions or other legal or regulatory enactments. To the extent our suppliers in the PRC or other countries are negatively impacted by new or amended regulations, any such negative implications could adversely impact our supply chain, including in the form of increased costs, disruptions, shortages or unavailability of product or component parts, and/or other deleterious consequences, which could materially adversely affect our business and operating results.

In addition, inflationary pressures could result in higher input costs, including those related to our raw materials, labor, freight, utilities, healthcare and other expenses. Our future operating results will depend, in part, on our continued ability to manage these fluctuations through pricing actions, cost savings initiatives and sourcing decisions, and any negative impact of inflation could materially adversely affect our financial results.

See “Overview -  Key Factors Affecting our Business" in Item 7 of this Annual Report on Form 10-K for a discussion of how pricing and availability of materials is currently impacting our business.

Demand in Enercon ’ s end markets can be cyclical, impacting the demand for its products, and Enercon ’ s business could be materially adversely affected by reductions in defense spending.

Our majority 80%-owned subsidiary Enercon is a leading supplier of highly customized power conversion and networking solutions to aerospace and defense markets globally. For full fiscal year 2025, approximately 93% and 7% of Enercon’s revenue was attributable to the defense and aerospace end markets, respectively. Demand in Enercon’s end-use markets can be sensitive to general economic conditions, competitive influences, and fluctuations in inventory levels throughout the supply chain. Enercon’s sales are sensitive to the market conditions present in the industries in which the ultimate consumers of its products operate, which in some cases have been highly cyclical and subject to substantial downturns.

As a result of the high correlation to government spending on defense and budgeting, Enercon has experienced, and in the future, it may experience, significant fluctuations in sales and results of operations with respect to a substantial portion of our total product offering, and such fluctuations could be material and adverse to our overall financial condition, results of operations and liquidity.

Because certain of Enercon’s products are used in a variety of land, air and sea defense applications, Enercon derives a substantial portion of its revenue from the defense industry. For full fiscal year 2025, approximately 93% of Enercon’s revenue was derived from customers in the defense industry. Although many of the programs under which Enercon sells products to prime U.S. and Israeli government contractors extend several years, they are subject to annual funding through governmental appropriations. While spending authorizations for defense-related programs by the U.S. and Israeli governments have increased in recent years, these spending levels may not be sustainable and could significantly decline. Future levels of expenditures, authorizations, and appropriations for programs Enercon supports may decrease or shift to programs in areas where Enercon does not currently offer products or solutions. Changes in spending authorizations, appropriations, and budgetary priorities could also occur due to a shift in the number, and intensity, of potential and ongoing conflicts, shifts in spending priorities from national defense as a result of competing demands for government funds, or other factors. Enercon’s business prospects, financial condition or operating results (and as a consequence, those of Bel on a consolidated basis), could be materially harmed among other causes by the following: (1) budgetary constraints affecting U.S. and/or Israeli government spending generally, or specific departments or agencies in particular, and changes in available funding; (2) changes in government programs or requirements; and (3) a prolonged government shutdown and other potential delays in the appropriations process.

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We have sub stantial manufacturing operations located in the PRC , which exposes us to significant risks that could materially and adversely affect our business, operations, consolidated financial condition and consolidated results of operations.

The majority of Bel's Magnetic Solutions manufacturing capacity and supplier base is located in the PRC, as is a portion of Bel's Power Solutions and Protection group. As of December 31, 2025, 42% of our associates, 56% of our owned or leased manufacturing facilities (by square footage) and 10% of our Company’s tangible assets were all located in the PRC. Our Company’s presence and operations in the PRC expose us to significant risks that could materially and adversely affect our Company and our business, operations, financial position and results of operations.

For example, our significant operational presence in the PRC exposes us to foreign currency exchange risk. Our PRC-based manufacturing associates’ salaries, and other labor and overhead costs, associated with our PRC operations are paid in the Chinese renminbi. As a result, the cost of our operations and our consolidated operating results may be adversely impacted by the effects of fluctuations in the applicable exchange rate for the renminbi as compared to the U.S dollar.

Our significant labor force based within the PRC subjects us to risks associated with staffing and managing this substantial complement of factory workers and other associates who are important to our Company’s operations and success. As noted above, factory workers in the PRC are represented by government-sponsored unions, and are participants in a cyclical labor market that may become subject to shortages including as a result of PRC government policies. See “ We may experience labor unrest” and “We may experience labor shortages” above. Wage rates in the PRC have been increasing in recent years as PRC government-mandated increases in the minimum wage rate have caused an increase in our overall pay scale for our PRC workers.

The PRC government has broad authority and discretion to regulate the economy, manufacturing, industry, and the technology sector, among other areas generally. As a result, our activities and operations in the PRC as well as those of our PRC-based suppliers are subject to extensive local government regulation. Additionally, the PRC government has implemented policies from time to time to regulate economic expansion. It exercises significant control over its economic growth through the allocation of resources, setting monetary policy and providing preferential treatment to particular industries or companies. Any additional new regulations or the amendment of previously implemented regulations could require us to change our business plans, increase our costs, or limit our ability to manufacture and sell products domestically and/or otherwise restrict or curtail our operations in the PRC. To the extent our suppliers in the PRC are negatively impacted by new or amended regulations, any such negative implications could adversely impact our supply chain, including in the form of increased costs, disruptions, shortages or unavailability of product or component parts, and/or other deleterious consequences, which could materially adversely affect our business and operating results.

Our significant manufacturing operations in the PRC  may expose us to other r isks. Risks inherent in our PRC operations include the following:

c hanges in import, export, transportation regulations and tariffs, and risks associated with boycotts and embargoes;

c hanges in, or impositions of, legislative or regulatory requirements or restrictions, including tax and trade laws in the U.S. and in the PRC, and government action to restrict our ability to sell to customers where sales of products may require export licenses;

t ransportation delays and other supply chain issues;

c hanges in tax regulations in the U.S. and/or the PRC, including restrictions and/or taxes applicable to the transfer or repatriation of funds;

i nternational political relationships, including the relationship between the U.S. and the PRC;

e pidemics and illnesses within the PRC that affect the areas in which we operate and manufacture our products;

e conomic, social and political instability;

l onger accounts receivable collection cycles and difficulties in collecting accounts receivable;

l ess effective protection of intellectual property and contractual arrangements, and risks associated with enforcing contracts and legal rights and remedies generally;

u ncertainties associated with the PRC legal system, which is based on civil law, can involve protected proceedings involving substantial judicial discretion, and is based in part on PRC government policies and internal rules, some of which are not published on a timely basis, or at all, and may have retroactive effect;

r isks arising out of any changes in governmental and economic policy and the potential for adverse developments arising out of any political or economic instability related to Hong Kong or Taiwan;

t he potential for political unrest, expropriation, nationalization, revolution, war or acts of terrorism; and

r isks associated with the concentration of a substantial portion of our manufacturing capacity and supplier base in the PRC, including potential trade restrictions placed on PRC suppliers by the U.S. government.

In addition to the risks associated with our PRC operations described above, the global nature of our operations generally subjects us to additional risks. We con duct operation s in 15 countries, and outside of the United States (and the PRC), our largest manufacturing operations and associate populations are located within Mexico, Slovakia, the Dominican Republic, Israel, India and the United Kingdom. Please see the Risk Factors appearing below under the captions, "We may face risks related to conducting business in Israel" and "The global nature of our operations exposes us to numerous risks that could materially adversely affect our consolidated financial condition and consolidated results of operations.”

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We may face risks related to conducting business in Israel.

Following our November 2024 acquisition of Enercon, we may be subject to, and possibly adversely affected by, risks related to conducting business in Israel. Enercon, in which we acquired an 80% stake in November 2024 and intend to acquire the remaining 20% interest by early 2027, is based in Netanya, Israel with additional facilities in New Hampshire, U.S. and Haryana, India. Enercon has approximately 321 employees located in Israel.

Companies based in or operating in, or having a significant number of employees located in Israel, may be more susceptible to political and economic instability. Political, economic and military conditions in Israel may directly affect their business. Since the establishment of the State of Israel in 1948, a number of armed conflicts have occurred between Israel and its neighbors. In October 2023, Hamas conducted several terrorist attacks in Israel resulting in ongoing war across the country, forcing the closure of many businesses in Israel for several days. In addition, there continues to be hostilities between Israel and Hezbollah in Lebanon and Hamas in the Gaza Strip, both of which resulted in rockets being fired into Israel, causing casualties and disruption of economic activities. In early 2023, there were a number of changes proposed to the political system in Israel by the current government which, if implemented as planned or in similar form, could lead to large-scale protests and additional uncertainty, negatively impacting the operating environment in Israel. In addition, Iran has threatened to attack Israel and may be developing nuclear weapons. Further, on April 13, 2024 and October 1, 2024, Iran launched a series of drone and missile strikes against Israel, to which Israel responded, and in June 2025, additional conflict included Israeli strikes on Iranian military and nuclear facilities, and Iranian missile and drone strikes against Israel. Uprisings in various countries in the Middle East over the last few years have also affected the political stability of those countries and have led to a decline in the regional security situation. Such instability may also lead to deterioration in the political and trade relationships that exist between Israel and these countries. Ongoing military activity in the Middle East may result in disruption to our operations and facilities, such as Enercon’s manufacturing and R&D facilities located in Israel. Any military activity, armed conflicts, terrorist activities or political instability involving Israel or other countries in the region, as well as any interruption or curtailment of trade between Israel and its present trading partners, could adversely affect the business, results of operations, financial condition, cash flows and prospects of Enercon, and thus of consolidated Bel. In addition, any of these events or circumstances involving Israel or the region prior to the completion of our intended acquisition of the remaining 20% stake in Enercon may delay or prevent the completion of our purchase of the remaining 20% interest.

A number of countries, principally in the Middle East, still restrict doing business with Israel and Israeli companies, and additional countries may impose restrictions on doing business with Israel and Israeli companies if hostilities in Israel or political instability in the region continue or intensify. In addition, there have been increased efforts by activists to cause companies and consumers to boycott Israeli goods based on policies promulgated by the Israeli Government. Such boycotts, particularly if they become more widespread, may adversely impact the business of our Enercon subsidiary or Bel’s broader business.

The operations of our Enercon subsidiary could also be disrupted by the absence for significant periods of one or more key employees or a significant number of other employees because of military service. Enercon’s employees in Israel may be obligated to perform military reserve duty, and in certain emergency circumstances, employees may be called to immediate and unlimited active duty in the Israeli armed forces.

The loss of certain substantial customers could materially and adversely affect us.

During the year ended December 31, 2025, there were no direct customers or ultimate end customers whose sales exceeded 10% of our 2025 consolidated net sales. While there were no customers who exceeded 10% of our net sales in 2025, we have experienced significant concentrations of customers in prior years. Furthermore, factors that negatively impact the businesses of our major customers could materially and adversely affect us even if the customer represents less than 10% of our 2025 consolidated net sales.

We may not achieve all of the expected benefits from our restructuring programs.

Over the past three years, the Company has undertaken a series of facility consolidations around the world, including as described in " Overview – Key Factors Affecting our Business – Restructuring" in Item 7 of this Annual Report and in Note 12, " Accrued Expenses - Restructuring Activities" in Item 7 of this Annual Report. W e make certain assumptions in estimating the anticipated savings we expect to achieve related to these initiatives, which include the estimated savings from the elimination of certain headcount and the consolidation of facilities. These assumptions may turn out to be incorrect due to a variety of factors. In addition, our abi lity to realize the expected benefits from these programs is subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond our control. If we are unsuccessful in implementing these or any similar future programs or if we do not achieve our expected results, our results of operations and cash flows could be adversely affected or our business operations could be disrupted.

Our global operations and demand for our products face risks related to public health crises, including potential future outbreaks, epidemics or pandemics.

Any outbreaks of contagious diseases and other adverse public health developments in countries where we operate could have a material and adverse effect on our business, consolidated financial condition and consolidated results of operations. In the past, our business was impacted by temporary facility closures, shelter-in-place orders and challenges related to travel restrictions imposed by the local governmental authorities as a result of a health epidemic, including precautionary measures during the coronavirus pandemic. Our suppliers, customers and our customers’ contract manufacturers have experienced similar challenges from time to time. Any future outbreaks, health epidemics or pandemics could result in similar measures, which may materially adversely affect our financial results.

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FINANCIAL RISKS

There are several factors which can cause our margins to suffer.

Our margins could be substantially impacted by the following factors:

Declines in Selling Prices : The average selling prices for certain of our products tend to decrease over their life cycles, and customers put pressure on suppliers to lower prices even when production costs are increasing. Further, increased competition from low-cost suppliers around the world has put additional pressures on pricing. Any drop in demand for our products or increase in supply of competitive products could also cause a significant drop in our average sales prices.

Increases in Material Costs : While we continually strive to negotiate better pricing for components and raw materials, there are many factors that could lead to higher material costs, or premiums incurred for expedited orders, including an increase in industry demand for or supplier shortages of certain components, or inflationary pressures. Further, commodity prices, especially those pertaining to gold and copper, can be volatile. Fluctuations in these prices and other commodity prices associated with Bel's raw materials will have a corresponding impact on our profit margins.

Increases in Labor Costs : Wage rates, particularly in the PRC, Mexico, India and Slovakia where the majority of our manufacturing associates are located, have been gradually increasing in recent years as government-mandated increases in the minimum wage rate in these jurisdictions cause an increase in our overall pay scale. Labor costs can also be impacted by fluctuations in the exchange rates in which local wages are paid as compared to the U.S. dollar.

Imposition of Tariffs : Governments may impose tariffs to raise domestic revenue, protect domestic industries or exert political leverage over another country. Bel is a global organization with a material volume of shipments of raw materials, work in progress and finished goods into and out of the U.S. to and from a number of other countries, including but not limited to the PRC, Mexico, Israel, India and throughout Europe. Any new or increase in tariffs imposed either by the U.S. government on foreign imports or by a foreign government on U.S. exports related to the countries in which Bel transacts business could lead to reduced margins or increased prices that could cause decreased customer demand. For additional information regarding risks associated with tariffs and the imposition of new or increased tariff rates, see the discussion set forth below under the caption, " Changes in trade policies and tariffs and other factors beyond our control remain uncertain and may materially adversely impact our results. The imposition of new or increased tariffs and trade restrictions, particularly with respect to the PRC and Mexico, may materially adversely affect our business, financial condition, and results of operations."

Profit margins will be materially and adversely impacted if we are not able to reduce our costs of production, introduce technological innovations as sales prices decline, or pass through cost increases to customers.

Changes in trade policies and tariffs and other factors beyond our control remain uncertain and may materially adversely impact our results. The imposition of new or increased tariffs and trade restrictions, particularly with respect to the PRC and Mexico, may materially adversely affect our business, financial condition, and results of operations.

A significant portion of our electronic components, sub-assemblies, and finished products are manufactured in or sourced from the PRC and Mexico. Additionally, as a global organization our business involves a material volume of shipments into and out of the U.S. to and from a number of other countries, including India, Israel and throughout Europe. The evolving regulatory landscape including the implementation and modification of tariffs, trade restrictions, and changes in trade agreements involving the aforementioned countries among others, together with general uncertainty about future changes in policy (including any new regulations, increased tariff rates, new tariffs or trade restrictions that may be implemented), could substantially increase our operating costs, reduce demand for our products and disrupt our supply chain. On February 20, 2026, the Supreme Court of the United States issued its decision in Learning Resources, Inc. v. Trump, striking down tariffs previously enacted by the Administration under the International Emergency Economic Powers Act (“IEEPA”) as invalid, and holding that IEEPA does not authorize the President to impose tariffs. However, the full impact and implications of the Court’s decision are not immediately clear amidst the rapidly-evolving regulatory landscape and the arena of international trade, and there remains great uncertainty as to what responses will emerge in light of the Court’s decision, including with respect to tariffs, international trade agreements, and international trade generally. For example, following and notwithstanding the Court’s ruling, the U.S. Congress could act in its discretion to codify tariffs, including ones similar to, more extensive and/or at higher rates than the duties invalidated by the Court’s decision; the Administration could act to impose duties or alternative tariffs under laws other than the IEEPA statute addressed in the Court’s decision; the state of bilateral and multilateral trade agreements is and may continue to be uncertain; foreign countries may yet impose tariffs (including retaliatory tariffs) or increase duty rates, among other uncertainties. At this time, following the tariffs enacted by the Administration and the subsequent Supreme Court ruling, it remains unclear what further measures will be implemented in response or if additional countries may impose retaliatory tariffs. Any new or continued trade disputes or increased tensions between the U.S. and other countries, and any governmental actions, including further increases of existing tariffs or the imposition of new tariffs, may further exacerbate any increases to our operating costs, decreases in demand for our products, and disruptions to our supply chain. While we continue to actively monitor the evolving and ever-changing regulatory landscape and to implement strategies intended to mitigate these impacts, including diversifying our manufacturing footprint and seeking alternative suppliers, these efforts may not be fully successful and could result in increased costs, delayed shipments, and reduced margins.

Specifically regarding the PRC, actions by the U.S. government to impose tariffs on Chinese-origin goods, particularly in the electronics and semiconductor sectors, have increased our production and procurement costs. These or any similar tariffs or duties, combined with potential retaliatory measures by Chinese authorities, could further increase the cost of our products and components or limit our ability to source critical materials and parts. Additionally, ongoing geopolitical tensions and potential expansion of export controls or restrictions on technology transfers could further complicate our supply chain operations and impact our ability to maintain competitive pricing.

With respect to our Mexican manufacturing operations and sourcing activities, changes in trade policies, including potential modifications to or withdrawal from existing trade agreements, could result in increased tariffs and other trade barriers. The United States-Mexico-Canada Agreement (USMCA) is scheduled for a comprehensive review and potential renewal in 2026, and if it is extended on less favorable terms, Bel could face increased risks related to supply chain disruptions, higher tariffs, and reduced market access throughout North America. The renegotiation process will address key structural changes, trade imbalances, and heightened geopolitical competition, potentially resulting in revised rules of origin, labor obligations, and domestic policy requirements that may adversely impact Bel’s operations and cost structure. Such changes could necessitate significant modifications to our regional manufacturing strategy and supply chain organization, potentially resulting in supply chain disruptions and inventory management challenges leading to higher input costs, increased manufacturing costs and a potential loss of customers. If the agreement expires or undergoes significant revision, Bel may need to rapidly adapt to new trade regulations and market conditions, which could have a material adverse effect on our business, financial condition, and results of operations.

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Our efforts to mitigate these risks through supply chain diversification, pricing adjustments, and operational restructuring may not be successful and could result in:

r educed profit margins if we are unable to pass increased costs to customers

l oss of market share to competitors with different supply chain structures

i ncreased operating costs from maintaining redundant supply sources

a dditional capital expenditures to relocate or duplicate manufacturing capabilities

p otential quality control challenges from new or alternate suppliers

i ncreased complexity in regulatory compliance and trade documentation

The continuation or escalation of trade tensions, particularly with the PRC and Mexico, could result in material adverse effects on our business that may not be fully mitigated by our ongoing adaptation efforts. Additionally, the uncertainty surrounding future trade policies and potential regulatory changes complicates our long-term planning and investment decisions, potentially affecting our competitive position in the global electronics market.

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Our backlog figures may not be reliable indicators.

While most of Bel’s orders are non-cancellable and non-returnable, and are subject to penalty if cancelled, Bel has historically worked with large customers to provide for cancellation if no costs have yet been incurred by Bel. Nonetheless, some orders that comprise our backlog may be delayed, accelerated, or canceled by customers. Customers may occasionally double order from multiple sources to ensure timely delivery when lead times are particularly long, and often cancel orders when business is weak or inventories are excessive. Additional factors that could cause Bel to fail to ship orders comprising our backlog include unanticipated supply difficulties, changes in customer demand, and new customer designs. Due to these factors, we cannot be certain that the amount of our backlog equals or exceeds the level of orders that will ultimately be delivered, and backlog may not be a reliable indicator of the timing of future sales. Our results of operations could be adversely impacted if customers cancel a material portion of orders in our backlog, even with our policies in place.

We may not be able to generate sufficient cash to service all of our indebtedness and may be forced to take other actions to satisfy our obligations under our indebtedness, which may not be successful.

Our ability to make scheduled payments on or refinance our debt obligations depends on our financial condition and operating performance, which are subject to prevailing economic and competitive conditions and to certain financial, business, legislative, regulatory and other factors beyond our control. We may be unable to maintain a level of cash flows from operating activities sufficient to permit us to pay the principal, premium, if any, and interest on our indebtedness.

If our cash flows and capital resources are insufficient to fund our debt service obligations, we could face substantial liquidity problems and could be forced to reduce or delay acquisitions, investments and capital expenditures or to dispose of material assets or operations, seek additional debt or equity capital or restructure or refinance our indebtedness. We may not be able to effect any such alternative measures on commercially reasonable terms or at all and, even if successful, those alternative actions may not allow us to meet our scheduled debt service obligations. Our Credit Agreement restricts our ability to dispose of assets and use the proceeds from those dispositions and may also restrict our ability to raise debt or equity capital to be used to repay other indebtedness when it becomes due. We may not be able to consummate those dispositions or to obtain proceeds in an amount sufficient to meet any debt service obligations then due.

Our inability to generate sufficient cash flows to satisfy our debt obligations, or to refinance our indebtedness on commercially reasonable terms or at all, would materially and adversely affect our consolidated financial position and consolidated results of operations. If we cannot make scheduled payments on our debt, we will be in default, the lenders under the Credit Agreement could terminate their commitments to loan money, the lenders could foreclose against the assets securing their borrowings and we could be forced into bankruptcy or liquidation.

Our level of indebtedness could negatively impact our access to the capital markets and our ability to satisfy financial covenants under our existing Credit Agreement.

We have incurred substantial amounts of indebtedness including to fund the acquisition of Enercon in 2024, and we may need to incur additional indebtedness to finance operations or for other general corporate purposes. Our consolidated principal amount of outstanding indebtedness was $197.5 million at December 31, 2025, resulting in a Leverage Ratio of 1.4x Consolidated EBITDA, each as defined and calculated in accordance with our Credit Agreement. Accordingly, our U.S. debt service requirements are significant in relation to our U.S. revenue and cash flow. This leverage exposes us to risk in the event of downturns in our business, in our industry or in the economy generally, and may impair our operating flexibility and our ability to compete effectively. Our current Credit Agreement requires us to maintain certain covenant ratios. For example, the applicable Credit Agreement covenant pertaining to the Leverage Ratio referenced above provides, subject to certain exceptions, that our Leverage Ratio must not exceed 3.50 to 1.00. Additionally, the interest rate that we pay under our Credit Agreement increases as our Leverage Ratio increases. If we do not continue to satisfy the required ratios including the Leverage Ratio or receive waivers from our lenders, we will be in default under the Credit Agreement, which could result in an accelerated maturity of our debt obligations. We cannot assure investors that we will be able to access private or public debt or equity on satisfactory terms, or at all. Any equity financing that could be arranged may dilute existing shareholders and any debt financing that could be arranged may result in the imposition of more stringent financial and operating covenants.

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LEGAL, TAX AND REGULATORY RISKS

We may be sued by third parties for alleged infringement of their proprietary rights and we may incur defense costs and possibly royalty obligations or lose the right to use technology important to our business.

From time to time, we receive claims by third parties asserting that our products violate their intellectual property rights. Any intellectual property claims, with or without merit, could be time consuming and expensive to litigate or settle and could divert management attention from administering our business. A third-party asserting infringement claims against us or our customers with respect to our current or future products may materially and adversely affect us by, for example, causing us to enter into costly royalty arrangements or forcing us to incur settlement or litigation costs.

We are subject to taxation in multiple jurisdictions. As a result, any adverse development in the tax laws of any of these jurisdictions or any disagreement with our tax positions could have a material adverse effect on our business, consolidated financial condition or consolidated results of operations.

We are subject to taxation in, and to the tax laws and regulations of, multiple jurisdictions as a result of the international scope of our operations and our corporate and financing structure. We are also subject to transfer pricing laws with respect to our intercompany transactions, including those relating to the flow of funds among our companies. Adverse developments in fiscal or tax laws, regulations or policies, or any change in position regarding the application, administration or interpretation thereof, in any applicable jurisdiction, could have a material adverse effect on our business, consolidated financial condition or consolidated results of our operations. In addition, the tax authorities in any applicable jurisdiction, including the United States, may disagree with the positions we have taken or intend to take regarding the tax treatment or characterization of any of our transactions. If any applicable tax authorities, including U.S. tax authorities, were to successfully challenge the tax treatment or characterization of any of our transactions, it could have a material adverse effect on our business, consolidated financial condition or consolidated results of our operations.

Our results of operations may be materially and adversely impacted by environmental and other regulations.

Our manufacturing operations, products and/or product packaging are subject to environmental laws and regulations governing air emissions; wastewater discharges; the handling, disposal and remediation of hazardous substances, wastes and certain chemicals used or generated in our manufacturing processes; employee health and safety labeling or other notifications with respect to the content or other aspects of our processes, products or packaging; restrictions on the use of certain materials in or on design aspects of our products or product packaging; and responsibility for disposal of products or product packaging. Discussions and proposals related to gas emissions and climate change have increasingly become the subject of substantial attention; additional regulation in this area could have the effect of restricting our business operations or increasing our operating costs. More stringent environmental regulations may be enacted in the future, and we cannot presently determine the modifications, if any, in our operations that any such future regulations might require, or the cost of compliance with these regulations.

We are subject to, and may continue to be subject to, incremental costs, risks, and regulations associated with global environmental and sustainability initiatives . Evolving expectations relating to environmental, social and governance considerations expose us to potential liabilities, increased costs, reputational harm and other adverse effects on our business.

There is heightened public and regulatory scrutiny regarding environmental sustainability and climate impact. This increased focus has resulted in numerous international frameworks, regulatory requirements, and industry standards. In addition to general environmental risks whereby we may be adversely affected by severe weather patterns and environmental events, we face evolving compliance obligations related to sustainability reporting, carbon footprint reduction, and environmental impact mitigation. Moreover, our key customers and partners are implementing increasingly stringent environmental performance criteria within their value chains. Any actual or perceived deficiency in meeting these standards could materially impact our market position, customer relationships, and overall business performance.

Given our extensive operational presence across multiple jurisdictions, emerging environmental regulations beyond our current compliance programs could impose significant additional burdens. These may include enhanced monitoring requirements, technology upgrades, operational modifications, and expanded reporting obligations. The associated costs could materially affect our operating expenses, capital allocation decisions, and competitive position.

Regulatory frameworks continue to evolve rapidly across our key markets. The European Union's enhanced environmental reporting framework introduces comprehensive sustainability disclosure requirements affecting both domestic and international operators. In the United States, recent federal initiatives sought to establish new environmental disclosure standards for public companies, though implementation timelines were stayed by ongoing legal review and in March 2025, the SEC announced that it had voted to end its defense of the challenged rules regarding enhancement and standardization of climate-related disclosures. However, the withdrawal of the SEC’s defense does mean these or similar SEC disclosures will not become mandatory in the future, including in the event the SEC’s priorities should change, and climate-related disclosures are still rapidly proliferating at the U.S. state level and internationally. We continue to actively monitor the rapidly evolving regulatory landscape to be prepared to develop compliance frameworks for applicable requirements, any of which if implemented may require substantial operational adjustments and additional incremental resources.

At the state level, several jurisdictions have enacted or proposed environmental accountability legislation with varying requirements and enforcement mechanisms. These regional variations create additional complexity in maintaining comprehensive compliance programs. We anticipate increased administrative burden and compliance costs as these requirements come into effect.

Beyond regulatory compliance, we face several emerging environmental and sustainability risks, including but not limited to:

Operational Risks – requirements to lower greenhouse gas emissions and improve energy efficiency may necessitate changes in business operations, potentially leading to disruptions.

Litigation Risks – climate-related lawsuits based on corporate disclosures and/or operational practices may arise.

Reputational Risks – customer, investor, and stakeholder expectations regarding any climate-related commitments or goals could influence business relationships and overall market perception.

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Our ability to effectively navigate these evolving environmental requirements while maintaining operational efficiency and market competitiveness may have material impacts on our financial condition, operational results, and strategic positioning.

Many governments, regulators, investors, employees, customers and other stakeholders have focused in recent years on environmental, social and governance (“ESG”) considerations relating to businesses. At the same time, there are efforts by some stakeholders and policymakers to reduce companies’ attention to certain ESG-related matters. Advocates and opponents of ESG matters have from time to time resorted to a range of activism to promote their viewpoints, which may require us to incur additional costs or otherwise adversely impact our business. Some stakeholders may disagree with our goals and initiatives and the focus of stakeholders may change and evolve over time. Stakeholders also may have very different views on where ESG focus should be placed, including differing views of regulators in various jurisdictions in which we operate. Any failure, or perceived failure, by us to achieve any goals that we may set, further our initiatives, adhere to our public statements, comply with federal, state or international ESG laws and regulations, or meet evolving and varied stakeholder expectations and standards could result in legal and regulatory proceedings against us and materially adversely affect our business, reputation, results of operations, financial condition and stock price.

Expanding and evolving data privacy laws and regulations could impact our business and expose us to increased liability.

Our global business is subject to complex and changing laws and regulations including but not limited to privacy, data security and data localization. Evolving foreign events may adversely affect our revenues and could subject us to new regulatory costs and challenges (such as the transfer of personal data between the EU and the United Kingdom), in addition to other adverse effects that we are unable to effectively anticipate. This may impose significant requirements on how we collect, process and transfer personal data, as well as significant financial penalties for non-compliance. Any inability to adequately address privacy concerns, even if unfounded, or to comply with the more complex privacy or data protection laws, regulations and privacy standards, could lead to significant financial penalties, which may result in a material and adverse effect on our consolidated results of operations.

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RISKS RELATED TO OUR COMMON STOCK

As a result of protective provisions in the Company's Restated Certificate of Incorporation, as amended, the voting power of holders of Class A common shares whose voting rights are not suspended (including officers, directors and principal shareholders) may be increased at future meetings of the Company's shareholders.

The Company's Restated Certificate of Incorporation, as amended, provides that if a shareholder, other than shareholders subject to specific exceptions, acquires (after the date of the Company's 1998 recapitalization) 10% or more of the outstanding Class A common stock and does not own an equal or greater percentage of all then outstanding shares of both Class A and Class B common stock (all of which common stock must have been acquired after the date of the 1998 recapitalization), such shareholder must, within 90 days of the trigger date, purchase Class B common shares, in an amount and at a price determined in accordance with a formula described in the Company's Restated Certificate of Incorporation, as amended, or forfeit its right to vote its Class A common shares. To the extent that the voting rights of particular holders of Class A common stock are suspended as of times when the Company's shareholders vote due to the above-mentioned provisions, such suspension would have the effect of increasing the voting power of those holders of Class A common shares whose voting rights are not suspended.

Our stock price, like that of many companies, has been and may continue to be volatile.

The market price of our common stock may fluctuate as a result of variations in our quarterly operating results and other factors beyond our control. These fluctuations may be exaggerated if the trading volume of our common stock is low. The market price of our common stock may rise and fall in response to a variety of other factors, including:

Announcements of technological or competitive developments;

General market or economic conditions;

Market or economic conditions specific to particular geographical areas in which we operate;

Acquisitions or strategic alliances by us or our competitors;

Our ability to achieve our anticipated cost savings from announced restructuring programs;

The gain or loss of a significant customer or order;

Changes in the amount or frequency of our payments of dividends or repurchases of our common stock; or

Changes in estimates of our financial performance or changes in recommendations by securities analysts regarding us or our industry.

In addition, equity securities of many companies have experienced significant price and volume fluctuations even in periods when the capital markets generally are not distressed. These price and volume fluctuations often have been unrelated to the operating performance of the affected companies.

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GENERAL RISKS

The global nature of our operations exposes us to numerous risks that could materially adversely affect our consolidated financial condition and consolidated results of operations .

We manufacture in 8 countries, and our products are distributed in those countries as well as in other parts of the world. A large portion of our manufacturing operations are located outside of the United States and a large portion of our sales are generated outside of the United States. Operations outside of the United States, particularly operations in developing regions, are subject to various risks that may not be present or as significant for our U.S. operations. Economic uncertainty in some of the geographic regions in which we operate, including developing regions, could result in the disruption of commerce and negatively impact cash flows from our operations in those areas.

Risks inherent in our international operations include:

Import and export regulations that could erode profit margins or restrict exports;

Foreign exchange controls and tax rates;

Foreign currency exchange rate fluctuations, including devaluations;

Changes in regional and local economic conditions, including local inflationary pressures;

Difficulty of enforcing agreements and collecting receivables through certain foreign legal systems;

Variations in protection of intellectual property and other legal rights;

More expansive legal rights of foreign unions or works councils;

Changes in labor conditions and difficulties in staffing and managing international operations;

Inability or regulatory limitations on our ability to move goods across borders;

Changes in laws and regulations, including the laws and policies of the United States affecting trade, tariffs and foreign investment;

Restrictive governmental actions such as those on transfer or repatriation of funds and trade protection matters, including antidumping duties, tariffs, trade wars, embargoes and prohibitions or restrictions on acquisitions or joint ventures;

Social plans that prohibit or increase the cost of certain restructuring actions;

The potential for nationalization of enterprises or facilities;

Unsettled political conditions and possible terrorist attacks against U.S. or other interests; and

Intergovernmental and other conflicts or actions, including, but not limited to, armed conflict, such as the ongoing military conflicts between Ukraine and Russia, as well as between Israel and its adversaries in the Middle East.

As a multi-national company, we are faced with increased complexities due to recent changes to the U.S. corporate tax code relating to our unremitted foreign earnings, potential revisions to international tax law treaties, and renegotiated trade deals. In addition, other events, such as the ongoing discussion and negotiations concerning varying levels of tariffs on product imported from the PRC, Mexico, India, Israel and throughout Europe also create a level of uncertainty. If we are unable to anticipate and effectively manage these and other risks, it could have a material and adverse effect on our business, our consolidated results of operations and consolidated financial condition.

For additional information regarding risks associated with our operations in the PRC, see the discussion set forth above under the caption, "We have substantial manufacturing operations located in the PRC, which exposes us to significant risks that could materially and adversely affect our business, operations, consolidated financial condition and consolidated results of operations."  For additional information regarding risks associated with our operations in Israel, see the discussion set forth above under the caption, "We may face risks related to conducting business in Israel."

Cybersecurity risk and the failure to maintain the integrity of our operational or security systems or infrastructure, or those of third parties with which we do business, could have a material adverse effect on our business, consolidated financial condition and consolidated results of operations.

Cybersecurity threats, including but not limited to malware, phishing, credential harvesting, ransomware and other attacks, are rapidly evolving and are becoming increasingly sophisticated, making it difficult to detect and prevent such threats from impacting the Company. Our Company has seen an increased volume of cybersecurity threats and ransomware attempts in 2025 and expects to continue to experience cybersecurity threats from time to time, which pose a risk to the security of our systems and networks and the confidentiality, availability and integrity of our data. Artificial intelligence ("AI") increases cybersecurity risks due to attacks crafted using AI including more effective phishing, false voice or image attacks. There are additional risks associated with utilization of technologies or applications the functionality of which relies upon externalizing data into public AI platforms, including the potential for unauthorized access or manipulation of sensitive information. Disruptions or failures in the physical infrastructure or operating systems that support our businesses and customers, or cybersecurity attacks or security breaches of our networks, systems or applications, could result in the loss of customers and business opportunities, legal liability, regulatory fines, penalties or intervention, other litigation, regulatory and legal risks and the costs associated therewith, reputational damage, reimbursement or other compensatory costs, remediation costs, increased cybersecurity protection costs, additional compliance costs, increased insurance premiums, and lost revenues, damage to the Company's competitiveness, stock price, and long-term shareholder value, any of which could materially adversely affect our business, financial condition and results of operations. While we attempt to mitigate these risks, our systems, networks, products, solutions and services remain potentially vulnerable to advanced and persistent threats. We also maintain and have access to sensitive, confidential or personal data or information in certain of our businesses that is subject to privacy and security laws and regulations. Despite our efforts to protect such sensitive, confidential or personal data or information, our facilities and systems and those of our customers and third-party service providers may be vulnerable to security breaches, theft, fraud, misplaced or lost data, “Acts of God”, programming and/or human errors that could lead to the compromising of sensitive, confidential or personal data or information, improper use of our systems, software solutions or networks, unauthorized access, use, disclosure, modification or destruction of information, defective products, production downtimes and operational disruptions, which in turn could adversely affect our consolidated financial condition and consolidated results of operations.

A loss of the services of the Company's executive officers or other skilled associates could negatively impact our operations and results.

The success of the Company's operations is largely dependent upon the performance of its executive officers, managers, engineers and sale speople.  Many of these individuals have a significant number of years of experience within the Company and/or the industry in which we compete and would be extremely difficult to replace. The loss of the services of any of these associates may materially and adversely impact our results of operations if we are unable to replace them in a timely manner.

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Item 7.   Management's Discussion and Analysis of Financial Condition and Results of Operations

The information in this Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A") should be read in conjunction with the Company's consolidated financial statements and the notes related thereto. The discussion of results, causes and trends should not be construed to imply any conclusion that such results, causes or trends will necessarily continue in the future. See "Cautionary Notice Regarding Forward-Looking Information" above for further information. Also, when we cross reference to a "Note," we are referring to our "Notes to Consolidated Financial Statements," unless the context indicates otherwise. All amounts and percentages are approximate due to rounding.

Overview

Our Company

We design, manufacture and market a broad array of products that power, protect and connect electronic circuits. These products are primarily used in the defense, commercial aerospace, networking, telecommunications, computing, general industrial, high-speed data transmission, transportation and eMobility industries. Bel's portfolio of products also finds application in the automotive, medical, broadcasting and consumer electronics markets.

We operate through three product group segments. In 2025, 53% of the Company's revenues were derived from Power Solutions and Protection, 34% from Connectivity Solutions and 13% from our Magnetic Solutions operating segment.

Our operating expenses are driven principally by the cost of labor where the factories that Bel uses are located, the cost of the materials that we use and our ability to effectively and efficiently manage overhead costs. As labor and material costs vary by product line and region, any significant shift in product mix can have an associated impact on our costs of sales. Costs are recorded as incurred for all products manufactured. Such amounts are determined based upon the estimated stage of production and include labor cost and fringes and related allocations of factory overhead. Our products are manufactured at various facilities in the U.S., Mexico, Israel, India, the Dominican Republic, the United Kingdom, Slovakia and the PRC.

We have little visibility into the ordering habits of our customers and we can be subjected to large and unpredictable variations in demand for our products. Accordingly, we must continually recruit and train new workers to replace those lost to attrition and be able to address peaks in demand that may occur from time to time. These recruiting and training efforts and related inefficiencies, and overtime required to meet any increase in demand, can add volatility to the labor costs incurred by us.

Key Factors Affecting our Business

The Company believes the key factors affecting Bel's 2025 and/or future results include the following:

Acquisition of Enercon - In November 2024, Bel acquired an 80% stake in Enercon. As a result, we benefited from a full year of Enercon's sales in 2025 within our Power Solutions and Protection segment. Enercon is a leading supplier of highly customized power conversion and networking solutions to aerospace and defense markets globally, providing robust and reliable solutions across air, land and sea applications, and its sales and results of operations may vary depending on government spending on defense. Enercon's sales have been reflected in the accompanying consolidated statements of operations since November 1, 2024 and amounted to $136.6 million during the year ended December 31, 2025 and $20.8 million during the year ended December 31, 2024.

Backlog  – Our backlog of orders totaled $439.1 million at December 31, 2025, representing an increase of $57.5 million, or 15.1%, from December 31, 2024. From 2024 to the 2025 year-end, the backlog for our Power Solutions and Protection products increased by 9.4%, due to an increase in demand within the defense and networking end markets. Our Magnetic Solutions backlog increased by 52.3%, primarily due to increased order volume from a large networking customer. The backlog for our Connectivity Solutions products increased by $21.5 million (19.4%) in 2025 from the 2024 level, due to increased demand from our commercial aerospace and industrial customers, and strength seen in defense applications through the distribution channel.

Product Mix  – Material and labor costs vary by product line and any significant shift in product mix between higher- and lower-margin product lines will have a corresponding impact on the Company’s gross margin percentage. In general, our Connectivity products have historically had the highest contribution margins due to the harsh environment, high-reliability end applications for these products. Our Power products have a higher-cost bill of materials and are impacted to a greater extent by changes in material costs. As our Magnetic Solutions products are more labor-intensive, margins on these products are impacted to a greater extent by minimum- and market-based wage increases in the PRC and fluctuations in foreign exchange rates between the U.S. dollar and the Chinese renminbi. Fluctuations in sales volume among our product groups will have a corresponding impact on Bel's profit margins. See Note 14, "Segments" for profit margin information by product group.

P ricing and Availability of Materials   – Pricing for commodities with Gold (Au), Silver (Ag), and Copper (Cu), is increasing as cost of these metals continue rise to historical highs. Lead-times for certain integrated circuits (ICs) have increased we believe primarily driven by AI and the infrastructure necessary to support this technology. Regulatory changes including but not limited to trade restrictions affecting suppliers in the PRC have previously and could in future disrupt our supply chain, leading to limited access to certain parts and suppliers, increased costs, shortages, or other adverse impacts on our business and operating results. Additionally, tariffs imposed by the U.S. or foreign governments on imports and exports could result in reduced margins or increased prices, potentially decreasing customer demand. The preceding discussion about pricing and availability of materials contains Forward-Looking Statements. See "Cautionary Notice Regarding Forward-Looking Information."

Global Tariffs – On April 5, 2025, the Trump Administration enacted reciprocal tariffs on U.S. imports from a number of countries in which Bel’s manufacturing sites and/or suppliers are located. To the extent all of these new tariffs were applicable and in force, based on information available and our sales patterns as of February 2025, our most recent estimates indicated that  approximately 25% of our consolidated global sales had been subject to these recently-enacted U.S. tariffs. On February 20, 2026, the Supreme Court of the United States issued its decision in Learning Resources, Inc. v. Trump, striking down tariffs previously enacted by the Administration under the International Emergency Economic Powers Act (“IEEPA”) as invalid, and holding that IEEPA does not authorize the President to impose tariffs. However, the full impact and implications of the Court’s decision are not immediately clear amidst the rapidly-evolving regulatory landscape and the arena of international trade, and there remains great uncertainty as to what responses will emerge in light of the Court’s decision, including with respect to tariffs, international trade agreements, and international trade generally; Congress has the authority to codify tariffs in statute, and the Administration could act to impose duties or alternative tariffs under authority delegated by other laws. Please see Part I, Item IA, “Risk Factors, above, for additional information.  Im ports into the U.S. from Mexico are currently exempt from tariffs as our products fall within the scope of the USMCA as presently in force. While global tariffs did not have a material financial impact on our full year 2025 financial results, we continue to closely monitor the evolving tariff landscape and are assessing possible alternatives aimed at potentially mitigating the impact of tariffs on Bel and our customers. The imposition of tariffs on our U.S. imports could result in reduced demand for our products and/or higher material costs. Our future sales and/or gross margins could be impacted as a result. The preceding discussion of “ Global Tariffs ” contains Forward-Looking Statements, including statements about the possible effects and impacts of tariffs, and statements about our present plans and intentions in connection therewith or in response thereto. See " Cautionary Notice Regarding Forward-Looking Information ."

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Labor Costs  – Labor costs as a percentage of sales were relatively stable from 2025 to 2024, decreasing just slightly to 7.7% of sales in 2025 from 7.8% of sales in 2024. During 2025, minimum wage increases were enacted in Slovakia, the PRC, the Dominican Republic, and Mexico, which increased our annual labor costs by approximately $1.8 million in the aggregate. While the impact of these increases has been partially mitigated by higher consolidated revenues to date, these and any future wage increases are expected to exert upward pressure on labor costs and adversely affect profit margins. Labor costs as a percentage of sales fluctuate based on product mix. Sales in our Magnetic Solutions segment are comprised largely of labor-intensive ICM products, resulting in greater sensitivity to labor cost changes. Labor costs in the PRC, Mexico, and Israel are primarily denominated in local currencies. Accordingly, significant fluctuations in exchange rates versus the U.S. dollar may materially impact our labor costs. By segment, the Magnetic Solutions segment is most exposed to fluctuations in the exchange rate of the Chinese renminbi relative to the U.S. dollar; the Connectivity Solutions segment is most exposed to fluctuations in the exchange rate of the Mexican peso relative to the U.S. dollar; and the Power Solutions and Protection segment is most exposed to fluctuations in the exchange rates of the Chinese renminbi and the Israeli shekel relative to the U.S. dollar. In addition to foreign currency exchange rate exposure, our labor costs are subject to government-regulated minimum wage increases in the countries in which we operate. The preceding discussion about labor costs contains Forward-Looking Statements. See "Cautionary Notice Regarding Forward-Looking Information."

Inflationary Pressures  – Inflationary pressures could result in higher input costs, including those related to our raw materials, labor, freight, utilities, healthcare and other expenses. Our future operating results will depend, in part, on our continued ability to manage these fluctuations through pricing actions, cost savings initiatives and sourcing decisions. The preceding two sentences represent Forward-Looking Statements. See "Cautionary Notice Regarding Forward-Looking Information."

Restructuring – In late 2025, we initiated a restructuring initiative within our Magnetic segment related to the transition of manufacturing from Bel's Pingguo, PRC facility to an outside subcontractor (the "Pingguo initiative"). In connection with the Pingguo initiative, we incurred $1.6 million of restructuring costs during the year ended December 31, 2025. We will continue to review our operations to optimize our business, which may result in restructuring costs being recognized in future periods. The preceding statements about restructuring initiatives contain Forward-Looking Statements. See "Cautionary Notice Regarding Forward-Looking Information."

Impact of Foreign Currency  – During 2025, labor and overhead costs increased by $1.3 million compared to 2024, primarily due to unfavorable foreign exchange movements involving the Israeli shekel, Euro, and Chinese renminbi. These increases were partially offset by favorable fluctuations in the Mexican peso and Indian rupee relative to the prior year period. As further detailed in the section titled " Inflation and Foreign Currency Exchange, " the Company recognized a foreign exchange revaluation gain of $10.1 million in 2025. This gain was primarily attributable to fluctuations in spot rates of certain currencies when translating balance sheet accounts at December 31, 2025, compared to December 31, 2024. As a U.S.-domiciled company, Bel translates its foreign currency-denominated financial results into U.S. dollars. Changes in the value of foreign currencies relative to the U.S. dollar, including the revaluation of certain intercompany and third-party transactions, may result in either favorable or unfavorable impacts to our consolidated statements of operations and cash flows. In 2025, the Company experienced unfavorable transactional foreign exchange impacts due to the appreciation of the Israeli shekel, Euro, and Chinese renminbi against the U.S. dollar. These impacts were partially offset by the depreciation of the Mexican peso against the U.S. dollar, compared to exchange rates in effect during 2024. Bel maintains significant manufacturing operations in the PRC, Slovakia, Mexico, and Israel, where labor and overhead costs are denominated in local currencies. As a result, the U.S. dollar equivalent costs of these operations were approximately $1.9 million higher in Israel, $0.5 million higher in Europe, and $0.1 million higher in the PRC, offset by $1.1 million lower costs in Mexico in 2025 versus 2024. The Company actively monitors changes in foreign currency exchange rates and has historically utilized foreign currency forward contracts. Bel may continue to implement additional hedging strategies and pricing actions to mitigate the impact of currency fluctuations on its consolidated operating results. The preceding sentence represents a Forward-Looking Statement.  See "Cautionary Notice Regarding Forward-Looking Information."

Effective Tax Rate  – The Company's effective tax rate will fluctuate based on the geographic region in which the pretax profits are earned. Of the jurisdictions in which the Company operates, t he U.S. and Europe's tax rates are generally equivalent; and Asia has the lowest tax rates of the Company's three geographic regions. See Note 10,  "Income Taxes", to the Company's Consolidated Financial Statements.

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Results of Operations - Summary by Operating Segment

Net Sales and Gross Margin

The Company's net sales and gross margin by major product line for the years ended December 31, 2025, 2024 and 2023 were as follows (dollars in thousands):

Years Ended

December 31,

Net Sales

Gross Margin

Power solutions and protection

Connectivity solutions

Magnetic solutions

2025 as Compared to 2024

Power Solutions and Protection:

Sales of Power Solutions and Protection products increased by $111.3 million (45.3%) in 2025 compared to 2024. This growth was primarily attributable to strong demand in aerospace and defense applications, which contributed $136.6 million of incremental revenue in 2025. These sectors represent a new end market for Bel’s Power segment, introduced through the acquisition of Enercon in November 2024. Additional contributors to revenue growth included an $18.3 million (32.9%) increase in sales of front-end power products, driven by heightened demand in networking and datacenter applications. Further sales of Fuse products increased by $5.6 million (32.5%). These gains were partially offset by declines in other end markets, including a $9.9 million (23.6%) reduction in sales to the rail market, an $8.5 million (17.9%) decrease in sales to other industrial applications, and a $6.3 million (41.6%) decrease in the eMobility market in 2025 compared to 2024.

Gross margin for the Power segment improved slightly in 2025 compared to 2024, reflecting 42.7% of segment sales for 2025, representing an increase of 30bps compared to 2024. The improvement in gross margin was primarily driven by increased sales volume and a favorable product mix resulting from the Enercon acquisition. The shift in product mix toward higher-margin aerospace and defense applications contributed positively to overall profitability for the segment.

Connectivity Solutions:

Sales of Connectivity Solutions products increased by $11.9 million (5.4%) in 2025 compared to 2024. This growth was primarily driven by a significant increase in sales to the commercial aerospace end market, which rose by $13.5 million (23.7%) year-over-year. Sales to the military end market also contributed positively, increasing by $4.7 million (10.1%) in 2025 compared to 2024. These gains were partially offset by a $2.3 million (3.1%) decrease in the volume of Connectivity Solutions products sold through distribution channels, as well as a $1.3 million (8.7%) reduction in sales of passive connector and cabling products used in the industrial premise wiring and 5G/IoT markets.

Gross margin for the Connectivity Solutions segment improved in 2025 to 38.7% of segment sales, representing an increase of 160 bps compared to 2024. The improvement in gross margin was primarily attributable to an enhanced product mix, favorable exchange rate fluctuations between the U.S. dollar and Mexican peso, and operational efficiencies resulting from facility consolidations completed in 2024. These benefits were partially offset by higher wage rates in Mexico.

Magnetic Solutions:

Sales of our Magnetic Solutions products increased by $17.5 million (25.4%) during 2025 as compared to 2024. This growth was primarily driven by higher demand from networking customers. Gross margin improvements for this product group during 2025 were supported by higher sales, recent facility consolidations in the PRC, and effective cost management, partially offset by unfavorable exchange rates between the Chinese renminbi and the U.S. dollar.

2024 as Compared to 2023

Power Solutions and Protection:

Sales of our Power Solutions and Protection products were lower by $68.6 million (21.8%) in 2024 as compared to 2023. This decrease was primarily due to lower sales of our front-end power products and board mount power products of $45.3 million and $9.5 million, respectively, both of which are used in networking and datacenter applications. Sales of our CUI products were down by $21.2 million in 2024 as compared to 2023 due to the loss of sales in connection with a trade restriction placed on one of our suppliers in the PRC. Further, sales of product into the eMobility end market decreased by $12.9 million as compared to 2023. These decreases were offset in part by an increase in sales of our rail products by $11.8 million as compared to 2023. Raw material expedite fee revenue for this segment totaled $0.1 million in 2024 as compared to $14.9 million in 2023. Enercon contributed $20.8 million of military, aerospace and defense applications sales in the last two months of 2024. Gross margin improved in 2024 as compared to 2023 as a result of the Enercon acquisition, favorable exchange rates with the Chinese renminbi versus the U.S. dollar, a lower volume of low-margin expedite fees and a favorable shift in product mix.

Connectivity Solutions:

Sales of our Connectivity Solutions products increased by $9.8 million (4.7%) in 2024 as compared to 2023. This increase was primarily due to an increase in sales into the commercial aerospace end market of $3.6 million (6.8%) in 2024 as compared to 2023. Sales into our military end market also grew by $2.3 million (5.2%) in 2024 as compared to 2023. We also experienced an increased volume of Connectivity Solutions products sold through our distribution channels in 2024 of $2.3 million (2.9%) compared to 2023. Gross margin for 2024 was favorably impacted by pricing actions on certain contract renewals, operational efficiencies from the facility consolidations completed in 2023 and a favorable fluctuation in exchange rates between the U.S. dollar and Mexican peso in 2024 versus 2023. These factors were partially offset by higher wage rates in Mexico in 2024 as compared to 2023.

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Magnetic Solutions:

Sales of our Magnetic Solutions products declined by $46.3 million (40.2%) during 2024 as compared to 2023. Reduced demand for our ICM products from our networking customers and through our distribution channels was the primary driver as we believe these customers continue to work through inventory on hand. Recent facility consolidations in the PRC, diligent cost management, product mix and a favorable exchange rate with the Chinese renminbi versus the U.S. dollar, were the primary drivers of gross margin expansion for this product group in 2024 as compared with 2023, despite the decline in revenue.

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Cost of Sales

Cost of sales as a percentage of net sales for the years ended December 31, 2025, 2024 and 2023 consisted of the following:

Years Ended

December 31,

Material costs

Labor costs

Other expenses

Total cost of sales

2025 as Compared to 2024

Material costs as a percentage of sales increased in 2025 compared to 2024, primarily due to a shift in production mix driven by higher sales of Power products, which typically have greater material content.

Labor costs as a percentage of sales declined slightly for full year 2025, relative to 2024. This decrease reflects increased sales and favorable exchange rate fluctuations in the Mexican peso versus the U.S. dollar, partially offset by higher minimum wage rates and unfavorable exchange rate fluctuations in the Israeli shekel versus the U.S. dollar.

Other expenses, including fixed costs such as support labor and benefits, depreciation and amortization, and facility costs (rent, utilities, insurance), remained relatively stable from a dollar amount perspective, aside from the inclusion of Enercon’s overhead expenses in 2025. However, as a percentage of sales, these expenses decreased in 2025 compared to 2024, benefiting from higher sales volumes during the year.

2024 as Compared to 2023

Material costs as a percentage of sales during 2024 were lower compared to 2023, due to a shift in product mix, the stabilization of raw material pricing, shorter lead times, and better procurement efforts. Labor costs in 2024 as a percentage of sales increased compared to 2023 due to lower sales volume, a shift in product mix in 2024 compared to the previous year, and the increase in statutory minimum wage rate in Mexico. This increase in labor cost was partially offset by lower labor costs in the PRC due to the favorable fluctuation in the Chinese renminbi exchange rate versus the U.S. dollar.

The other expenses noted in the table above include fixed cost items such as support labor and fringe, depreciation and amortization, and facility costs (i.e. rent, utilities, insurance). In total, these other expenses within cost of sales decreased by $1.5 million in 2024 as compared to 2023. As a percentage of sales, other expenses increased due to the lower sales volume in 2024 as compared to 2023.

Research and Development ("R&D")

R&D expenses were $30.9 million, $23.6 million and $22.5 million for the years ended December 31, 2025, 2024 and 2023, respectively. The increase in R&D expenses in 2025 compared to 2024 was primarily due to the inclusion of a full year of Enercon-related salaries, benefits, product development costs, and other R&D expenses, whereas 2024 reflected only two months of Enercon’s R&D activity following its November 2024 acquisition. The increase noted in R&D expenses during 2024 compared to 2023 is largely due to higher salaries, benefits, and product development costs and R&D expense resulting from the November 2024 Enercon acquisition, which have been included in Bel's results since its acquisition date.

Selling, General and Administrative Expenses ("SG&A")

2025 as Compared to 2024

SG&A expenses were $125.8 million in 2025, compared to $110.6 million in 2024. The increase was primarily due to the incremental increase in Enercon’s SG&A expense by $20.8 million in 2025, versus inclusion of only two months of Enercon SG&A activity in 2024 after its acquisition. Excluding Enercon, legacy Bel SG&A expenses declined $5.6 million, driven by lower legal fees in 2025 compared to 2024.

2024 as Compared to 2023

S G&A expenses were $110.6 million in 2024 as compared with $99.1 million in 2023. The primary drivers for the increase in SG&A during 2024 related to acquisition-related costs within SG&A of $10.9 million in connection with the acquisition of Enercon, and $2.5 million of SG&A expenses attributable to the acquired business for the two months of 2024 under Bel ownership. Excluding these items related to Enercon, legacy-Bel SG&A expenses declined due to lower legal fees, as well as lower incentive compensation, commissions and business promotion expenses in 2024, as compared to 2023 due to the lower sales base in the 2024 period.

Restructuring Charges

In 2025, new restructuring charges totaled $2.4 million, primarily consisting of $1.6 million in severance and other costs associated to the transition of manufacturing from Bel's Pingguo, PRC facility to an outside subcontractor (the "Pingguo initiative"), and $0.4 million in charges related to the transition of certain manufacturing operations from Glen Rock, Pennsylvania to other existing Bel sites. These charges were partially offset by a $3.2 million reversal, resulting from a non-cash settlement of liabilities associated with the prior consolidation of two Magnetic Solutions manufacturing sites into a single new facility.

The Company recorded $3.5 million of restructuring charges in 2024 largely in connection with the Glen Rock initiative and the Fuse initiative. In 2023, the Company recorded $10.1 million of restructuring charges largely in connection with its four facility consolidation projects in the U.S., the United Kingdom and the PRC.

Gain on Sale of Properties

In 2025, the Company recognized gains on sales of assets totaling $5.7 million, primarily attributable to the sale of multiple buildings in Zhongshan, PRC and the sale of property in Glen Rock, Pennsylvania. During 2023, the Company recorded a gain of $3.8 million related to the sale of one of its properties in Jersey City, New Jersey.

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Interest Expense

2025 as Compared to 2024

Interest expense was $14.8 million in 2025, compared to $4.1 million in 2024. The increase in 2025 was primarily driven by higher outstanding borrowings under the Company's Credit Agreement, including amounts incurred to finance the Enercon acquisition and related costs. For further information on the Company's outstanding debt, refer to "Liquidity and Capital Resources" below and Note 11, " Debt ". Additional details related to the Enercon acquisition are provided in Note 3, " Acquisition ".

2024 as Compared to 2023

The Company incurred interest expense of $4.1 million in 2024 and $2.9 million in 2023 primarily due to its outstanding borrowings under the Company's Credit Agreement. The increase in interest expense during 2024 related to an increase in debt balance in the fourth quarter of 2024 due to Enercon acquisition (see Note 3, “ Acquisition ” for additional details). See "Liquidity and Capital Resources" and Note 11, "Debt"  for further information on the Company's outstanding debt.

Interest Income

Interest income was $1.0 million for the year ended December 31, 2025, representing a decrease of $3.7 million, or 78.2%, compared to $4.8 million for the year ended December 31, 2024. The decrease was primarily attributable to lower average balances of U.S. Treasury Bills held during 2025 as compared to the prior year.

Interest income for the year ended December 31, 2024 increased to $4.8 million, compared to $1.7 million for the year ended December 31, 2023. The increase was primarily driven by higher levels of investment in U.S. Treasury Bills during 2024, which resulted in higher interest income relative to the prior year.

Impairment of Innolectric

On November 26, 2025, management concluded that an impairment charge was required in connection with the Company’s noncontrolling minority investment in innolectric, a Germany-based e-Mobility technology company, and related party notes receivable. Bel acquired a one-third (1/3) noncontrolling equity interest in innolectric in February 2023. Based on management’s assessment of the carrying value of the investment and the recoverability of the related party notes receivable, the Company recorded a pre-tax impairment charge of $13.1 million in the fourth quarter of 2025. This charge represents the full impairment of Bel’s investment in innolectric and the related notes receivable, and the Company does not expect any future recovery through the insolvency process. The impairment was determined based on indicators of impairment including the cessation of financial support from the majority owner, recent financial performance, changes in market conditions, and other relevant factors affecting innolectric’s business.

Other Income (Expense), Net

2025 as Compared to 2024

Other income (expense), net was income of $10.9 million for the year ended December 31, 2025, compared to expense of $3.2 million for the year ended December 31, 2024, representing an increase of $14.1 million year-over-year. The increase in other income (expense), net for 2025 was primarily attributable to a foreign exchange gain of $10.8 million, which was an improvement of $12.8 million compared to the prior year. Additionally, gains from the Company's Supplemental Executive Retirement Plan ("SERP") investments increased by $0.1 million to $1.4 million, and stamp duty tax expense decreased by $2.0 million in 2025 as compared to 2024.

2024 as Compared to 2023

Other income (expense), net was a net expense of $3.2 million in 2024 compared to a net expense of $4.5 million in 2023. The net expense in 2024 was comprised of a foreign exchange loss of $1.9 million, $0.6 million of losses associated with Bel's investment in innolectric and $2.0 million of stamp duty fees related to Enercon; partially offset by a gain of $1.3 million related to the Company's SERP investments. The net expense in 2023 was comprised of a foreign exchange loss of $1.4 million, the loss on liquidation of a foreign subsidiary of $2.7 million, $0.8 million of losses associated with Bel's investment in innolectric and $0.8 million of other expense; partially offset by a gain of $1.2 million related to the Company's SERP investments.

Income Taxes

The Company’s effective tax rate will fluctuate based on the geographic regions in which the pretax profits are earned. Of the jurisdictions in which the Company operates, the U.S. and Europe’s tax rates are generally equivalent; and Asia has the lowest tax rates of the Company’s three geographic regions. See Note 10, “Income Taxes.”

2025 as Compared to 2024

The provision for income taxes increased by $8.3 million for the year ended December 31, 2025, compared to the year ended December 31, 2024. This increase was primarily attributable to a higher level of worldwide income before income taxes in 2025.

The Company’s effective tax rate increased to 22.0% for the year ended December 31, 2025, from 20.5% for the prior year. The increase in the effective tax rate was primarily driven by the following factors:

Changes in the mix of jurisdictional earnings: A greater proportion of earnings was generated in jurisdictions with higher statutory tax rates, resulting in an increased overall tax rate.

Higher U.S. taxes on foreign subsidiary income: There was an increase in taxes related to income from foreign subsidiaries that is subject to U.S. taxation under the provisions of the Tax Cuts and Jobs Act.

Decrease in tax benefit from reversal of uncertain tax positions: The tax benefit recognized in connection with the reversal of previously recorded uncertain tax positions declined, as certain statutes of limitations expired during the year.

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2024 as Compared to 2023

The provision for income taxes increased by $3.1 million for the year ended December 31, 2024, compared to the year ended December 31, 2023.  The Company’s effective tax rate increased to 20.5% for the year ended December 31, 2024, from 11.4% for the prior year. The increase in the effective tax rate was primarily driven by the following factors:

Higher U.S. taxes resulting from an adjustment for non-deductible tax expenses in the prior year.

Higher foreign taxes resulting from valuation allowances on foreign net operating losses.

Decrease in tax benefit from reversal of uncertain tax positions: The tax benefit recognized in connection with the reversal of previously recorded uncertain tax positions declined, as certain statutes of limitations expired during the year.

Other Tax Matters

The Company has a portion of its products manufactured on the mainland of the PRC where Bel is not subject to corporate income tax on manufacturing services provided by third parties. Hong Kong has a territorial tax system which imposes corporate income tax at a rate of 16.5% on incom e from activities solely conducted in Hong Kong.

The Company holds an offshore business license from the government of Macao. With this license, a Macao offshore company named Bel Fuse (Macao Commercial Offshore) Limited ("Bel Fuse Macao") has been established to handle the Company’s sales to third-party customers in Asia. Sales by this company primarily consist of products manufactured in the PRC. Bel Fuse Macao is subject to Macao's corporate tax rate of 12% on income from activities solely conducted in Macao.

Due to the practicality of determining the deferred taxes on outside basis differences in our investments in our foreign subsidiaries, management has not provided for deferred taxes on outside basis differences at December 31, 2025 and deemed that these basis differences will be indefinitely reinvested.

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Inflation and Foreign Currency Exchange

During the past three years, we do not believe the effect of inflation was material to our consolidated financial position or our consolidated results of operations. We are ex posed to market risk from changes in foreign currency exchange rates. Fluctuations of the U.S. dollar against other major currencies have not significantly affected our foreign operations as most sales continue to be denominated in U.S. dollars or currencies directly or indirectly linked to the U.S. dollar. Most significant expenses, including raw materials, labor and manufacturing expenses, are incurred primarily in U.S. dollars, Mexican pesos, the Chinese renminbi or the Israeli shekel, and to a lesser extent in British pounds, or I ndian ru pees. The Mexican peso depreciated by 5%, the Euro appreciated by 4%, the British pound appreciated by 3%, the Israeli shekel appreciated by 6% and the Chinese renminbi remained flat versus the U.S. dollar in 2025 compared to 2024. To the extent the renminbi, peso or shekel appreciate in future periods, it could result in the Company's incurring higher costs for most expenses incurred in the PRC, Mexico and Israel. The Company periodically uses foreign currency forward contracts to manage its short-term exposures to fluctuations in operational cash flows resulting from changes in foreign currency exchange rates as further described in Note 13 , "Derivative Instruments and Hedging Activities" . The Company's European entities, whose functional currencies are Euros and British pounds, enter into transactions which include sales that are denominated principally in Euros, British pounds and various other European currencies, and purchases that are denominated principally in U.S. dollars and British pounds. Such transactions, as well as those related to our multi-currency intercompany payable and receivable transactions, resulted in a net realized and unrealized currency exchange gain of $10.1 million in 2025, a loss of $1.9 million i n 2024 and a loss of $1.4 million in 2023 which were included in other income (expense), net on the consolidated statements of operations. Translation of subsidiaries' foreign currency financial statements into U.S. dollars resulted in translation adjustments, net of taxes, of $ 2.5 m illion and ($5.5) million for the years ended December 3 1, 2025 and 2024, respectively, which are included in accumulated other comprehensive loss on the consolidated balance sheets.

Liquidity and Capital Resources

Our principal sources of liquidity include $57.8 million of cash and cash equivalents at December 31, 2025, cash provided by operating activities and borrowings available under our credit facility. We expect to use this liquidity for operating expenses, investments in working capital, capital expenditures, interest, taxes, lease and purchase obligations, pension benefit obligations, dividends, purchases of common stock under our Repurchase Program, and dividends, debt obligations and other long-term liabilities. Our liquidity may also be utilized to fund potential acquisitions in future periods, as well as potential future cash requirements related to the Enercon acquisition, including potential Earnout Payments that may become due and the put-call options under the Enercon shareholders’ agreement, pursuant to which Bel has the current intention to purchase the remaining 20% interest by early 2027. We believe that our current liquidity position and future cash flows from operations will enable us to fund our operations, both in the next twelve months and in the longer term.

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Cash Flow Summary

During the year ended December 31, 2025, the Company's cash and cash equivalents decreased by $10.5 million.  This decrease was primarily due to the following:

n et repayments of long-term debt of $90.0 million;

p urchases of property, plant and equipment of $12.0 million;

d ividend payments of $3.5 million; and

d eferred financing costs of $0.7 million; partially offset by

●  n et cash provided by operating activities of $80.6 million;

●  p roceeds from the sale of property of $7.8 million; and

●  p roceeds from held to maturity securities o f $ 1.0   million;

During the year ended December 31, 2025, the Company’s operating activities demonstrated continued growth and operational efficiency, supported by strong cash generation and disciplined working capital management. Accounts receivable increased by $8.6 million, primarily due to higher sales volume compared to 2024. Notably, the Company improved its collection efficiency, as reflected by a decrease in days sales outstanding (DSO) to 64 days at December 31, 2025, from 68 days at December 31, 2024. This improvement underscores enhanced cash conversion from sales and effective receivables management. Inventories increased by $2.4 million over the prior year, primarily due to higher sales volumes and increased purchasing activity to support customer demand. The Company’s inventory turns improved to 2.5 times in 2025 from 2.1 times in 2024, indicating more efficient inventory utilization and stronger demand for products. Other operating cash flow line items, such as changes in accounts payable and accrued expenses, contributed positively to liquidity, as the Company maintained disciplined expense management and optimized payment cycles.

During the year ended December 31, 2024, accounts receivable decreased by $6.8 million primarily due to the lower sales volume in 2024 as compared to 2023. Days sales outstanding (DSO) increased to 68 days at December 31, 2024 from 55 days at December 31, 2023. Inventories increased by $24.8 million from the December 31, 2023 level primarily due to the inclusion of Enercon's inventory balance at December 31, 2024 of $42.7 million. Inventory turns were 2.1 times for the year ended December 31, 2024 and 3.1 times for the year ended December 31, 2023. Given the nature of Enercon’s manufacturing process and low unit quantity per order, a higher value of inventory is kept on hand for longer periods of time, with Enercon’s inventory turns being 1.6 times, bringing Bel’s consolidated inventory turn level down substantially.

During the year ended December 31, 2023, the Company's cash and cash equivalents increased by $19.1 million. This increas e was primarily due to cash provided by operating activities of $108.3 million, proceeds from the sale of property, plant and equipment of $6.0 million, proceeds from held to maturity securities of $19.9 million, and proceeds from the sale of our business in the Czech Republic of $5.1 million; partially offset by the purchases of held to maturity and marketable securities of $60.0 million, payments for our equity method investment in innolectric of $10.3 million, purchases of property, plant and equipment of $12.1 million, dividend payments of $3.5 million, and net repayments under our revolving credit line of $35.0 million. During the year ended December 31, 2023, accounts receivable decreased $22.5 million primarily due to the lower sales volume in the second half of 2023 as compared to the same period of 2022. DSO decreased to 55 days at December 31, 2023 from 58 days at December 31, 2022. Inventories decreased by $33.6 million from the December 31, 2022 level. Inventory turns were 3.1 times for the year ended December 31, 2023 and 2.7 times for the year ended December 31, 2022.

Cash and cash equivalents, held to maturity U.S. Treasury securities and accounts receivable comprised approxima tely 19.2% and 19.0 % of the Company's total assets at December 31, 2025 and December 31, 2024, respectively. The Company's current ratio (i.e., the ratio of current assets to current liabilities) was 3.0 to 1 and 2.9 to 1 at December 31, 2025 and December 31, 2024, respectively. At December 31, 2025 and 2024, $43.4 million and $48.4 million, respectively (or 75% and 71%, respectively), of cash and cash equivalents was held by foreign subsidiaries of the Company. During 2025, the Company repatriated $26.0 million of funds from outside of the U.S., with minimal incremental tax liability. We continue to analyze our global working capital and cash requirements and the potential tax liabilities attributable to further repatriation, and we have yet to make any further determination regarding repatriation of funds from outside the U.S. to fund the Company's U.S. operations in the future. In the event these funds were needed for Bel's U.S. operations, the Company would be required to accrue and pay U.S. state taxes and any applicable foreign withholding taxes to repatriate these funds.

Future Cash Requirements

The Company expects foreseeable liquidity and capital resource requirements to be met through its existing cash and cash equivalents, and anticipated cash flows from operations, as well as borrowings available under its revolving credit facility, if needed. The Company's material cash requirements arising in the normal course of business primarily include:

Debt Obligations and Interest Payments - The Company had $197.5 million outstanding under its revolving credit facility at December 31, 2025, as further described below and in Note 11, "Debt" . There were no mandatory principal payments due on the credit facility borrowings during 2025. The current balance of $197.5 million is due upon expiration of the credit facility on September 1, 2028. Anticipated interest payments due amount to $26.8 million, of which $10.0 million is expected to be paid in 2026 based on our debt balance and interest rate in place at December 31, 2025.

Lease Obligations - The Company has operating leases for its facilities used for manufacturing, research and development, sales and administration. There are also operating and finance leases related to manufacturing equipment, office equipment and vehicles. As of December 31, 2025, the Company was contractually obligated to pay future operating lease payments of $26.9 million, of which $9.2 million is expected to be paid in 2026, and future financing lease obligations of $1.3 million, of which $0.5 million is expected to be paid in 2026. See Note 18, "Leases," for further information.

Purchase Obligations - The Company submits purchase orders for raw materials to various vend ors throughout the year for current production requirements, as well as forecasted requirements. Certain of these purchase orders relate to special purpose material and, as such, the Company may incur penalties if an order is cancelled. The Company had outstanding purchase orders related to raw materials in the am ount of $81.5 million at December 31, 2025, of which $79.5 million is expected to be paid in 2026. The Company also had outstanding purchase orders related to capital expenditures which totaled $2.0 million at December 31, 2025, of which $1.4 million is expected to be paid in 2026.

Pension Benefit Obligations - As further described in Note 15, "Re tirement Fund and Profit Sharing Plan" , the Company maintains a Supplemental Executive Retirement Plan ("SERP"). At December 31, 2025, estimated future obligations under the plan amounted to $18.9 million. It is expected that the Company will pay $1.1 million in benefit payments in connection with the SERP during 2026. Included in other assets at December 31, 2025 is the cash surrender value of company-owned life insurance and marketable securities held in a rabbi trust with an aggregate value of $18.4 million, which has been designated by the Company to be utilized to fund the Company's SERP obligations.

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Dividends - The Company has historically paid quarterly dividends on its two classes of common stock, which am ounted to $3.5 million in each of  2025 and 2024. Consistent with the dividend rates declared in prior years, Bel's Board of Directors declared dividends on October 31, 2025 and again on February 17, 2026 on each of our two classes of common stock. These two quarterly payments, the first made in January 2026 and the second scheduled for later in the first half of 2026, comprise a total anticipated amount of $1.7 million.

Share Repurchase Program - In February 2024, Bel's Board of Directors authorized the repurchase of up to $25 million of the Company's common stock. The Repurchase Program does not obligate the Company to repurchase any dollar amount or number of shares, and the Repurchase Program may be suspended or terminated at any time. The timing and actual number of shares repurchased will depend on a variety of factors including price, market conditions, corporate and regulatory requirements and the consideration of other uses of cash including other investment opportunities. At December 31, 2025, the Company had an aggregate amount of $9.0 million of authorized repurchases under the program that had not yet been executed upon.

Tax Payments - At December 31, 2025, we had liabilities for unrecognized tax benefits and related interest and penalties of $17.5 million, all of which is included in other liabilities on our consolidated balance sheet. At December 31, 2025, we cannot reasonably estimate the future period or periods of cash settlement of these liabilities. See Note 10, "Income Taxes", for further discussion.

In addition to its cash requirements arising in the normal course of business described above, the Company has potential future cash requirements related to its acquisition of Enercon, whereby the Company has recorded earnout liabilities having a fair value as of December 31, 2025 in the amount of $6.6 million that would be paid in early 2026 and early 2027 in the event certain financial thresholds are achieved by the acquired business  based on the Purchase Agreement provision which provides for potential earnout payments of up to $5.0 million for each of the fiscal 2025 and fiscal 2026 earnout periods subject to the achievement of the financial thresholds. Further, there are put-call options associated with the redeemable noncontrolling interest in early 2027. As described elsewhere in this Annual Report, we have the current intention to purchase the remaining 20% interest in Enercon by early 2027 in accordance with the terms and subject to the conditions of the shareholders' agreement. At December 31, 2025, the redemption value related to the redeemable noncontrolling interest was $93.2 million. See Note 3, "Acquisition" and Note 6, "Fair Value Measurements" for further information.

Contractual Obligations

The following table sets forth at December 31, 2025 the amounts of payments due under specific types of contractual obligations, aggregated by category of contractual obligation, for the time periods described below.

Payments due by period (dollars in thousands)

Contractual Obligations

Total

Less than 1 year

1-3 years

3-5 years

More than 5 years

Long-term debt obligations(1)

Interest payments due on long-term debt(2)

Capital expenditure obligations

Operating leases(3)

Raw material purchase obligations

First quarter 2026 quarterly cash dividend declared

Total

Represents the principal amount of the debt required to be repaid in each period.

Includes interest payments required under our CSA related to our revolver balance.  The interest rate in place under our Credit and Security Agreement on December 31, 2025 was utilized and this calculation assumes obligations are repaid when due.

Represents estimated future minimum annual rental commitments primarily under non-cancelable real and personal property leases as of December 31, 2025.

Credit Facility

The Company is a party to a credit agreement, as further described in Note 11, "Debt" . The Credit Agreement contains customary representations and warranties, covenants and events of default. In addition, the Credit Agreement contains financial covenants that measure (i) the ratio of the Company’s total funded indebtedness, on a consolidated basis, less the aggregate amount of all unencumbered cash and cash equivalents, to the amount of the Company’s consolidated EBITDA (“Leverage Ratio”) and (ii) the ratio of the amount of the Company’s consolidated EBITDA to the Company’s consolidated fixed charges (“Fixed Charge Coverage Ratio”). If an event of default occurs, the lenders under the Credit Agreement would be entitled to take various actions, including the acceleration of amounts due thereunder and all actions permitted to be taken by a secured creditor.

At December 31, 2025, the Company had $197.5 million outstanding under its Credit Agreement. The unused credit available under the credit facility at December 31, 2025 was $202.5 million, of which we had the ability to borrow the full amount without violating our Leverage Ratio covenant based on the Company's existing consolidated EBITDA. At December 31, 2025, the Company was in compliance with its debt covenants, including its most restrictive covenant, the Leverage Ratio.

At December 31, 2025, the Company was also a party to two pay-fixed, receive-variable interest rate swap agreements in the aggregate amount of $60 million through August 2026. See Note 13, "Derivative Instruments and Hedging Activities" for further details.

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Critical Accounting Estimates

The Company's consolidated financial statements include certain amounts that are based on management's best estimates and judgments. The Company bases its estimates on historical experience and on various other assumptions, including in some cases future projections, that are believed to be reasonable under the circumstances. The results of these estimates form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. Different assumptions and judgments could change the estimates used in the preparation of the consolidated financial statements, which, in turn, could change the results from those reported. Management evaluates its estimates, assumptions and judgments on an ongoing basis.

Based on the above, we have determined that our most critical accounting estimates are those related to business combinations, inventory valuation, goodwill and other indefinite-lived intangible assets, and those related to our pension benefit obligations.

Business Combinations

In a business combination, we allocate the fair value of purchase price consideration to the identifiable assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree based on their estimated fair values. The excess of the fair value of purchase price consideration over the fair values of these identifiable assets and liabilities is recorded as goodwill. Such valuations require management to make significant estimates and assumptions, especially with respect to intangible assets. Significant estimates in valuing certain intangible assets include, but are not limited to, future expected cash flows from acquired customers or earned through the use of acquired trademarks, estimated royalty rates, acquired technology, useful lives and discount rates. Management’s estimates of fair value are based upon assumptions believed to be reasonable, but which are inherently uncertain and unpredictable and, as a result, actual results may differ from estimates.

Inventory Valuation

Inventories consist of raw materials and purchased components and are stated at the lower of cost and net realizable value. Material costs are principally determined by standard cost or the weighted moving average method, both of which approximate actual cost. The Company reduces the carrying value of its inventory for estimated obsolescence or unmarketable inventory by an amount equal to the difference between the cost of inventory and the estimated market value based on the aforementioned assumptions. Our reserve calculations are based on historical experience related to slow-moving inventory in addition to specific known concerns in the case of products going end-of-life or customer cancellations. As of December 31, 2025 and 2024, the Company had reserves for excess or obsolete inventory of $18.0 million and $1 4.5 million, respectively. In the event of a sudden decrease in demand for our products, or a higher incidence of inventory obsolescence, the Company could be required to increase its inventory reserve, which would have an unfavorable impact on our gross margin.

Goodwill

We use a fair value approach to test goodwill for impairment. We must recognize a non-cash impairment charge for the amount, if any, by which the carrying amount of goodwill exceeds its implied fair value. We derive an estimate of fair values for each of our reporting units using a combination of an income approach and an appropriate market approach, each based on an applicable weighting. We assess the applicable weighting based on such factors as current market conditions and the quality and reliability of the data. Absent an indication of fair value from a potential buyer or similar specific transactions, we believe that the use of these methods provides a reasonable estimate of a reporting unit's fair value.

Fair value computed by these methods is arrived at using a number of factors, including projected future operating results, anticipated future cash flows, effective income tax rates, comparable marketplace data within a consistent industry grouping, and the cost of capital. There are inherent uncertainties, however, related to these factors and to our judgment in applying them to this analysis. Nonetheless, we believe that the combination of these methods provides a reasonable approach to estimate the fair value of our reporting units. Assumptions for sales, net earnings and cash flows for each reporting unit were consistent among these methods.

Income Approach Used to Determine Fair Values

The income approach is based upon the present value of expected cash flows. Expected cash flows are converted to present value using factors that consider the timing and risk of the future cash flows. The estimate of cash flows used is prepared on an unleveraged debt-free basis. We use a discount rate that reflects a market-derived weighted average cost of capital. We believe that this approach is appropriate because it provides a fair value estimate based upon the reporting unit's expected long-term operating and cash flow performance. The projections are based upon our best estimates of projected economic and market conditions over the related period including growth rates, estimates of future expected changes in operating margins and cash expenditures. Other significant estimates and assumptions include terminal value long-term growth rates, provisions for income taxes, future capital expenditures and changes in future cashless, debt-free working capital. We applied a combined weighting of 75% to the income approach when determining the fair value of our reporting units.

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Market Approach Used to Determine Fair Values

The market approach estimates the fair value of the reporting unit by applying multiples of operating performance measures to the reporting unit's operating performance (the "Guideline Publicly Traded Company Method"). These multiples are derived from comparable publicly traded companies with similar investment characteristics to the reporting unit, and such comparables are reviewed and updated as needed annually. We believe that this approach is appropriate because it provides a fair value estimate using multiples from entities with operations and economic characteristics comparable to our reporting units and the Company as a whole. The key estimates and assumptions that are used to determine fair value under this market approach include current and forward 12-month operating performance results and the selection of the relevant multiples to be applied. Under the Guideline Publicly Traded Company Method, a control premium, or an amount that a buyer is usually willing to pay over the current market price of a publicly traded company, is applied to the calculated equity values to adjust the public trading value upward for a 100% ownership interest, where applicable.

In order to assess the reasonableness of the calculated fair values of our reporting units, we also compare the sum of the reporting units' fair values to our market capitalization and calculate an implied control premium (the excess of the sum of the reporting units' fair values over the market capitalization). We evaluate the control premium by comparing it to control premiums of recent comparable market transactions. If the implied control premium is not reasonable in light of these recent transactions, we will reevaluate our fair value estimates of the reporting units by adjusting the discount rates and/or other assumptions.

We applied a combined weighting of 25% to the market approach when determining the fair value of our reporting units.

As indicated in Note 5, "Goodwill and Other Intangible Assets" , the fair value of each of our four reporting units exceeded their respective carrying values by a very large margin (ranging from 56% to 540%) . If market factors change and the discount rate utilized in the fair value calculation changes, it would result in a higher or lower fair value of our reporting units. The discount rates utilized in our October 1, 2025 impairment test ranged from 10.0% to 12.0%. An increase in the discount rate assumption of 50 basis points would have impacted the fair values of our reporting units, and would have reduced the excess of fair value over carrying value to a revised range of 51% to 517%. Further, if we are unable to achieve the projected revenue growth rates or margins assumed in our projections, this would also impact the fair value of our reporting units. If we were to change our reporting unit structure again or if other events and circumstances change (such as a sustained decrease in the price of our common stock, a decline in current market multiples, a significant adverse change in legal factors or business climates, an adverse action or assessment by a regulator, heightened competition, strategic decisions made in response to economic or competitive conditions or a more-likely-than-not expectation that a reporting unit or a significant portion of a reporting unit will be sold or disposed of), we may be required to record impairment charges in future periods. Any impairment charges that we may take in the future could be material to our consolidated results of operations and consolidated financial condition.

The Company conducted its annual goodwill impairment test as of October 1, 2025, and no impairment was identified at that time.  Management has also concluded that the fair value of its goodwill exceeded the associated carrying value at December 31, 2025 and that no impairment exists as of that date. S ee Note 5, "Goodwill and Other Intangible Assets," for details of our goodwill balance and the goodwill review performed in 2025 . We will continue to monitor goodwill on an annual basis and whenever events or changes in circumstances, such as significant adverse changes in business climate or operating results, changes in management's business strategy or significant declines in our stock price, indicate that there may be a potential indicator of impairment.

Indefinite-Lived Intangible Assets

The Company tests indefinite-lived intangible assets for impairment annually on October 1, or upon a triggering event, using a fair value approach, the relief-from-royalty method (a form of the income approach). The Company conducted its annual impairment tests as of October 1, 2025 and in connection with its analysis, did not identify any impairment as of that date. Management has also concluded that the fair value of its trademarks exceeds the associated carrying values at December 31, 2025 and that no impairment existed as of that date. At December 31, 2025, the Company's indefinite-lived intangible assets related solely to trademarks.

Pension Benefit Obligations

Net periodic benefit cost for the Company's SERP totaled $1.1 mi llion in 2 025, $1.4 million in 2024, and $1.3 million in 2023. Benefit plan information for financial reporting purposes is calculated using actuarial assumptions including a discount rate for plan benefit obligations. The changes in net periodic benefit cost year-over-year are attributable to demographic changes within the plan, as well as any changes to the discount rate or the assumption around the future annual increases in compensation. The discount rate utilized for the net periodic benefit cost was 5.50% at December 31, 2025 and 4.75% at December 31, 2024. An increase or decrease in this 2025 discount rate assumption of 25 basis points would have increased/decreased the 2025 periodic benefit cost by less than $0.1 million.   T he discount rate utilized for the pension benefit obligation was 5.25 % at December 31, 2025 and 5.50% at December 31, 2024. An increase in this 2025 discount rate assumption of 25 basis points would have reduced the pension benefit obligation by $0.4 million at December 31, 2025. A decrease in this 2025 discount rate assumption of 25 basis points would have increased the pension benefit obligation by $0.5 million at December 31, 2025.

Other Matters

The Company believes that it has sufficient cash reserves to fund its foreseeable working capital needs. It may, however, seek to expand such resources through bank borrowings, at favorable lending rates, from time to time. If the Company were to undertake another substantial acquisition for cash, the acquisition would either be funded with cash on hand or would be financed through cash on hand and through bank borrowings or the issuance of public or private debt or equity. If the Company borrows additional money to finance acquisitions, this would further decrease the Company's ratio of earnings to fixed charges, and could further impact the Company's material restrictive covenants, depending on the size of the borrowing and the nature of the target company. Under its existing credit facility, the Company is required to obtain its lender's consent for certain additional debt financing and to comply with other covenants, including the application of specific financial ratios, which may limit the Company’s ability to pay cash dividends on its common stock and/or the amounts thereof, including to the extent that payment of any such dividend would cause noncompliance with any such financial ratio. Depending on the nature of the transaction, the Company cannot assure investors that the necessary acquisition financing would be available to it on acceptable terms, or at all, when required. If the Company issues a substantial amount of stock either as consideration in an acquisition or to finance an acquisition, such issuance may dilute existing shareholders and may take the form of capital stock having preferences over its existing common stock.

New Financial Accounting Standards

The discussion of new financial accounting standards applicable to the Company is incorporated herein by reference to Note 1, "Description of Business and Summary of Significant Accounting Policies."

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