Ladies and gentlemen, good morning and welcome to the Bel Fuse Inc. third quarter 2025 earnings conference call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone requires operator assistance during the conference call, please signal the operator by pressing star then zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn the call over to Jean Marie Young with Three Part Advisors. Please go ahead. Thank you, and good morning everyone. Before we begin, I'd like to remind everyone that on today's conference call we will make statements relating to our business that will be considered forward-looking statements under federal securities laws, such as statements regarding the company's expected operating and financial performance for future periods, including guidance for future periods in 2025. These statements are based on the company's current expectations and reflect the company's views only as of today and should not be considered representative of the company's views as of any subsequent date. The company disclaims any obligation to update any forward-looking statements or outlook. Actual results for future periods may differ materially from those projected by these forward-looking statements due to a number of risks, uncertainties, and other factors. These material risks are summarized in the press release that we issued after market close yesterday. Additional information about the material risks and other important factors that could potentially impact our financial performance and cause actual results to differ materially from our expectations is discussed in our filings with the Securities and Exchange Commission, including our most recent annual report on Form 10-K for the fiscal year ended December 31, 2024, and our quarterly reports and other documents that we have filed or may file with the SEC from time to time. We may also discuss non-GAAP results during this call and reconciliations of our GAAP results to non-GAAP results have been included in our press release. Our press release and our SEC filings are all available at the IR section of our website. Joining me today on the call is Farouq Tuweiq, President and CEO, and Lynn Hutkin, CFO. With that, I'd like to turn the call over to Farouq. Thank you, Jean, and we appreciate everyone joining our call this morning. Thank you. During the third quarter, we continue to see robustness across most of our end markets, particularly within the commercial, aerospace, defense, and networking sectors, with continued steady rebound within our distribution channel and consumer lines. Our profitability this quarter surpassed our expectations thanks to the continued dedication and discipline of our global team. This strong performance reflects our global team's dedication from pursuing strategic business opportunities and investing in key customers to effective procurement, cost management, operational efficiencies, and improved fixed cost absorption resulting from increased sales volumes. As part of our ongoing commitment to operational excellence, we are continuously reviewing our global footprint with an eye towards scaling Bel for long-term performance. In October, we made the strategic decision to transition operations from an additional facility in China to a subcontractor during the fourth quarter of 2025. This move follows a thorough evaluation of internal manufacturing costs versus outsourcing, and outsourcing in this instance proved to be the better alternative. We expect the transition to largely be completed by December 2025, with a fair amount of annualized cost savings to be occurring as we head into next year. We're also progressing with the restructuring initiative at our Glen Rock, Pennsylvania facility following the sale of the building in the second quarter of 2025. We are now transitioning the remaining manufacturing operations to other Bel sites, with full completion expected by early 2026. The Glen Rock initiative is projected to incur minimal incremental restructuring cost in Q4 2025, and throughout this process, we have already realized significant annualized savings as we had previously discussed. To put this in perspective for some of our newer investors, our restructuring efforts over the past four years have resulted in seven facility consolidations in addition to the sale of our Czech business in 2023. These actions have resulted in an over 600,000 plus net square footage reduction in our annual manufacturing lines while leaning into automation and investing for the future of our factories. I recall that again just to put a pin on it in terms of where we are heading, which is the more important part as we approach the end of 2025 and look ahead to 2026, our focus is and has been firmly on our go to market strategy and drive both organically and inorganically. Throughout the past few months we have been meeting with Bel's key leadership across the world to identify the areas, methods, and resources needed to better achieve top line growth. While we're in the early stages of strategic planning, I want to emphasize the exciting collaboration and energy within Bel's extended leadership team as we chart our next chapter. One of the common themes emerging is shifting our historical focus from products to end markets and customers to ensure we are delivering the totality of Bel to them. This mindset shift will take a while to cement but is a logical step for a company such as Bel given the impressive breadth of our product portfolio. This is an exciting effort and one that is key for a long cycle design business such as Bel. In addition to driving growth, we're investing in the foundational structures that support our business, especially around IT systems and data infrastructure. To give you an example of some of the current initiatives, we are in the process of updating and implementing a CRM platform, travel management software, developing various dashboards, and tools for key financial and operational metrics and KPIs. These enhancements will enable our leaders to make faster data driven decisions, strengthen accountability, and improve overall performance. Standardizing our processes and terminology will also allow us to scale efficiently and seamlessly integrate future acquisitions. In summary, there is a tremendous amount of activity and excitement underway at Bel, all aligned to our common goal of growth and continued maturity. With that, I'll turn the call over to Lynn to run through the financial highlights from the quarter and some color on the Q4 outlook. Lynn, Thank you Farouq. From a financial perspective, we delivered another strong quarter marked by continued margin expansion and robust sales growth across all segments. Third quarter 2025 sales totaled $179 million, representing a 44.8% increase compared to the same quarter last year. In addition to the $34.4 million of incremental revenue in the current quarter related to the Enercon acquisition, each of our three product segments achieved double-digit organic growth over last year's third quarter. Profitability improved alongside sales, with gross margin rising to 39.7% in Q3 2025, up from 36.1% in Q3 2024. This margin expansion was driven by improved absorption of our fixed costs in our factories with the higher sales volumes and by strong execution within each of our segments in maintaining discipline around the SKU level profitability. Turning to some details at the product group level, Power Solutions and Protection delivered another exceptional quarter with sales reaching $94.4 million, representing a 94% increase compared to the third quarter of last year. Excluding A and D, organic sales grew by $11.3 million or 23.2%, reflecting strong demand for our power products in key markets. Sales of power products for networking applications increased by $11.4 million. Growth within the networking market reflects both rebound in demand following a long period of inventory destocking and new incremental demand driven by AI. As we've noted in the past, it is difficult to isolate exactly how much of this growth is AI driven, but to provide a comparable metric to prior quarters, our third quarter sales into AI-specific customers were $3.2 million in Q3 2025, up from $1.8 million in Q3 2024. Other areas of strength within the power segment were seen in sales of our Fuse products, which were up $1.8 million or 41% from Q3 2024, and an increase of sales into consumer applications of $2.3 million or 39% from Q3 2024. As an important note, Fuse products and consumer-facing products have very short lead times and are generally the first areas where we see the pickup in intra-quarter turns, which is a positive indicator for the overall business as an offsetting factor. e Mobility sales were $2.2 million in Q3 2025 versus the $3.4 million in Q3 2024, and sales into the rail market were $8 million in Q3 2025 versus $9 million in Q3 2024. Gross margin for the segment came in at 41.8% for the quarter, up 240 basis points from Q3 2024, largely driven by the higher sales volumes and better absorption of fixed costs at our factories. Turning to our Connectivity Solutions group, sales for the third quarter of 2025 reached $61.9 million, up 11% compared to Q3 2024. This growth was primarily driven by strong performance in commercial aerospace applications where sales totaled $18.8 million, an increase of $6.3 million or 50.5% year- over- year. Connectivity product sales into defense applications also continued to be robust in the third quarter with sales rising $3.6 million, a 31.2% increase from the prior year quarter. Contained within our defense number here are sales into space applications which amounted to $2.5 million in Q3 2025, up 25% from Q3 2024, while Connectivity sales through the distribution channel were down $1.9 million or 9.7% versus Q3 2024. It's important to note that this reflects the shift of an end customer out of the distribution channel and who we are now servicing directly. Profitability within the Connectivity segment continued to improve, with gross margin for the group rising to 40.3% in Q3 2025 from 36.6% in Q3 2024. This margin expansion reflects the benefits of operational efficiencies achieved through facility consolidations completed last year and a more favorable product mix. These positive factors were partially offset by minimum wage increases in Mexico and foreign exchange pressures related to the Peso. Lastly, our Magnetic Solutions group delivered a strong quarter with sales reaching $22.7 million, an 18% increase compared to Q3 2024. This performance was consistent with the expectations we shared on our last earnings call and was primarily driven by higher shipments to a major networking customer. Gross margin for the group improved to 29% in Q3 2025, up from 27.3% in Q3 2024. This margin expansion was supported by higher sales base and the benefits of facility consolidations in China, which helped reduce fixed overhead costs. These gains were partially offset by minimum wage increases in China and unfavorable foreign exchange impacts related to the Renminbi. At September 30, 2025, R&D expenses totaled $7.5 million in Q3 2025, representing an increase of $2.1 million compared to Q3 2024. This increase was primarily attributable to the inclusion of Enercon's R&D costs, which amounted to $2 million during Q3 2025. Looking ahead, we anticipate that R&D expenses in future quarters will generally remain consistent with the Q3 2025 level as we continue to invest in new technologies and solutions to support our customers and drive long-term growth. Our selling, general, and administrative expenses for the third quarter of 2025 were $32.8 million, or 18.3% of sales, up from $26.7 million in Q3 2024. Importantly, SG&A as a percentage of sales declined from 21.6% last year, reflecting continued progress in managing our cost structure as our business grows. The increase in total SG&A dollars was primarily driven by the inclusion of Enercon's SG&A expenses, which contributed $6.6 million to the quarter, and our U.S. medical claims continued to be high in the third quarter. As noted in prior quarters, our legacy level of SG&A expense was maintained during our period of reduced sales such that we believe we are already spending the right amount on fixed SG&A infrastructure needed to support future growth. Turning to our balance sheet and cash flow, we closed the quarter with $57.7 million in cash and securities, down $10.5 million from year-end. This decrease was primarily driven by our proactive efforts to strengthen the balance sheet, including paying down $62.5 million in long-term debt, resulting in $225 million of total debt outstanding at September 30, 2025. Additionally, we made $2.5 million in dividend payments and invested $8.6 million in capital expenditures to support growth and efficiency initiatives. These outflows were partially offset by $7.8 million in proceeds from property sales and $1 million from the sale of held-to-maturity securities earlier in the year. Looking ahead to the fourth quarter of 2025, we continue to see strength across all three segments. Historically, we have seen seasonality in the fourth quarter with fewer production days due to the holidays being celebrated around the world. In light of this historical trend and based on the information available as of today, we expect Q4 2025 sales to be in the range of $165 million- $180 million. We noted in the second and third quarters that the trend of intra-quarter sales has resumed, and this range assumes that trend continues into the fourth quarter. With that, I'd now like to turn the call back to the operator to open it up for questions. Thank you. Ladies and gentlemen, we will now begin the question and answer session. If you would like to ask a question, please press star and one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star and two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Ladies and gentlemen, we will wait for a moment while we poll for questions. The first question comes from the line of Bobby Brooks from Northland Capital Markets. Please go ahead. Hey, good morning guys. Thank you for taking my question. Just wanted to circle back on those last. The last piece that Lynn, you were touching on for the fourth quarter guide, obviously something that caught my eye was, yeah, bucking kind of the historical trend of 4Q being lower than 3Q. You mentioned that trends of intra quarter sales have resumed and that the range assumes that continues in the fourth quarter. I was just wondering if we could just discuss what other factors might be at play driving that outlook. A little bit more detail because I feel like that's a really kind of exciting development for you guys. Yeah. Hey, Bobby, I'll let Lynn jump in here with more details, but I just want to call out a comment that caught my ear here, which is this kind of step down over Q4. I think you said bucking the seasonality trend. I think if you look at, you know, we see a potential of that. If you just look at the range that we put out there, $165 million- $180 million versus let's say the $179 million that was delivered. Possibly. When we look at the range, I think it's broader than that in the sense that we do expect some seasonality. Right. End of the day we're going to have fundamentally less working days as we head into the holiday season and year end and as we look around the world and also just various holidays, whether it be kind of Golden Week or some of the holidays, for example, in Israel. I just want to be mindful that we do have less working days. Could it happen? Sure. The good news is we're expecting it to be a good quarter and maybe we beat Q3. I just want to be mindful of that. I'll turn that over to Lynn here. Yeah. Just to add to what Farouq said, I think that we are seeing continued strength in areas like commercial air defense, AI space. We are continuing to see the rebound coming through in networking and distribution. All of these trends are continuing from Q3 into Q4. It is definitely end market strength continuing. To Farouq's point, just mathematically there are fewer production days in the quarter. There is Golden Week in China, which was the first week of October, and then there is Thanksgiving and all of the winter holidays throughout the world in December. Those are the pieces. If you stripped out the holidays, the messaging would likely be different. If you look back at our trend historically, having a dip from Q3 to Q4 is pretty natural for us. I really appreciate that. I really appreciate that color. I definitely can appreciate that. A lot of the ranges would be 4Q coming in lower than 3Q. What just caught my eye was the guidance that you gave matched what the guidance was for 3Q. Usually your guidance is for even the high end of the range being lower than what 3Q was. I can appreciate those puts and takes you just laid out. The other pieces, just like on those legacy customers and the order trends, is it fair to assume that though? It seems like it's fair to assume that those are still trending positively. Maybe could you give some more context as to how to think about where they could go? Obviously we're coming off trough levels in 2024, but do you think they can, do you feel like they are continuing to improve or are they just at an improved level now, stabilizing? Just curious to hear more on that. I think if we look, if we zoom out and we look at kind of, let's say the last five years, 2020, 2025, I think the industry would generally agree with the statement that it's been anything but normal in terms of the extreme extended lead times that happened in the earlier part of the time frame I just laid out to an extended dip, if you will, where the industry was down for a longer time than normal. You overlay a lot of geopolitical and economical uncertainties. I think the reason I point that out, I'd say is it's still a little bit, I would say not normal. I think what we're seeing is a little bit of maybe hesitation, if you will, on the parts of the customers and kind of robustly coming back. The good news is that the attitudes have changed a little bit, I think from a historical perspective. What we are seeing in our business and we look at backlog and discussions, there's definitely a positive outlook. I think maybe if you look back at again we're speak we have a lot of customers in a lot of places, so just general terms here but generally we'd see people maybe coming back a little bit stronger. I think if you look at the industry wide and I was at a conference last week, you know, there's a little bit of timidness. People are maybe not investing as much in a buffer stock and really more kind of just ordering as needed. What we really look at is the end demand. Our customers demand. We're in a B2B business. What does their demand cycles look like? Where are their products going and are they growing? The answer is yes, as reflected with our number and with our guide. We like the outlook, but I think it's hard to generalize that. Everybody is feeling all yippee about the world. Nonetheless we like our positioning, we like our where we are with our customers and I think we'll have pretty good outcomes here. Our book-to-bill was positive again this quarter. That's the third consecutive quarter of a positive book-to-bill ratio. We hadn't seen that trend since back in 2022. I think just generally we're seeing more activity, which is positive. Got it. Just last one for me is I was really impressed, Lynn, when you were going through each kind of segment of the Power, and it really seems like Power was driven, these robust results in Power were driven across many different segments. It was nice to hear you break out what Enercon was as well. Just curious on Enercon, you know, is. Has. Is the integration of them into you guys kind of wrapped up now, or is there still a bit more to go? I'm just curious, obviously you guys are working on the long lead time projects, but any early reads on kind of cross selling opportunities maybe started to bubble up here? Yeah. I would say I think we want to be just mindful of the word, you know, integration because the plan was never kind of a, let's say, classical approach to integration. Right. From our, when we think about integration, it's really around alignment from a go to market and tackling opportunities and co selling and making sure that we are kind of creating opportunities together. Obviously in Europe, it's a little bit of a different playbook as we've talked about in the past. Right. Just in terms of trying to manufacture a little bit more there and being more present in our customers' backyards. Putting all that aside, I think we're definitely moving in the right direction. There's definitely, obviously more work to be done, but we are seeing some nice, let's say, early sparks of where one side of the house is bringing an opportunity to the other side of the house. I think our, let's call it lead sharing, co tackling is better, but we do have more room to go. Keeping in mind that while we also want to do that, it is a very busy market. Right. Step one, we got to do our day jobs and get out and push and we're seeing the benefits of that strategy, but also want to make sure that we're more aligned. I would say we like what we're doing. We could do a little bit more and we plan on doing a little bit more. Fair enough. Appreciate the call and congrats on the great quarter. I'll turn it over to the Q. Thanks, Bobbi. Thank you. Thank you. We take the next question from the line of Theodore O'Neill from Litchfield Hills Research. Please go ahead. Yeah, thanks very much and congratulations on the good quarter. Lynn, you mentioned in your prepared remarks you saw a shift. You had a shift of a customer out of distribution to service directly. I had three questions related to that. How often does that happen? What determines the shift, and how does the distributor feel about it? First of all, thank you for the question there, Theo. We've kind of talked about in the past, distribution is a very dynamic channel and they're great and key partners for us and within our industry. It's really hard to paint this in a broad stroke, but I'll try my best. Some customers, while we may design and work with them directly, ultimately want the distributor to aggregate all their purchases. We may start the relationship direct and it goes into the distribution channel to give them some kind of fixed fee. The inverse of that also happens where a customer comes through a distribution and then we develop something together and it can be distributed and worked through the distributor or sometimes it does come out. It happens both ways. I would also say some of the guiding principles on that include minimum order quantity. If it's something smaller, we'd want it to go through distribution. Sometimes we push people into the distribution channel to really maximize our cost to service these customers model. It's definitely a dynamic channel. When we look at distribution, it's a great discovery channel for new customers. I wouldn't say we're doing anything unusual in our industry because at the same time, we're not looking to burn the relationships. This is pretty standard. The other thing is not all distributors are the same. There are some folks that really focus on kind of low quantities. As things scale, they don't want you in the channel, so you take it out directly. Other folks more, you know, if it's big and opening up doors. The answer is depends. I wouldn't say anything unnatural or odd happened here. Okay, thanks for the color on that. What's the M&A opportunity looking like for you right now? Yeah, I mean, I think we've been very clear. We like our balance sheet. We continue to pay down our balance sheet. We like where the direction of just paying down more heading into Q4 and to next year is going. We feel like we are in a very good position to do an M&A deal. I think really the question we tend to think about is how big and what is it. When I say how big, it's both in terms of just size and scale complexity and also purchase price. Right. Today I would say it's still not a healthy M&A environment. I think we are seeing a step up in terms of opportunities versus Q1, Q2 this year. We are seeing more shots on goal. I would not classify it as normal yet, but we definitely have some opportunities ahead of us that we're kind of working through. I would also say it feels like if you look at our course of a quarter, we always have something live. The question is, do you want to strike and do you like the business fundamentals. Hopefully that answers our question. Theo. Yep, thanks very much. Thank you. Thank you. We take the next question from the line of Jim Ricchiuti from Needham & Company. Please go ahead. Thanks. Good morning. Apologize if you gave some of this detail in the presentation. I joined a little late, but I did hear something regarding the ongoing transition with some of your manufacturing footprint, I think. Did you say you're divesting a facility in China, if I understood you correctly, are you partnering with a contract manufacturer on these products? If I missed it, did you provide any detail on which product areas are affected and to what extent this is going to have an impact on margins, or is it fairly small? It's within our Magnetics segments and we basically went through an analysis of whether it was more cost efficient for us to be manufacturing internally versus outsourcing that manufacturing. In this case, we chose that outsourcing was the better alternative. As far as impact on gross margin, that would be about $1 million. A year, give or take. Obviously, we're in the process of moving that, but it will be positive. More importantly, I'd say than that, Jim, is allowing us focus on the things that we excel at. Right. Hopefully it unlocks more bandwidth and brainwidth for us to pursue things that have a better ROI for us. Got it. The strength you're seeing in networking, I was wondering if you could maybe drill down into that a little bit. Is that being driven by just the increased AI investment that we're all hearing about, or is it simply the distribution channel having just burned off the excess inventory that was out there? Maybe it's a combination of both. Yeah. In networking, and if we talk about, are you asking about a particular segment or just in general, Jim? I'm. Talking about networking because you did highlight that as one of the areas. Right. If we're talking about the Power segment we had mentioned, it's really a combination of both of those factors that you just said. There is some rebound happening coming off of a couple of years of destocking that we went through, but we're also seeing new incremental demand related to AI. It's a mix of those two that's driving the growth in networking. Lynn, you mentioned, I thought book-to-bill was above one. Is that right? Did you. Can you characterize the bookings by the three main product areas? Whether there was much variability among the three. Each of the segments were above one. We saw positive book-to-bill across all three segments. Great. Thank you. Sure. Thank you. We take the next question from the line of Greg Palm from Craig-Hallum, please go ahead. Hey guys, this is Danny Eggerichs on for Greg today. Congrats on the solid results here. Thank you. I think just first off, maybe kind of a broader question on demand, you're seeing from each of your respective geographies. Anything to call out in terms of outperformance or underperformance? Maybe specifically on China, I know last quarter we saw kind of the pause and then the resumption of order patterns. Maybe just what you're seeing current day and whether those have just returned to business as usual. Yeah, I think that's a good question. I think given our end markets, taking a step back and saying the numbers move around a little bit, but by far two thirds plus of our business is kind of exposed to U.S.-based customers. When we look at those, we also see that A&D is our largest end market today, which kind of lends itself both to the U.S., Israel, and Europe. When we look at geographies within the lens of the end markets, I'd say to you, U.S.-based customers and Israeli-based customers are probably leading the way. Also, keep in mind the networking side. Those are the vast majority of the people we spend time with. Asia is our smallest exposure, and then Europe, Israel is in the middle. Right. From a mathematical perspective, we're going to really kind of move the needle as we see our U.S. and Israel business moves predominantly in terms of demand environment. I'd say the U.S. seems a little bit more healthier, broadly speaking. When we look at Europe, I think it's a little bit of a mixed bag. Our rail business is a fair amount in Europe, for example. That was a little bit down. EV/eM obility, which sits in our Power group, tends to be more European exposure. Obviously, there's other things going on in that sector, but Europe I'd say is a mixed bag. It really depends on what it is you're talking about in terms of end market exposure. Asia is kind of an interesting place for us. It is a small place, but we have throughout this year invested in the senior leadership within our sales organization in Asia. I think we're seeing some nice opportunities coming out of that. We like what we're seeing, but Asia generally is a smaller play for us. Also, keep in mind that for us and the end markets we play in, we're not really a heavy consumer market business. We're not auto and we're not a race to the bottom on pricing. Asia for us is a selective strategic play where we pick our spot. We can do more in Asia. We are planning on doing more in Asia, but I would say that that's going to be round robin there on geographies. Yeah, got it. That's all really helpful. Maybe if I can hit on the Power segment and specifically kind of the gross margin there. I think kind of same thing we saw last quarter where, you know, this quarter you see even a bigger sequential step up in revenue, but that gross margin kind of stays flat or maybe even slightly steps down. I know last quarter was kind of the legacy business outgrowing Enercon and kind of being a negative mix factor there. I guess how should we think about that as Power continues its growth trajectory and when should we think about kind of that gross margin hooking up with the revenue growth and seeing some expansion there? Yes, I think on the gross margin side for Power, I mean there's a few different factors going on. Obviously the Enercon acquisition is additive to our legacy Power margins. I think the one thing to keep in mind both in Q3 and going forward here is there are two currencies within the Power segment where there could be margin pressure. We have the Israeli Shekel related to the Enercon business and then also the Renminbi related to the China facility that we have within Power, and we don't have a natural hedge in place. We do have some hedging programs, but they're not hedging in all exposure. That's something that we just need to be mindful of because that can move margins a little bit. Also keeping in mind, some of our other margin businesses like e Mobility and Rail are down and those tend to be higher margin. I think the bigger discussion is, today we are at a point where I would say we're at great levels of gross margin. If we're trying to think about growth, what is the opportunity there to expand to new customers, new offerings, and new products versus having an extremely strict line on gross margin? That's kind of something we're thinking about. How do we smartly think about that to ultimately drive EPS all the way down? As we've said in the past, to a large degree, SG&A and R&D are relatively range bound. How do we really get some operational leverage from that cost structure to continue to drive the top line? These are things that we're all thinking about. I would say today we're definitely up there in terms of performance on margins. Okay. Yeah. Maybe that kind of plays into my last question here, which is kind of the Q4 guide and the gross margin range. Just looking back year to date, the gross margin's kind of been at like 39%. Obviously, revenue levels in Q4 suggest, you know, higher than, quite a bit higher than what we saw in the first half, you know, at the midpoint here. I'm sure it's a lot of those factors that you just talked about. Any other things within that gross margin assumptions, maybe mix, or maybe there's a little bit of conservatism built in there? Any thoughts there? I think it's a couple of factors. One is our Magnetics group has been depressed over the last couple of years. As that rebounds, it is our lowest gross margin segment. If you're looking at our gross margin in total on a consolidated basis, that would have some downward pressure on it as Magnetics grows into a larger piece of the overall pie. That's one piece to keep in mind. If we were looking at Q3 sales to Q4, seasonally we're down a bit in Q4 versus Q3. If that happens, you have less leverage within your fixed cost absorption. That could have some potential gross margin pressure. As I mentioned on the FX side with the Peso, the Renminbi, and the Shekel, those do directly impact our margin. Those are some of the factors that come into play when we are putting out our guide for margin for the fourth quarter. Okay, got it. I will leave it there. Thanks for all the color. Thank you. Thank you. Thank you. We take the next question from the line of Christopher Glynn from Oppenheimer & Company. Please go ahead. Yeah, thanks. Good morning and congrats on the nice results. Just curious, in terms of the development of the commercial multiple that you described in some detail, where are you seeing the kind of leading end of progress, that early adopters, so to speak, in terms of design cycles, new business opportunities generating? Seems like AI, maybe defense. You noted a little progress in Asia. Maybe there's some other cross sections to bring into the discussion as well. Thanks for that, Chris. I think your question is just more commercial across the business and where they're coming from, the new wins. Yeah, exactly. Maybe a little color on new business opportunities. What's the growth there year- over- year? Yeah. In general terms, right, we as an engineering-led organization, and we've talked about this, we're a medium to long term kind of design cycle business. The actions and the results that we're seeing today in Q3, you almost have to look back at least one to two, three years to see what was done then and kind of see where these wins have come. Obviously, as Lynn said, we do have some intra-quarter turns that do happen. Generally, I would say what happened in Q3 here is probably not a whole lot in large in terms of new business things that happened in Q2, maybe some Q1 stuff. This puts a big pressure on us to make sure that today we are working Q3 or Q4 here. We're working for, you know, Q2, Q3, Q4, next year and beyond. The question is, how are we as a team tackling go-to-market and what are our sales initiatives and what is our data side of things to help lead those kind of spear activities? When we look at the activity around new developments and new wins that we saw, for example in Q3, it's definitely exciting for us, to be honest with you. We're seeing some nice new wins, some bigger wins that maybe we historically have, some new customers that we historically were not maybe competitive or didn't kind of co-tackle it appropriately. Obviously, with the customers we've had for a very long time, I would say we probably constantly win new programs. Right. When we look at obviously defense, which is our biggest kind of market nowadays, it's not like there's a whole lot of primes in the U.S., right? Really there we look at are we getting more shots on goal? Are we getting new opportunity design wins? I think the answer is yes. When I speak to the teams across Bel Fuse, I think there's a pretty fair aggressiveness in terms of hunting for the new. We defined, we're defining what new is. We want certain margin profiles of business and learning how to win again. We've always done this throughout our 76 year history, but I think we're putting more fire around it. You know, in recent times, and this was kind of my earlier commentary here, Chris, where today our business is really kind of, we think about things to some extent from a product perspective, but we have a lot of products that go to the same customer. How can we align ourselves more robustly to deliver solutions to our customers to ensure that we're not missing a cable or a connector or a fuse sale because we're selling a power system? When we look at our product portfolio, I think we can do more with it. This is back to also my earlier commentary around we got to invest in the systems and structures that we can make sure we're going after highest ROI opportunities and really measuring performance. It was a little bit of a new muscle for us. I think the early signs and the wins we're seeing today, we kind of got to look back, you know, probably before 2025, to be honest with you. Okay, great. Just curious on Enercon if they're caught up on shipments. I think they had a little delivery snags last quarter, and did the quarter include some catch up, or is that just the sequential scaling that the business is generating? Yeah, both. It continues to kind of go from strength to strength. There was a little bit of catch up, but also just kind of depends on where the catch up we're talking about is the biggest issue. End of June, as you may recall, just flights stopped coming in specifically from India and out of Israel. That's kind of the catch up. It wasn't a very long pause. Obviously, there was local consumption that happens inside of Israel, so there was some catch up, but also, yes, growth, whether it be sequentially or year- over- year. Great, thanks for that. Thank you. Thank you. We take the next question from the line of Luke Junk from Baird, please go ahead. Thanks for taking the question, Farouq. Want to circle back to gross margins and maybe more of a, not philosophical, but bigger picture. Certainly, if we look at the gross margin trend this year, it's been above the high end of guidance three straight quarters, 39% plus in general. Just love to get your thoughts on your feel for volume leverage in the business on a go forward basis, especially as you continue to layer on those new design wins, just relative to your understanding of the improved cost structure and what that can do mean incrementally as you do add volume. Thank you. I appreciate that question, Luke. It's a question we've been thinking a lot about in general: where should you be? I think by all accounts, putting aside our mix between Magnetics and the other segments, yes, we're seeing an uplift in margin as sales grow and we are getting operational leverage. The question is, now that we are really trying to shift our mindset away from just operations and cost efficiency, which always just become regular way table stakes, how do you drive growth? As we launch new products and go after new customers, invest in new relationships and new technologies, we need to be honest with ourselves and say, okay, what is the pricing strategy on things? For example, let's say there's a very nice piece of business that was, I don't know, $2 million that was a little bit below corporate averages, but over time we can scale it up and also get new opportunities. Would we take that business? I think we really need to consider that if it's a strategic relation. I think the gross margin strategy has not been one that was available to us through our history. Now we got to look at it as an asset and as a tool. Keeping in mind we worked very hard to get our gross margins here. We don't want to arbitrage arbitrarily into that 37%, 39%. I think there's a little bit of self-discovery, to be honest with you, as to where we should be. When we look at gross margins today, we want to make sure we're not pigging out too much and really missing the boat on EPS growth, given that we talked about the range boundness of our SG&A and R&D. That's, I think, the sense of maybe a little bit of conservatism there. I appreciate in public markets that everybody's looking to manage a certain level of expectations, but our intention, and we've talked about this internally, is we want to land in range. Right. We don't really want to blow the range on the top or on the bottom. I think we get the optics here, the last three quarters here point, I think we can see some conservatism that's fair. The question is, you know, as we go throughout next year, where do we want to be? The good news is we have a lot of, we have a buffet of options to play while delivering good returns, good gross margins to our investors, and that's kind of the front and center. It's a little bit of a self-discovery journey we're going through, to be honest. That's all very helpful. Second question, just curious if we could double click on networking in AI specifically in terms of the Design Win activity and just tilting the organization to growth overall. I guess I'd be especially interested in Power and just how you think going forward we're seeing this rebound obviously in demand from an inventory standpoint and whatnot and those direct AI sales. As you think about building the pipeline, just the opportunity side with Power specifically. Thank you. Yeah, no, today with improved cost structures and the investment that has gone into the factories from an automation perspective, the improvements R&D teams have done in terms of moving quicker to launch products, our sales team being more mindful of what we're going after, I think today we're in a better position to go after opportunities and be a little bit maybe more serious about it than we have been able to in the past. As a result of that, as we think about networking, there's obviously a, and as Lynn talked about earlier, we know where our AI products are going, but that's a floor. Right. We know that we sell to some other networking folks that are servicing directly AI, so we know that our products that we're selling to networking guys are probably also being impacted by AI. How do you measure it is a different, different complexity to it. Right. Because our products are high end products that can go to AI or other applications. I think it's hard to say that all things going on in the AI data center world are not positively impacting us. The other thing I would say is with the improved operational structure and more focus on the markets, we have, I'd say, started to open up doors with some customers that maybe in the past we were not cost competitive or were not focused on, maybe a little bit too much in our comfort zone. We're seeing some of that newness as well. The other thing I would say in the networking side, given that there's a lot of investment and focus on it, broadly speaking, we are seeing new entrants into the markets with newer technologies. All that I think at the end of the day is additive for us from a networking perspective. We want to make sure that we're not just simply waiting for the same customers we had three, four years ago to come back. Yes, that's a benefit obviously. I would also say we want to make sure we're investing in new relationships, and within the existing relationships, I think we're doing a little bit of a better job learning how to more service our customers, to more ingratiate ourselves into that relationship and get more opportunities on goal. If you look at some of our big customers, we can do so much more. The question is how can you do so much more. Right. That's kind of what we're trying to really push the team, and quite frankly we're seeing some nice results of that. All really great color. Just a quick one for my last question. Lynn, you called out for the second straight quarter that there was some increased medical exposure in the SG&A line. Just how we should think about that sequentially into the fourth quarter if you have any visibility, and then going into next year to the extent that that doesn't repeat. Would it be reasonable to assume some normalization in SG&A? Thank you. I would say, can I give some context here? We're really talking about the U.S. side of the business, and obviously we all read and feel what's going on in all things world of healthcare and medical care. We are a self-insured plan, right? Whenever we do kind of market checks on it, it still is the most cost advantageous way to do it. Every few years we go out there and check and make sure it's right. Today we are self-insured. The downside of self-insurance is there could be variability in claims that come in the door, and we're seeing that in Q2 and Q3. The variability is hard to get a read on. Right. We just don't know when somebody is going to have a major medical issue that comes our way. The plus side of going to a regular way healthcare is you have a fixed cost, but every year somebody comes and the healthcare companies will give you a big increase. Right. From our perspective we're still in a cost advantageous way, but it does introduce variability. To your point, the other thing I would say is, as the overall age of our organization, medical claims are not unexpected. What does that mean for next year? I think that's a tough question to answer for us. We obviously saw a spike in Q2 and Q3 a little bit here. Fair enough. I'll leave it there. Thanks Farouq. Thank you. Thank you. We take the next question from the line of Hendi Susanto from Gabelli Funds. Please go ahead. Good morning Farouq and Lynn. Congrats on strong results. Thank you. Thank you. My first question is you talk about rebound in networking and distribution customers. Can you talk about rebound or sign of rebounds across other areas, specifically let's say in Magnetic, Connectivity, and then some major areas. Sure. I think you're looking for a breakdown by product group, Hendi, or just other end markets aside from networking? I think like where like besides networking and distribution channels, are there early signs of inventory rebound, customers rebuilding their inventory, or maybe whether you have some outlook or expectation on where rebounds would start to take place in other areas? Yeah, I think the other two areas that we've been seeing a rebound, which had been depressed in prior periods, is in the consumer end market. If you recall, last year that was the end market that was impacted by one of our large suppliers in China, and that had been depressed for several quarters. We did see a rebound in that business in the third quarter. That was nice to see. Now that we have some new suppliers identified, getting product back out into the market at this point, there's been rebound there and then also on the fuses side. I mean, fuses go into everything, but that's something that had been softer in the past, and we're seeing that rebound now. I think those are probably the other two areas in addition to networking and distribution. Got it. Magnetic sales are still significantly below pre-COVID levels. Any puts and takes in terms of expectation on Magnetic sales, let's say going forward, like where the recovery is somewhat likely in the short to midterm. I think when we look at Magnetics in the end, I think when we look at the industry and we've seen this in our power, right, there was a very unnatural spike that happened back in 2022, 2023 where customers were literally buying and renting new warehouses just to store a lot of these components. There was, let's say, unnatural behavior there today. If we were to kind of put a range on where we've been, let's say it was $175 million to roughly $75 million. If we look at peak to trough, roughly speaking, I would say $175 million is probably not on the cards for the next few years because also remember we walked away from certain business and we are being prudent after what business we're going after. Also, keeping in mind that the Magnetics, as we talked about, there is a product concentration and two end market concentration, which is networking and distribution largely. If we were looking at the ranges of $75 million- $175 million, or I should say $70 million, sorry, the range was $180 million- $70 million. I'll let you kind of decide where we are. We're seeing the year-over-year growth, but 2022 at $180 million was extremely unnatural and we've slimmed down the business since then. I would not really anchor to that. I'll kind of leave it at that. We do think that we got some ways to go here. Got it. Lynn, may I ask how we should think and project the pace of potentially early debt payment? The pace of debt payments going forward? Yes. Yep. Barring an M&A opportunity coming up or anything like that, we've been running at a rate of, call it, $20 million- $25 million a quarter just based on our cash flows. We would continue to pay down debt. That would be our first priority barring anything on the M&A side. Okay. Thank you, Farouq. Thank you, Lynn. Thank you. Thank you, ladies and gentlemen. With that, we conclude the question and answer session. I will now hand the conference over to Farouq Tuweiq for his closing comments. Again, want to thank everybody for joining us here and a very big thank you for the Bel Fuse team and our customers that helped us deliver this great quarter. We'll put our head down, continue to work throughout the year here heading into 2026. Wishing everybody a great holiday season as we head into year end and I'm sure we'll be talking soon. Thank you very much for joining us this morning. Thank you. Ladies and gentlemen, the conference of Bel Fuse Inc. has now concluded. Thank you for your participation. You may now disconnect your line.