What changed in this filing

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Item 7. Management’s Discussion and Analysis

2026-02-24 compared with 2025-02-28 · 194 added, 179 removed, 280 unchanged (57% of the section changed)

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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 in order to meet any increase in demand, can add volatility to the labor costs incurred by us.

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:

Revenues – The Company's revenues decreased by $105.0 m illion, or 16.4%, in 2024 as compared to 2023.

By product segment, Power Solutions and Protection sales decreased by 21.8%, Connectivity Solutions sales increased by 4.7% and Magnetic Solutions sales decreased by 40.2%.

Backlog – Our backlog of orders totaled $381.6 million at December 31, 2024, representing a decrease of $8.5 million, or 2%, from December 31, 2023.

From 2023 to the 2024 year-end, the backlog for our Power Solutions and Protection (excluding Enercon) products decreased by 44%, due to a reduction in demand within the networking end market and in the distribution channel.

Enercon backlog at December 31, 2024 was $119 million.

Our Magnetic Solutions backlog decreased by 13%, primarily due to reduced order volume from a large networking customer.

The backlog for our Connectivity Solutions products decreased by $8.2 million (7%) in 2024 from the 2023 level, due to reduced demand from customers in the networking and industrial end markets partially offset by an increase in demand from our military customers.

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.

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See Note 14, "Segments" for profit margin information by product group.

P ricing and Availability of Materials – There has been some stabilization of raw materials pricing in 2024;

however overall, our cost of materials remains elevated.

Supply constraints have eased related to components that constitute raw materials in our manufacturing processes, particularly with capacitors, resistors and Integrated circuits ("IC's").

Sharp increases in metal commodity prices, particularly copper and gold over the years continues to impact cost structures and supplier pricing.

Lead times are still above normal though suppliers are now meeting the agreed delivery deadlines with more regularity.

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.

We anticipate continued downward pressure on our Power sales given trade restrictions on one of our former suppliers previously utilized for this segment, which had historically supported approximately $3 to $4 million per quarter of our sales into the consumer end market.

We are currently evaluating alternative manufacturing options for the components previously supplied by this manufacturer.

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.

Further, governments may impose tariffs to raise domestic revenue, protect domestic industries or exert political leverage over another country.

We are 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, 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 we transact business could lead to reduced margins or increased prices that could cause decreased customer demand.

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."

Labor Costs – Labor costs as a percentage of sales fluctuate based upon our product mix, with our Magnetic Solutions segment sales comprised largely of labor-intensive ICM products.

Further, our labor costs in the PRC, Mexico and Israel are largely paid in local currencies and any significant fluctuations in these exchange rates versus the U.S.

dollar will have an impact on our labor costs.

By segment, our Magnetic Solutions segment is most impacted by fluctuations in the exchange rates of the Chinese renminbi versus the U.S.

our Connectivity Solutions segment is most impacted by fluctuations in the exchange rate of the Mexican peso versus the U.S.

and our Power Solutions and Protection segment is most impacted by fluctuations in the exchange rates of the Chinese renminbi and the Israeli shekel versus the U.S.

In addition to foreign exchange rate exposure, our labor costs are also subject to government-regulated minimum wage increases in the countries in which we operate.

On January 1, 2025, minimum wage increases went into effect at our factory in PRC and are expected to result in approximately $0.4 m illion of higher labor costs at that facility in 2025 as compared to 2024.

The preceding discussion about labor costs, including our estimates of expected costs associated with increases, contains Forward-Looking Statements.

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.

On February 20, 2026, the Supreme Court of the United States issued its decision in Learning Resources, Inc.

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 ."

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.

the Connectivity Solutions segment is most exposed to fluctuations in the exchange rate of the Mexican peso relative to the U.S.

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.

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.

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See "Cautionary Notice Regarding Forward-Looking Information."

Restructuring –In late 2023, we initiated a restructuring initiative within our Connectivity segment related to the transition of certain manufacturing from our Glen Rock, Pennsylvania facility to other existing Bel sites (the “Glen Rock initiative”).

During the third quarter of 2024, we initiated a restructuring initiative within our Power segment related to the transition of our fuse manufacturing to other existing sites (the "Fuse initiative").

In addition to the Fuse initiative and the Glen Rock initiative, the Company also implemented headcount reductions within our Magnetics segment in response to the lower sales volume in recent quarters within that segment.

In connection with these initiatives, the Company incurred $3.5 million of restructuring costs during the year ended December 31, 2024 which primarily consisted of severance costs.

The Glen Rock initiative was largely complete by the end of 2024 at a total cost to implement of $0.8 million (almost all of which was incurred during the year ended December 31, 2024).

Annual cost savings related to the Glen Rock initiative are estimated at $3.1 million (of this annualized amount, $1.5 million was realized throughout 2024, with the incremental $1.6 million to be realized in 2025).

The Fuse initiative is expected to be complete by the end of the first quarter of 2025 at a total cost to implement of $4.2 million (of which $2.0 million was incurred in the year ended December 31, 2024, with the balance to be incurred in early 2025).

Annual cost savings related to the Fuse initiative are estimated at $1.8 million and are expected to be realized beginning in the second quarter of 2025.

The Company will continue to review its operations to optimize the business, which may result in restructuring costs being recognized in future periods.

The preceding statements about restructuring initiatives, including our projections and estimates, represent Forward-Looking Statements.

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 – As further described below in this "Impact of Foreign Currency" discussion, during 2024, labor and overhead costs were $0.4 million lower than in 2023 due to favorable foreign exchange environment involving the Chinese renminbi and the Mexican peso, partially offset by unfavorable foreign exchange fluctuations due to the Israeli shekel as compared to the prior year period.

Also as described below in the discussion captioned "Inflation and Foreign Currency Exchange" , the Company realized foreign exchange transactional losses of $1.9 million during 2024, due to the fluctuation of the spot rates of certain currencies in effect when translating our balance sheet accounts at December 31, 2024 versus those in effect at December 31, 2023.

Since Bel is a U.S.

domiciled company, our foreign currency-denominated financial results are translated into U.S.

Due to the changes in the value of foreign currencies relative to the U.S.

dollar, translating our financial results and the revaluation of certain intercompany as well as third-party transactions to and from foreign currencies to U.S.

dollars may result in a favorable or unfavorable impact to our consolidated statements of operations and cash flows.

We were favorably impacted by transactional foreign exchange gains in 2024 due to the depreciation of the Chinese renminbi and Mexican peso against the U.S.

dollar, which was largely offset by an appreciation of the Israeli shekel against the U.S.

dollar, as compared to exchange rates in effect during 2023.

We have significant manufacturing operations located in the PRC, Mexico and Israel where labor and overhead costs are paid in local currency.

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.

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.

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 $0.7 million lower in the PRC, and $0.5 million lower in Mexico, largely offset by higher costs in Israel of approximately $0.8 million, in 2024 as compared to 2023.

The Company monitors changes in foreign currencies and has historically implemented additional foreign currency forward contracts, and may continue to implement pricing actions to help mitigate the impact that changes in foreign currencies may have on its consolidated operating results.

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.

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and Asia has the lowest tax rates of the Company's three geographic regions.

See Note 10 to the Company's Consolidated Financial Statements - "Income Taxes" .

See Note 10, "Income Taxes", to the Company's Consolidated Financial Statements.

Results of Operations - Summary by Operating Segment

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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.

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.

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dollar, were the primary drivers of gross margin expansion for this product group in 2024 as compared with 2023, despite the decline in revenue.

2023 as Compared to 2022

Power Solutions and Protection:

Sales of our Power Solutions and Protection products were higher by $25.7 million in 2023 as compared to 2022.

This increase was primarily due to higher sales of our front-end power products and board mount power products of $42.7 million and $6.9 million, respectively, both of which are used in networking and datacenter applications.

Further, sales of product into the eMobility end market increased by more than $7.5 million (40%) and sales of product into the rail end market increased by $7.5 million (33%) in 2023 as compared to 2022.

These increases were offset in part by a reduction in sales of our CUI products of $13.7 million and a decline in sales of our circuit protection products of $9.9 million, both of which were largely impacted by the lower demand from our distribution customers.

Raw material expedite fee revenue for this segment totaled $14.9 million in 2023 as compared to $32.5 million in 2022.

Gross margin improved in 2023 as compared to 2022 as pricing actions, higher sales volume, 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 offset the impact of increased material costs.

Connectivity Solutions:

Sales of our Connectivity Solutions products increased by $23.5 million (12.6%) in 2023 as compared to 2022.

These increases were primarily due to an increase in sales into the commercial aerospace end market of $22.2 million (71%) in 2023 as compared to 2022.

Sales into our military end market also grew by $8.8 million (24%) in 2023 as compared to 2022.

We also experienced an increased volume of Connectivity Solutions products sold through our distribution channels in 2023 compared to 2022.

These sales increases were offset in part by a decline in sales of passive connector and cabling products used in the industrial premise wiring and 5G/IoT markets of $11.0 million (29.0%) for 2023 as compared to 2022.

Gross margins for the 2023 periods presented above were favorably impacted by the higher overall sales volume, pricing actions and operational efficiencies implemented during 2023, partially offset by higher wage rates in Mexico and an unfavorable fluctuation in exchange rates between the U.S.

dollar and Mexican peso in 2023 as compared to 2022.

Magnetic Solutions:

Sales of our Magnetic Solutions products declined by $63.6 million during 2023 as compared to 2022.

Reduced demand for our Magnetic Solutions products from our networking customers and through our distribution channels has been the primary driver as we believe these customers continue to work through inventory on hand.

The lower sales volume and favorable exchange rates with the Chinese renminbi versus the U.S.

dollar, were the primary drivers of gross margin reduction for this product group in 2023 compared with 2022.

Cost of Sales

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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.

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 have 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.

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.

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rent, utilities, insurance).

In total, these other expenses within cost of sales have decreased by $1.5 million in 2024 as compared to 2023.

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.

2023 as Compared to 2022

Material costs as a percentage of sales during 2023 came down compared to 2022, as pricing actions helped to offset the continued heightened cost of certain raw materials.

Labor costs in 2023 as a percentage of sales decreased significantly from 2022 due to a variety of factors, including the shift in product mix resulting in a lower consolidated percentage of sales from of our labor-intensive Magnetic products, lower labor costs in the PRC due to the favorable fluctuation in the Chinese renminbi exchange rate versus the U.S.

dollar, and the restructuring and efficiency programs implemented throughout 2023 in our Connectivity Solutions segment.

The reduction in labor costs were partially offset by the unfavorable fluctuation of the Mexican Peso exchange rate versus the U.S.

dollar in 2023 versus 2022.

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 were largely the same in 2023 as compared to 2022 as the benefits realized on cost savings initiatives were offset by higher costs from the redundant operations in the PRC that were in place while our facility consolidation project was underway for much of 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 noted in R&D expenses during 2024 compared to 2023 is largely due to higher salaries, benefits, product development costs and R&D expense of the 2024 Enercon acquisition, which have been included in Bel's results since its acquisition date.

The increase noted in R&D expenses during 2023 compared to 2022 is largely due to higher salaries, benefits, and product development costs.

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 $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.

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.

Within SG&A, increases in salaries and fringe benefits of $6.1 million, legal and professional fees of $2.4 million, and travel of $1.0 million were partially offset by a $1.3 million reduction in commissions to outside sales representatives, and a $1.2 million reduction in depreciation and amortization as compared to 2022.

Restructuring Charges

The Company recorded $3.5 million of restructuring charges in 2024 largely in connection with the Glen Rock initiative and the Fuse initiative, as further described in "Overview - Key Factors Affecting our Business - Restructuring" above.

In 2023, the Company recorded $10.1 million of restructuring charges largely in connection with the four facility consolidation projects in the U.S., UK and PRC.

In 2022, the Company recorded $7.3 million of restructuring charges related to these same four facility consolidation projects in the U.S., UK and PRC.

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.

In 2022, a gain of $1.6 million was recorded in connection with the sale of a separate property in Jersey City.

Interest Expense

2025 as Compared to 2024

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 a increase in debt balance in the fourth quarter of 2024 due to Enercon acquisition (see Note 3, “ Acquisition and Divestiture ” for additional details).

See "Liquidity and Capital Resources" and Note 11, "Debt" for further information on the Company's outstanding debt.

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 lower interest expense during 2023 related to a lower debt balance throughout 2023 as compared to 2022.

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

The Company earned interest income of $4.8 million in 2024, $1.7 million in 2023, and $0.2 million in 2022, primarily related to its investments in U.S.

Treasury Bills during the 2023 and 2024 periods.

Other Expense, Net

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 expense, net was a net expense of $3.2 million in 2024 compared to a net expense of $4.5 million in 2023.

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;

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partially offset by a gain of $1.2 million related to the Company's SERP investments.

2023 as Compared to 2022

Other expense, net was a net expense of $4.5 million in 2023 compared to a net expense of $2.9 million in 2022.

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.

The net expense in 2022 was comprised of a foreign exchange loss of $2.2 million in 2022 related to the Company's SERP investments and $1.0 million of other expense;

partially offset by foreign exchange gains of $0.3 million.

The Company’s effective tax rate will fluctuate based on the geographic regions in which the pretax profits are earned.

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2025 as Compared to 2024

The provision for income taxes for the years ended December 31, 2024 and 2023 was$12.6 million and $9.5 million, respectively.

The Company’s earnings before income taxes for the year ended December 31, 2024 were approximately $21.5 million lower as compared with the year ended December 31, 2023, primarily attributable to a decrease in income in the Asia and North America regions.

The Company’s effective tax rate was 20.5% and 11.4% for t he years ended December 31, 2024 and 2023, respectively.

The change in the effective tax rate during the year ended December 31, 2024 as compared to 2023 is primarily attributable to an increase in tax expense relating to valuation allowances and prior period accruals, as well as a decrease in the tax benefit relating to the reversal of uncertain tax positions resulting from the expiration of certain statutes of limitations.

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.

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.

2024 as Compared to 2023

The provision for income taxes for the years ended December 31, 2023 and 2022 was $9.5 million and $6.4 million, respectively.

The Company’s earnings before income taxes for the year ended December 31, 2023, were approximately $24.2 million higher as compared with the year ended December 31, 2022, primarily attributable to an increase in income in the Asia and North America regions.

The Company’s effective tax rate was 11.4% and 10.8% for t he years ended December 31, 2023 and 2022, respectively.

The change in the effective tax rate during the year ended December 31, 2023, as compared to 2022 is primarily attributable to an increase in tax expense resulting from higher U.S.

income, which was offset by a benefit resulting from the impact of permanent differences on U.S.

activities, as well as an increase in the tax benefit relating to the reversal of uncertain tax positions resulting from the expiration of certain statutes of limitations.

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:

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 inco me from activities solely conducted in Hong Kong.

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.

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Inflation and Foreign Currency Exchange

During the past two years, we do not believe the effect of inflation was material to our consolidated financial position or our consolidated results of operations.

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.

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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 pesos depreciated by 3%, the Euro was flat, the British pound appreciated by 2%, and the Indian rupee and the Chinese renminbi each depreciated by 2% versus the U.S.

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.

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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 exchangeloss of $1.9 million in 2024, a loss of $1.4 million i n 2023 and a gain of $0.3 million in 2022 which were included in other expense, net on the consolidated statements of operations.

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 ($5.5) million and $6.7 million for the years ended December 3 1, 2024 and 2023, respectively, which are included in accumulated other comprehensive loss on the consolidated balance sheets.

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 $68.3 million of cash and cash equivalents at December 31, 2024, $1.0 million of held to maturity investments in U.S.

Treasury securities, 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, dividends, debt obligations and other long-term liabilities.

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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This decrease was primarily due to the following:

payment for Enercon acquisition of $320.5 million;

purchase of common stock of $16.1 million;

repayment of long-term debt of $15 million;

dividend payments of $3.5 million;

deferred financing costs of $1.7 million;

purchases of property, plant and equipment of $14.1 million;

purchases of held to maturity and marketable securities of $131.3 million;

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;

d eferred financing costs of $0.7 million;

partially offset by

● net cash provided by operating activities of $74.1 million;

● proceeds of long-term debt of $242.5 million;

● proceeds from held to maturity securities o f $167.9 millio n;

● proceeds from the sale of property, plant and equipment of $0.9 million.

D uring 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.

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

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

● 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 m illion .

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.

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Inventory turns were 3.1 times for the year ended December 31, 2023 and 2.7 times for the year ended December 31, 2022.

During the year ended December 31, 2022, the Company's cash and cash equivalents increased by $8.5 million.

This increase was primarily due to cash provided by operating activities of $40.3 million, and proceeds from the sale of property, plant and equipment of $1.8 million;

partially offset by the purchase of property, plant and equipment of $8.8 million, dividend payments of $3.4 million, and repayments under our revolving credit line of $17.5 million.

During the year ended December 31, 2022, accounts receivable increased $20.7 million primarily due to the higher sales volume in 2022 as compared to 2021.

DSO increased to 58 days at December 31, 2022 from 54 days at December 31, 2021.

Inventories increased by $36.6 million from the December 31, 2021 level as raw material supply constraints hindered our ability, and our end customers' ability, to fully manufacture our respective finished goods.

Inventory turns were 2.6 times for the year ended December 31, 2022 as compared to 3.1 times for the year ended December 31, 2021.

Cash and cash equivalents, held to maturity U.S.

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Future Cash Requirements

The Company expects foreseeable liquidity and capital resource requirements to be met through its existing cash and cash equivalents, held to maturity investments in U.S.

Treasury securities and anticipated cash flows from operations, as well as borrowings available under its revolving credit facility, if needed.

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 are no mandatory principal payments due on the credit facility borrowings during 2025.

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.

Ant icipated interest payments due amount to $28.7 million, of which $17.2 million is expected to be paid in 2025 based on our debt balance and interest rate in place at December 31, 2024.

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.

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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 $4.7 million at December 31, 2024, all of which is expected to be paid in 2025.

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").

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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.

Dividends - The Company has historically paid quarterly dividends on its two classes of common stock, which am ounted to $3.5 million in 2024 as compared to $3.5 million in 2023.

Consistent with the dividend rates declared in prior years, Bel's Board of Directors declared dividends on November 1, 2024 and again on February 12, 2025 on each of our two classes of common stock.

These two quarterly payments will be made in the first half of 2025 in the total anticipated amount of $1.7 million.

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.

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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, 2024, the Company had an aggregate amount of $9.0 million of authorized repurchases under the plan that had not yet been executed upon.

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.

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See Note 10, "Income Taxes", for further discussion.

Also included on our consolidated balance sheet at December 31, 2024 is $2.0 million of liabilities for transition tax associated with the 2017 U.S.

tax reform, all of which is expected to be paid in 2025.

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, 2024 in the amount of $3.5 million that would be paid over 2025 and 2026 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 million for each of the fiscal 2025 and fiscal 2026 earnout periods subject to the achievement of the financial thresholds.

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.

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At December 31, 2025, the redemption value related to the redeemable noncontrolling interest was $93.2 million.

See Note 3, "Acquisition and Divestiture" and Note 6, "Fair Value Measurements" for further information.

See Note 3, "Acquisition" and Note 6, "Fair Value Measurements" for further information.

Contractual Obligations

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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, 2024, the Company had $287.5 million outstanding under its credit agreement.

The unused credit available under the credit facility at December 31, 2024 was $37.5 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, 2024, the Company was in compliance with its debt covenants, including its most restrictive covenant, the Leverage Ratio.

At December 31, 2024, the Company was also a party to two pay-fixed, receive-variable interest rate swap agreements covering the full amount of its then variable interest exposure through August 2026.

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.

December 31, 2025, the Company was in compliance with its debt covenants, including its most restrictive covenant, the Leverage Ratio.

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.

"Derivative Instruments and Hedging Activities" for further details.

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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, 2024 and 2023, the Company had reserves for excess or obsolete inventory o f $14.5 m illion and $1 3.7 million, respectively.

With the recent acquisition of Enercon our value of inventory on hand has increased by $24.8 mi llion from December 31, 2023 to December 31, 2024.

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.

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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.

Effective with the October 1, 2024 testing date, we changed our reporting unit structure to align with how management is currently reviewing and managing the business.

Based on the testing performed, no impairment existed either under the former reporting unit structure or under the new reporting unit structure.

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.

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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.

See Note 5, "Goodwill and Other Intangible Assets," for details of our goodwill balance and the goodwill review performed in 2024 .

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.

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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, 2024 and in connection with its analysis, identified and recorded a $0.4 million impairment charge related to its CUI tradename.

This charge is reflected in the accompanying statement of operations during the year ended December 31, 2024.

No impairment was identified at the Company's October 1, 2023 testing date.

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.

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Pension Benefit Obligations

Net periodic benefit cost for the Company's SERP totaled $1.4 million in 2 024, $1.3 million in 2023, and $1.5 million in 2022.

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.

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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 2024 discount rate assumption of 25 basis points would have increased/decreased the 2024 periodic benefit cost by less t han $0.1 million.

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.

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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 stockholders and may take the form of capital stock having preferences over its existing common stock.

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

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis