Bel Fuse Inc (BELFB) Q4 2020 Earnings Call Transcript

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Bel Fuse Inc (BELFB 0.85%)
Q4 2020 Earnings Call
Feb 18, 2021, 11:00 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good day, and welcome to the Bel Fuse Inc. Fourth Quarter 2020 Results Conference Call. Today's conference is being recorded.

At this time, I'd like to turn the conference over to Dan Bernstein, President and Chief Executive Officer. Please go ahead.

Daniel Bernstein -- President and Chief Executive Officer

Thank you, James. I would like to welcome everybody to our fourth quarter and year end financial results today.

Before I begin, we hope you and your family stay safe during these difficult times. On the call today is Craig Brosious, our Vice President of Finance; Lynn Hutkin, our Director of Financial Reporting; and I would like to introduce our new Chief Financial Officer, Farouq Tuweiq, who came onboard this week.

While working with BMW -- I'm sorry, working with Bank of Montreal in the past, we have developed a strong relationship with Farouq. During this time, we've been overly impressed with his knowledge of our industry, work experience, interpersonal skills and most importantly his ability to solve problems in a timely manner. His number one goal at Bel, simply put, will be to increase Bel's overall value to our shareholders. The Board believes there is a substantial valuation gap between Bel's share price and our current breakup value. Farouq has a broad mandate to work team members to examine the various pathways to increase top-line growth, margin improvement, simplify our operations while driving growth through M&A. When searching for our first CFO in the Company's history, he was the best candidate, and we feel fortunate that he joined Bel to offer us his fresh perspective. Welcome aboard Farouq.

Farouq Tuweiq -- Chief Financial Officer

Thank you, Dan, for the introduction there. I'm very excited to be joining the Bel family and team.

Daniel Bernstein -- President and Chief Executive Officer

Okay. Lynn, can you please go over the Safe Harbor statement?

Lynn Hutkin -- Director of Financial Reporting

All right. Thank you, Dan. Good morning, everybody.

Before we start, I'd like to read the following Safe Harbor statement. Except for historical information contained on this call, the matters discussed on this call, such as statements regarding the potential rebound of sales in Magnetic Solution business and overall products sale, anticipated impact of global cost reduction program on Bel's positioning for further margin expansion, anticipated cost savings resulting from the closing on the sale of the Switzerland facility and other restructuring actions, potential benefits of Bel's margins resulting from recovery of demand in Bel's end markets, the anticipated impact of the rms Connectors acquisition included on Bel's EBITDA, the anticipated impact of the EOS Power acquisition including the timing and closing thereof, factors that may -- and factors that may impact Bel's organic growth for 2021 including continuing visibility -- limited visibility as a result of COVID and long lead times for semiconductors and certain components are all forward-looking statements as described under the Private Securities Litigation Reform Act of 1995 that involve risks and uncertainties. Actual results could differ materially from Bel's projections.

Among the factors that could cause actual results to differ materially from such statements are: the market concern facing our customers; the continuing viability of sectors that rely on our products; the impact of public health crises, such as the governmental, social and economic effects of COVID-19; the effects of business and economic conditions; difficulties associated with integrating recently acquired companies; capacity and supply constraints or difficulties; product development, commercialization or technological difficulties; the regulatory and trade environment; risks associated with foreign currency; uncertainties associated with legal proceedings; the market's acceptance of the Company's new products and competitive responses to those new products; the impact of changes to U.S. trade and tariff policy; and the risk factors detailed from time-to-time in the Company's SEC reports.

In light of the risks and uncertainties, there can be no assurance that any forward-looking statement will in fact prove to be correct. We undertake no obligation to update or revise any forward-looking statements. 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 release.

I would now like to turn the call back to Dan for a general business update.

Daniel Bernstein -- President and Chief Executive Officer

Thank you, Lynn. First, I'd like to provide an update on COVID-19 and how it impacted our facilities. Overall, I'm pleased to report that all our manufacturing sites globally continued to be operational for the majority of the fourth quarter. There were two facilities that needed to be closed for about a week during the quarter in response to the infection, but we were still able to service our customers during this time.

While the number of COVID-19 cases appeared to be moving in the right direction and vaccine distribution is now under way, the situation still remains fluid. We continue to operate our facilities with all preventive measures in place and ensuring ongoing compliance with local regulations to migrate our risk. I would again like to acknowledge our production managers and manufacturing associates who work day-to-day under difficult conditions. The continued -- their continued dedication to Bel and our customers is truly appreciated.

Now, turning to our results. We saw improve in margins on relatively flat sales as compared to last year's fourth quarter. While there was a minimal change in overall sales balance, the composition of our sales has changed quite a bit since last year's fourth quarter.

Sales within our Power Solutions and Protection group were up $16.2 million, or 44.8%, from the fourth quarter of 2019. Our acquisition of CUI in December 2019 contributed $11 million incremental sales for the fourth quarter of 2020 and this business run at a higher margin. Other areas within our Power segment that was strong as well. Our products sold in the fast growing e-mobility market were up $2.5 million, a 200% increase from 2019 quarter and CUI sales were up $1.3 million, an increase of over 40% from last year's fourth quarter. These areas of growth were offset by the elimination of low-margin products within this group.

Within our Connectivity Solutions segment, sales were down $6.8 million, or 16.6%, in the fourth quarter of 2020 versus the same quarter of 2019. We continue to be impacted by the depressed commercial aerospace industry, where sales were down $7 million, or 80%, from last year's fourth quarter. The Connectivity segment was also impacted by the lower sales of product in the premise wiring applications as new construction projects stalled in 2020 due to COVID also. We were able to shift our production lines to support our growing military backlog, which enabled us to capture 60% increase in military sales, partially offsetting the commercial decline.

Sales within our Magnetic Solution business was down $3.4 million, or 22.1%, from the fourth quarter of 2019, as one of our largest OEM end customers had paused ordering as they work through their inventory on hand. On a positive note, Magnetic bookings have since rebound and which will see the sales pick back up in the first quarter of 2021.

Overall, margins have improved by 420 basis points and are trending in the right direction. This can be attributed to a combination of product mix, I discussed previously, and our ongoing cost reduction program.

On the acquisition front, we have been busy over these last few months as we recently announced our purchase of two companies, rms Connectors and EOS. Bel closed the acquisition of rms Connectors in January, which will enable us to expand our market share in the commercial aerospace business. They will benefit us when the industry start to be dominated in 2021. We also signed an agreement to acquire EOS Power, which is based in India. The acquisition of EOS will not only expand our product portfolio in the low to mid range, but will also importantly provide us a manufacturing capability of outside China. Both these acquisitions fit within our strategy to increase market share while diversifying our product portfolios and geographic footprint.

Looking to 2021, we have seen some recovery in certain of our served markets. We would expect demand from military customers in e-mobility to remain the driver for sales throughout 2021. We additionally see signs of certain additional markets such as premise wiring, rail, commercial aerospace have potential to recover throughout the year as COVID conditions improve. While our competitive position remains strong as ever, the COVID situation is still with us and uncertainty regarding some semiconductor components that might be in short supply, gives us limited visibility into the future. In the meantime, the management team will remain focus on bottom-line growth while integrating the announced acquisitions and actively looking other strategies -- avenues to better position Bel for the future.

And with that, I'd like to turn the call over to Craig for the financial update. Craig?

Craig Brosious -- Vice President, Finance

Thank you, Dan.

Sales by product segment for the fourth quarter of 2020 were as follows: Power Solutions and Protection sales were $52.3 million, up 44.8% from last year's fourth quarter; Connectivity Solutions sales were $34.2 million, a decline of 16.6%; and Magnetic Solution sales were $29.6 million, down 22.1% from last year's fourth quarter.

Gross margin by product segment for the fourth quarter of 2020 were as follows: Power Solutions and Protection had a gross margin of 27.8% in the fourth quarter of 2020, up from 19.7% in last year's fourth quarter; Connectivity Solutions gross margin was 24%, down from 24.5% in the 2019 quarter; and Magnetic Solutions gross margin was 23.3%, up from 19.1% in last year's fourth quarter. On a consolidated basis, gross profit margin increased to 25.3% in the fourth quarter of 2020 as compared with 21.1% in the fourth quarter of 2019, the result of a combination of factors.

Overhead and indirect labor costs were $1 million lower during the fourth quarter of 2020, primarily due to restructuring measures implemented during late 2019 and a reduction in the cost structure for Cinch Connectivity Solutions segment to align with current sale and volume within that segment. A portion of the margin improving in the fourth quarter of 2020 related to the elimination of certain low-margin power products from our portfolio.

Research and development costs were $5.7 million during the fourth quarter of 2020, a decline of $1 million from the fourth quarter of 2019, primarily due to restructuring efforts implemented during the latter part of 2019.

Our selling, general and administrative expenses were $19.6 million, or 16.8% of sales, flat from the fourth quarter of 2019. Lower travel expenses of $713,000 and savings from other cost containment efforts fully offset the $1.1 million of incremental SG&A expenses associated with the CUI business acquired in December of 2019. On a go-forward basis, we would expect SG&A to run between $19 million and $20 million per quarter in the near-term as we expect our T&E spend will continue to be lower than normal for at least the first half of 2021.

During the fourth quarter of 2020, we closed on the sale of our facility in Switzerland. This transaction resulted in a gain of $1.9 million, which is included in our fourth quarter results.

These factors resulted in income from operations of $5.6 million in the fourth quarter of 2020 as compared to a loss from operations of $2.9 million in the fourth quarter of 2019.

Other expense net was $395,000 for the fourth quarter of 2020 as compared to $1.7 million during the fourth quarter of 2019. An increase in foreign exchange losses of $700,000 in the fourth quarter of 2020 was offset by a larger gain on the Company's SERP investments, which are now included in this line item. The expense in the fourth quarter of 2019 largely related to a $2.1 million loss on the liquidation of foreign subsidiaries.

The interest expense was $900,000 in the fourth quarter of 2020, down from $1.3 million in the same quarter last year as a result of decreases in the LIBOR rate, the Company's spread on its credit facility driven by EBITDA improvements, and the overall reduction in our outstanding debt balance.

We had a provision for income taxes of $774,000 in the fourth quarter of 2020 compared to a provision of $392,000 during last year's fourth quarter.

Earnings per share for the Class A common shares was earnings of $0.27 per share in the fourth quarter of 2020 as compared with a loss of $0.50 per share in the fourth quarter of 2019. Earnings per share for the Class B common shares was earnings of $0.29 per share in the fourth quarter of 2020 as compared with the loss of $0.52 per share in the fourth quarter of 2019.

On a non-GAAP basis, which excludes certain unusual and other non-recurring items, EPS for Class A shares was earnings of $0.18 per share in the fourth quarter of 2020 as compared with a loss of $0.30 per share in the fourth quarter of 2019. On a non-GAAP basis, EPS for Class B shares was $0.20 per share in the fourth quarter of 2020 as compared with a loss of $0.30 per share in the fourth quarter of 2019.

And now, I'd like to go through some balance sheet and cash flow items.

Our cash and cash equivalents balance at December 31, 2020, was $84.9 million, an increase of $12.7 million from December 31, 2019.

During 2020, we generated cash flows from operating expense -- activities of $46.1 million and received $4 million in proceeds from the sale of property. We made net payments of $28.2 million toward our outstanding debt balance and used cash for capital expenditures of $5.5 million, dividend payments of $3.4 million and interest payments of $4.1 million.

Accounts receivable were $71.4 million at December 31, 2020, as compared with $76.1 million at December 31, 2019. Days sales outstanding decreased to 57 days at December 31, 2020, as compared to 60 days at December 31, 2019. The decrease in accounts receivable balance was largely due to lower sales in Asia where payment terms tend to be the longest.

Inventories were $100.1 million at December 31, 2020, down $7.1 million from December 31, 2019. The decline we see in raw material is due to reduced material intake in anticipation of slower fourth quarter.

Accounts payable were $39.8 million at December 31, 2020, down $4.4 million from its level at December 31, 2019, primarily due to lower purchases of raw materials during the fourth quarter of 2020.

Bel's total outstanding debt balance was $115.6 million as of December 31, 2020, net of deferred financing costs, a decrease of $28.1 million since the 2019 year end balance. This primarily reflects voluntary debt repayments of $28 million made during 2020.

Book value per share, which is calculated as stockholders' equity divided by our combined A and B classes of common stock outstanding, was $15.04 per share at December 31, 2020, as compared to $13.69 per share at December 31, 2019.

And with that, I'll turn the call back over to Dan. Dan?

Daniel Bernstein -- President and Chief Executive Officer

Thank you, Craig. At this time, James, can we open up the call for questions?

Questions and Answers:

Operator

Thank you, Mr. Bernstein. [Operator Instructions] And we'll take our first question today from Jim Ricchiuti with Needham & Company.

James Ricchiuti -- Needham & Company -- Analyst

Hi, good morning. I'm wondering if you could speak a little bit more about rms Connectors and EOS acquisition. Share with us, perhaps if you could, just any details on their financial contribution, or just the impact that you would anticipate in 2021? Thanks a lot.

Daniel Bernstein -- President and Chief Executive Officer

Okay. Before I have Craig go over the numbers review -- but just to give you an insight to both those companies. EOS, again, we've been private labeling their product for over three years. We have a very strong relationship with them. We know the people. It was a market, perhaps, in a low, medium market, mostly in the medical area and industrial area, which we felt we could grow with the proper pricing structure and product portfolio. So, we've been pestering them for many years if they were interested in selling. So, we're very excited that -- again, that we could put this deal together and close on March 31st. So, that deal, as I said -- and the key for us also is that we are overly dependent with manufacturing in China, which gives us another area that we can have low-cost manufacturing. And in addition to that, we do believe India market should be a substantially stronger market for Bel as we move forward.

The other acquisition, rms, when Cinch was the Boeing supplier for the 737 connectors, Boeing suggested very strongly that they approve a second source and that company was rms. And over the past 10 years, we've contacted them every year to see if they were interesting in selling, because of price pressures that we're feeling on the aerospace companies out there. Because their medical sales were growing so fast, this wasn't a strategic product line for them any longer. So, they allowed us to buy and we came up, I thought, with a very strong deal, almost close to book value. And their book value is a lot of automated high-end equipment that we didn't have with us. So, beside eliminating a good competitor, we were able to pick up some state-of-the-art equipment. So, we think that also is going to be a home run acquisition. And we do think it's going to become profitable once we move it into our facility, which would take three or four months. And once Boeing kicks -- Boeing starts ordering again, we think it would be one of our most successful acquisitions.

Craig, can you go over more of the financial, how we see both companies in terms of the bottom-line?

Craig Brosious -- Vice President, Finance

Yeah. Starting with rms, obviously, they play in that commercial aerospace segment. So, their revenues have been depressed over the last 12 months, the pause in the manufacturing and also the aftermarket impacts. So, for the coming 12 months, we're kind of expecting an incremental revenue, maybe $5 million to $8 million related to that. Once we get back to a normal run rate, obviously, that revenue would be -- certainly pick up. And because we were moving the entire production facility into one of our existing facilities, there is no incremental G&A and we will be able to leverage our internal overhead structure. And so we expect that this could be fairly profitable.

On the EOS acquisition, they have been, obviously, impacted by COVID like the rest of the industry. They had been running at approximately $12 million revenue run rate over the past seven, eight months now. So, once they come on board, we expect the incremental revenue, assuming a March close, would be approximately $8 million to $9 million for 2021. Margins there are similar to our rather Power margins. So, we except that -- we expect that business to be accretive right out of the gate.

Hope that answers your question, Jim?

James Ricchiuti -- Needham & Company -- Analyst

It does. [Speech Overlap] Clarification, Craig, the margin will be more of the back Power and not like CUI?

Craig Brosious -- Vice President, Finance

Yeah, that's correct. The traditional Power origin.

James Ricchiuti -- Needham & Company -- Analyst

Thanks for that. Thanks for the color. Dan, they sound like nice acquisitions. So, congrats. I wonder if you could also, to the extent, you can elaborate a little bit more on the impact of some of the component supply chain issues on the business? Are you seeing any impact, or is this just a case of monitoring the situation in terms of whether it gets worse?

Daniel Bernstein -- President and Chief Executive Officer

I think, again, we're very fortunate because we do have long-term relationship with our semiconductor companies we deal with and the components that we deal with. So, again, they came to us [Indecipherable] listen, hey, if you want -- if you want support this year, you have to sign up for a yearly non-cancelable order, and then you had to lock in the deliveries. Also, I think, we did a good job in staying ahead of the situation because of our relationships we had in this industry, so we tend to know about shortage before it go down. So, again, one of the major problems that we don't have, we won't have any pricing pressure during this period and we have seen some pricing increases during the shortage period. But I don't think it will affect our delivery, but it might impact the price going forward and we have to increase pricing on to our consumers.

James Ricchiuti -- Needham & Company -- Analyst

Got it. And just last question from me. Just, in general, the level of activity you're seeing across your markets, it sounds like with the exception, obviously, the commercial aerospace and potentially a couple of situations with one of the larger OEMS, is it fair to say that the level of business activity you're seeing is picking up?

Daniel Bernstein -- President and Chief Executive Officer

Well, comparing to last year when we were in the middle of COVID and you had Chinese shut down, I think, going over that bar, it's not too high.

James Ricchiuti -- Needham & Company -- Analyst

Yeah. I'm thinking more in terms of as you're entering the year versus Q4? Obviously, year-over-year comparison are skewed.

Daniel Bernstein -- President and Chief Executive Officer

I wish I could. I still think we just had such limited visibility. I think there's still so much uncertainty out there with COVID, how the new government is going to affect policy, and I still think there's still a little bit -- a lot more positive than last year, overall. However, I still think there is still a substantial amount of uncertainty, where people, again, that infamous term 'cautiously optimistic', but I don't see anybody opening up the champagne, how about that.

James Ricchiuti -- Needham & Company -- Analyst

That's fair enough. Thank you. Thank you for that. I'll jump back in the queue, if want.

Operator

Next, we'll hear from Theodore O'Neill with Litchfield Hills Research.

Theodore O'Neill -- Litchfield Hills Research -- Analyst

Thanks very much. Two questions for you. First on the margins, which continue to show improvement, last quarter, there was a $900,000 Chinese subsidy in there, were there any one-time items like that in this quarter?

Daniel Bernstein -- President and Chief Executive Officer

Craig or Lynn, can you address it?

Lynn Hutkin -- Director of Financial Reporting

So -- hi, Theo. This is Lynn. We did have a similar amount in Q4 this year related to those subsidies that was $835,000 in the fourth quarter.

Theodore O'Neill -- Litchfield Hills Research -- Analyst

And again, this is -- this may or may not continue into the next year?

Lynn Hutkin -- Director of Financial Reporting

We don't believe [Phonetic] that it will continue.

Theodore O'Neill -- Litchfield Hills Research -- Analyst

Okay. My other question is about the EOS acquisition. So, just from a branding perspective, will you continue to private label and sell under the EOS brand, or will you move that to the Bel label brand?

Daniel Bernstein -- President and Chief Executive Officer

That is one of the big questions we're debating constantly. I'll show you how crazier the situation we have. We private label EOS under the Bel brand. The company we acquired last year, CUI, private labels under -- EOS product under their brand, and then EOS uses their brands. So, we have a couple of distributors that sell three of the same products with three different names, all go by EOS. So, the margin, it's -- the number one thing our marketing group is working on is how do we brand -- how we brand EOS, but how we brand Bel with so many different companies that we acquired over the past couple of years.

Theodore O'Neill -- Litchfield Hills Research -- Analyst

Okay. Thanks very much.

Operator

We'll now hear from Hendi Susanto with Gabelli.

Hendi Susanto -- Gabelli -- Analyst

Good morning, Dan, Farouq, Craig and Lynn.

Daniel Bernstein -- President and Chief Executive Officer

Good morning.

Craig Brosious -- Vice President, Finance

Good morning.

Hendi Susanto -- Gabelli -- Analyst

Dan, can you just talk about your M&A pipeline now that you have Farouq in your team?

Daniel Bernstein -- President and Chief Executive Officer

I'll let Farouq speak about our M&A pipeline. Farouq?

Farouq Tuweiq -- Chief Financial Officer

Yeah. Thanks, Dan. Great to be with you here today. So, coming from the industry, there is a good amount of activity that we expect to occur a little bit and more frequently in 2021, especially as the world set to recover up from COVID. So, our expectation is we will see more and expect to have a robust pipeline. And then, obviously, we, with the team at Bel here, and now, in addition to myself, will be trying to cultivate our own proprietary side of the house, not to be similar to [Indecipherable]. So, I would say, it's in -- it's definitely out there, and that we just need to figure out where we want to be spending time and going after it.

Hendi Susanto -- Gabelli -- Analyst

Thank you.

Daniel Bernstein -- President and Chief Executive Officer

And I think with the value also, Farouq, besides knowing so many of our competitors or companies in the industrial market which we will participate in, I think how we deal with the banks going forward, where historically -- now because we have involved nobody in the past, and the financing terms and so forth, I think that's key for us. It's great that we want to buy a company, but the question is can we get the proper financing from our lenders? And I think with Farouq on board I think that's going to be a major benefit that he brings to the party besides his acquisition knowledge.

Hendi Susanto -- Gabelli -- Analyst

Got it. I would like to repeat that long lead times, there has been talk -- I don't know whether you had talked about this or not. There has been talk about inventories in the channel and inventory at OEMs are lower than optimal, and therefore, they would take more and then build their inventories. Do you see the same trends among your customers, or that doesn't apply in your area?

Daniel Bernstein -- President and Chief Executive Officer

I think, again, I think the initial concern you have, we have long lead times. If someone has to wait nine months for a semiconductor, I think, [Indecipherable] two months, are they going to push back your deliveries for the last item. Generally, we will never see that. What we see generally when there are long lead times, we always feel it's beneficial to the business, because most of our customers are more concerned about delivery than they are about pricing. And at some point, they willing to pay a premium for pricing. So, we think, even though we do think it's a beneficial, again, for all of us when we have long lead times and how we prepare ourselves properly for. And I think [Indecipherable] flood line is open with product and because of the long-term relationships we have with our suppliers. Again, I feel with these lead times, we are somewhat confident that we can manage it properly. And if we do face increased pricing, then we can offset it with our pricing to our customers.

Hendi Susanto -- Gabelli -- Analyst

Got it. And then, within EOS and rms Connectors, what should be our expectation for operating expense?

Daniel Bernstein -- President and Chief Executive Officer

Craig?

Craig Brosious -- Vice President, Finance

Hendi, you're asking the expectation for OpEx?

Hendi Susanto -- Gabelli -- Analyst

OpEx and SG&A.

Craig Brosious -- Vice President, Finance

Yeah. For rms, there should be very little incremental OpEx, because they basically bringing a manufacturing facility into our own, and we are not bringing any incremental SG&A, it's a lot of that. On the EOS piece, the OpEx would be probably traditional about 13% to 15% of revenue. Maybe some synergy there, we're not anticipating a significant amount.

Hendi Susanto -- Gabelli -- Analyst

And then, Craig, can you share what kind of absolute dollars of SG&A we should expect?

Craig Brosious -- Vice President, Finance

Let's see, that would be revenue on an annualized basis of, say, $12million to $15 million. So, I'd say 14%, 15% of that.

Hendi Susanto -- Gabelli -- Analyst

Okay. And then I think for -- starting from Q1, you would see some benefit in R&D and then some closures also?

Craig Brosious -- Vice President, Finance

Well, on the comparative basis, we should see positive comparison for R&D.

Hendi Susanto -- Gabelli -- Analyst

Okay. Thank you, Craig.

Lynn Hutkin -- Director of Financial Reporting

[Speech Overlap] were you asking about the consolidated business?

Hendi Susanto -- Gabelli -- Analyst

Yeah. The consolidated business, yeah. I think months ago, I think, that we've fashioned that SG&A as between like $19 million to $20 million.

Lynn Hutkin -- Director of Financial Reporting

Great. So, for the consolidated business, we will see incremental cost savings in Q1 of about $1.3 million. The majority of that will be in R&D, about $750,000 related to the Switzerland closure. And then the rest will be split between SG&A and closure.

Hendi Susanto -- Gabelli -- Analyst

That's helpful. Thank you, Lynn. Thank you.

Daniel Bernstein -- President and Chief Executive Officer

Thanks, Hendi.

Operator

We'll now hear from Steve Kohl with Mangrove.

Steven Kohl -- Mangrove Capital -- Analyst

Yes. Good morning, guys. Thanks for having the call. I have a few quick questions. First off on Magnetics. I know you mentioned one of the large OEMs was kind of sitting tight, now are starting to come back. Can you give a little bit more color on what else is happening there that gives a comfort that the order patterns are coming back and you're seeing more strength outside of that OEM?

Daniel Bernstein -- President and Chief Executive Officer

Based on -- we're using our backlog to make that judgment call, and the backlog has increased nicely in the fourth quarter in the Magnetic side of the business.

Steven Kohl -- Mangrove Capital -- Analyst

Okay. And turning down to the rms business, I know you talked about the five-day bump in incremental revenues. If we kind of go back and look at what a more normalized world will look like in commercial aerospace side, what is the expectation on where rms Connectors be if you look a longer view? So, if we don't look at this year, but we look [Speech Overlap]

Daniel Bernstein -- President and Chief Executive Officer

So, again, I think the key is where Boeing planes are going to be. Before COVID and before the 737 problems, they were looking at 49 to 51 planes a month. And that's and I think we have 5,000 connector per plane. So, there is a substantial valid in rms versus second source at Boeing and to the suppliers. So again, -- and now I think, Craig, will say -- hoping to get to '21 soon. Craig?

Craig Brosious -- Vice President, Finance

Right. Yeah, the activity -- it's going -- is expected to be a slower ramp up in their build schedules. So it's going to take a couple of years until they get back up to that run rate that we were anticipating earlier.

Daniel Bernstein -- President and Chief Executive Officer

So again, if you look at, I think the point to us is, we could have waited if Boeing was back to normal, saying 42, 43 planes, we believe the buy rms would probably be maybe two to three times what we paid for it today. So, we feel very fortunate. We did take a big risk. If the 737 doesn't come back, this is not the best acquisition we have had. But even the fact that we picked up state-of-the-art of equipment that we needed anyway in offsetting, we were really pleased again with the acquisition besides Boeing and the aftermarket and how it strengthens our relationship with some of our key aerospace distributors. So, for us, it's just with -- again, it took me eight years, I think, nine years from sending Christmas cards to the President of the Company before he finally responded, and I thought he's going to thank me for our Christmas card. It's obviously -- funny, right. Again, it's probably the best investment we thought we've ever made with $20 Christmas card.

Craig Brosious -- Vice President, Finance

That's pretty good deal. And it's probably $20 for whole package. So not as an individual one. [Speech Overlap]

Daniel Bernstein -- President and Chief Executive Officer

Well, maybe, it's also exciting. We were able to complete this deal in a roughly two-months period, less than eight weeks, right. Working closely with them and I think that's a good sign. When we do deal with a lot of acquisitions, which we will going forward, we can -- I don't think there's many companies out there that can close a deal in that shorter timeframe. And so that our philosophy, as you say, that we've done a lot of divestitures with billion-dollar companies. And I think if you look at it [Indecipherable] some of the other companies we deal with, I think they decided to go with Bel Fuse, not because we pay the highest dollar, it's because of user transaction and how we treat the customers and associates. So I think we have a team of expertise, some of our competitors, we have a really good track record. We can do a deal, we're going to do a fair deal and will be quick do, so that that's going to help to look a lot in his pursuit.

Steven Kohl -- Mangrove Capital -- Analyst

[Speech Overlap] Okay. Go ahead, I'm sorry. I'm sorry, Lynn.

Lynn Hutkin -- Director of Financial Reporting

I just wanted to quickly add that if you looked at a couple of years, pre-COVID, pre-grounding, the rms business was running around $15 million to $16 million a year in revenue, and that compares to where they were in 2020, which was around $8 million. So just to give you some perspective of where they were in 2020.

Daniel Bernstein -- President and Chief Executive Officer

And Lynn, do you have their profitability?

Lynn Hutkin -- Director of Financial Reporting

Yes. So before all of this and in normal conditions, their EBITDA margin was around 20%. Where it's right now, they've been running around 5%. There's definitely room for improvement as conditions improve.

Daniel Bernstein -- President and Chief Executive Officer

I repeat, on the Bel without their overhead and without their building and so forth, we should be able to substantially improve those margins.

Steven Kohl -- Mangrove Capital -- Analyst

All right. And this is going to seem like an off-the-wall question. I'm sure you've hear this one too. But the world -- you talked about obviously T&E has gone for everybody now. But how do you -- when we look longer-term -- in terms of how you're doing business, will you expect a structural change in T&E and things like this going forward, or how -- in terms of how you conducting your business, or how do you view that...

Daniel Bernstein -- President and Chief Executive Officer

I think we're going through a revolution. And maybe I'm wrong, but I think the revolution would have taken maybe four or five years. But I think the revolution is going to take in few months or sooner. I mean, the role of salespeople, when people working from home, how can you call on the customer, that's 50% of the people working from home going forward, and how do you connect with these people. And that's why we made a major effort over the last three or four months to consolidate our sales force. Historically, we had no sales person for each company. So, we had a sales person a CUI and sales person for Bel Power Solution, a sales person for Signal Transformer, possibly all point on the same customer.

We consolidate that -- we're consolidating that into four people that cover the country. In addition to that, we are pushing our digital sales group substantially that add people on. So how do we connect to engineer, through LinkedIn, through YouTube, through Twitter. Again, if you're dealing with young people, as you know, I don't think they like to use phone calls and I don't think they like to talk to people, they want the information quickly, they want it fast, and they don't want BS. And so we clearly understand that and hopefully they're moving quick enough to address the new engineers. And for us, that's the key. I mean we -- for us to be successful, we have to be able to work with engineers before designing the product. If we coming as a second supplier or a third supplier, it makes it extremely difficult. But we come when the engineer is designing the product, we can help them, we can guide them and assist them to use our product in the proper way, and then hopefully eliminate some of our competitors. So, it's definitely an exciting time we're within and I definitely believe things are changing rapidly.

Steven Kohl -- Mangrove Capital -- Analyst

One last question that was kind of your opening about the one that feel into my heart. So you mentioned about pointing out the valuation disparity between the sum of the pieces in the current marketplace. I guess, obviously Farouq is coming on and I guess the best thing to do is throw him right into this task of, how do we narrow that. So, obviously you've been successful to varying degrees on acquisitions as you've alluded to and running the company efficiently. But how do we narrow -- I'm still little bit confused on how do we do that? So how do you get a share price on a public [Speech Overlap]

Daniel Bernstein -- President and Chief Executive Officer

Farouq, you want to earn your salary right now and explain on how you going to do it? [Speech Overlap]

Farouq Tuweiq -- Chief Financial Officer

Got to start somewhere. I'm basically here. So I was on other side of the table looking at Bel, and kind of seeing kind of the same information that you're looking at, I would say you develop certain expectations and perspective on the business and being slightly under the covers here. On the other side, I would echo Dan's sentiment, now that we're peeling back the onion. I'd also say though when -- that I was sitting at another side of table, on the far side, Bel represents a unique opportunity from a size, reach and global positioning quite frankly, with varying degrees, whether it be on the Connectivity side or the Power side and the Magnetic side.

So when I see -- when I'm looking at I feel great base for us to build upon and drive growth faster, both, I would emphasize, inorganically and organically. So one of the benefits from my perspective is bring a fresh set of eyes and asking questions for us to look at how Bel is conducting business today and where should we be and what do we want to do down the road.

So to your question, how we'll have bridge the gap? I think there is a consistency in kind of performance and the way we do business that we need to address. So we cannot have a feeling, again, sitting in your shoes, talking to investors, and I would say that Dan had alluded to it earlier, whether it be on the margin side, the way we just do business is simplifying and position ourselves for longer-term sustainable growth. So, it is a tough question, but I think we know the answers and we need to just figure out how to get there.

Steven Kohl -- Mangrove Capital -- Analyst

Sounds good. Thank you very much. Not a bad answer for day three.

Farouq Tuweiq -- Chief Financial Officer

I'll take it.

Steven Kohl -- Mangrove Capital -- Analyst

Okay. Thanks.

Operator

We have a follow-up from Jim Ricchiuti with Needham & Company.

James Ricchiuti -- Needham & Company -- Analyst

Hi, Thanks. Just looking at the commercial aircraft market, the comparisons actually get much, much easier for you when Q3, was that when the business really started to come down sharply?

Lynn Hutkin -- Director of Financial Reporting

So, on the commercial aerospace, I guess, it was actually end of the second quarter of 2020 is when we saw the largest drop off. So, there will be some incremental pressure on Q1 sales related to that, but then we should be in a more normalized position come Q2.

James Ricchiuti -- Needham & Company -- Analyst

Got it. Thank you. And I'm just looking at comment in your press release. I just want to make sure I'm not misinterpreting it. You talked about an additional $4.4 million of cost savings in 2021. And I just want to make sure I'm not confusing that with some of the other saving you've highlighted this morning.

Lynn Hutkin -- Director of Financial Reporting

Right. So, the $4.4 million that will be incremental in 2021, that is looking at full year 2020 cost versus 2021. So like of that, $2 million relates to the Switzerland facility closure. We have about $1 million of that cost savings realized in 2020 at the tail end of the year here, and the other $2 million will be realized in 2021. Other actions that we have done throughout the year, the Germany sales office closing, our North America sales reorganization. And we had a couple of other actions that were implemented in Q4, with moving some functions in Asia that will result in another $1 million of savings in 2021. So that $4.4 million is incremental. And I do have the detail of it by quarter if that would be helpful?

James Ricchiuti -- Needham & Company -- Analyst

Sure. Thank you.

Lynn Hutkin -- Director of Financial Reporting

Okay. So again, these are year-over-year incremental savings. So, in Q1, it's $1.3 million versus if you're looking at Q1 '20. On Q2, it's almost $1.4 million. In Q3, it's $1.1 million. And in Q4, it's about $600,000.

Daniel Bernstein -- President and Chief Executive Officer

And Jim, just to add some more color on that. We still believe that we still got ways to go before we start our cost savings program with a few things with the implementation of our new software. And now instead of having many different ROI systems, we got it down to two, one for Cinch group and one for the Bel group. So we can look at consolidating many functions because we're all on one system now. Also our manufacturing footprint in China, we have three operations in China that we have to look at consolidating down to either one or maybe two. So we still think there is good opportunity to improve our savings over the next year or two years. So, we still got ways to go and we're still focused on.

James Ricchiuti -- Needham & Company -- Analyst

Perfect. Thanks very much. Thank you.

Operator

[Operator Instructions] And that will conclude today's question-and-answer session. I'll now turn the conference over to Mr. Bernstein for any additional or closing remarks.

Daniel Bernstein -- President and Chief Executive Officer

Thank you, James. Thank you for joining our call today, and we're looking forward to speaking to you in April. Have a good day.

Operator

[Operator Closing Remarks]

Duration: 51 minutes

Call participants:

Daniel Bernstein -- President and Chief Executive Officer

Farouq Tuweiq -- Chief Financial Officer

Lynn Hutkin -- Director of Financial Reporting

Craig Brosious -- Vice President, Finance

James Ricchiuti -- Needham & Company -- Analyst

Theodore O'Neill -- Litchfield Hills Research -- Analyst

Hendi Susanto -- Gabelli -- Analyst

Steven Kohl -- Mangrove Capital -- Analyst

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