Welcome to the Bellefuse Inc. 4th 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.
Thank you, James. I would like to welcome everybody Berns. Thank you, Dan. Before I begin, we hope you and your family stay safe Berns. On the call today is Craig Brocious, our Vice President of Finance Lynn Hocken, our Director of Financial Reporting Berns.
And I would like to introduce our new Chief Financial Officer, Farooq Taric, who came on board this week. Berns. While working with BMW I'm sorry, working with Bank of Montreal in the past, we have developed a strong relationship with Farooq. Berns. We have been overly impressed with his knowledge of our industry, work experience, interpersonal skills and most importantly, Berns' ability to solve problems in a timely manner.
His number one goal at Bell, simply put, will be to increase Bell's overall value to our shareholders. The Board believes there's a substantial valuation gap between valves, share price Berns. Saluk has a broad mandate to work with team members to examine the various pathways to increase top line growth, Burns. When searching for our first CFO in the company's history, Berns. He was a best candidate and we feel fortunate that he joined Bell to offer us his fresh perspective.
Welcome aboard, Farooq. Bernstein. Thank you, Dan, for the introduction there. I'm very excited to be joining the Bell family in Seaphem. Bernstein.
Okay. Lynn, can you please go over the Safe Harbor statement? Berns.
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 Zill's magnetic solutions business and overall product sales, Berns. Anticipated impact of global cost reduction program on Bell's positioning for further margin expansion anticipated cost savings resulting from the closing on the sale of the Switzerland facility and other restructuring actions Berns.
Potential benefits to Bell's margins resulting from recovery of demand in Bell's end markets, the anticipated impact of the RMX Connectors acquisition included on Zelle's EBITDA, the anticipated impact of the EOS Power acquisition, including the timing and closing barrels, Berns. Factors that may impact Bell's organic growth for 2021, including continuing visibility, Berns. Some of the visibility as a result of COVID and long lead times for semiconductors and certain components are all forward looking statements Berns, as described under the Private Securities Litigation Reform Act of 1995 that involve risks and uncertainties. Actual results could differ materially from Bell's Bernstein's projections. Among the factors that could cause actual results to differ materially from such statements are the market concerns 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-nineteen, the effects of business and economic conditions, difficulties associated with integrating recently acquired companies, Berns.
Capacity and supply constraints or difficulties product development, commercialization or technological difficulty Berns. The regulatory and trade environment, risks associated with foreign currency, uncertainties associated with legal proceedings, Berns. 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 policies Berns.
In light of the risks and uncertainties, there can be no assurance Berns. Any forward looking statement will in fact prove to be correct. We undertake no obligation to update or revise any forward looking statements. Berns. 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.
Bernstein. I would now like to turn the call back to Dan for a general business update.
Thank you, Lynn. First, I'd like to provide an update on COVID-nineteen Berns and how it impacted our facilities. Overall, I'm pleased to report that all our manufacturing sites globally continue to be operational for the majority of the Q4. Berns. There were 2 facilities that needed to be closed for about a week during the quarter in response to the infection, but we're still able to service our customers during this time.
Berns. While the number of COVID-nineteen cases appear to be moving in the right direction and vaccine distribution is now underway, the situation still remains fluid. Berns. We continue to operate our facilities with all preventive measures in place and ensuring ongoing compliance with local regulations Bernstein to migrate our risk. I would again like to acknowledge our production managers and manufacturing associates who work day to day under difficult conditions.
Berns. The continued dedication to Bell and our customers is truly appreciated. Now turning to our results. Berns. We saw improved margins on relatively flat sales as compared to last year's Q4.
While there was a minimal change in overall sales volumes, Berns. The composition of our sales has changed quite a bit since last year's Q4. Sales within our Berns. Power Solutions and Protection Group were up $16,200,000 or up 44.8 percent from the 4th quarter Bernstein. Our acquisition of CUI in December 2019 contributed $11,000,000 incremental sales Bernstein for the Q4 of 2020.
And this for instance runs at a higher margin. Other areas within our Power segment that were strong as well. Berns. Our products sold in the fast growing e mobility markets were up $2,500,000 a 200% increase from 2019 quarter Berns. And fuel sales were up $1,300,000 an increase of over 40% from last year's Q4.
Berns. These areas of growth were offset by the elimination of low margin products within this group. Berns. Within our Connectivity Solutions segment, sales were down $6,800,000 or 16.6 Bernstein in the Q4 of 2020 versus the same quarter of 2019. We continue to be impacted by the depressed Berns.
Commercial Aerospace Industry, where sales were down $7,000,000 or 80% from last year's Q4. Berns. The Connectivity segment was also impacted by the lower sales of product into premise wiring applications as new construction projects stalled in 2020 Berns. We were able to shift our production lines to support our growing military backlog, Berns, which enabled us to capture 60% increase in military sales, partially offsetting the commercial decline. Berns.
Sales within our Magnetic Solutions business was down $8,400,000 or 22.1 percent from the Q4 of 2019. Berns as one of our largest OEM end customers and has paused ordering as they work to their inventory on hand. On a positive note, Berns. Magnetic bookings have since rebounded and we should see these sales take back up in the Q1 of 2021. Berns.
Overall margins have improved by 4 20 basis points and are trending in the right direction. Berns. This can be attributed to a combination of product mix as discussed previously and our ongoing cost reduction program. Bernstein. On the acquisition front, we have been busy over these past few months as we recently announced our purchase of 2 companies, Berns.
Val closed with the acquisition of RMS Connected in January, Berns, which will enable us to expand our market share within the commercial aerospace business. That will benefit us and the industry start to be down later in 20 Berns. 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 all importantly provide us a manufacturing capability of outside China. Berns.
Both these acquisitions fit within our strategy to increase market share, while diversifying our product portfolios and geographic footprint. Berns. Looking to 2021, we have seen some recovery in certain of our served markets. We would expect demand for military customers and e mobility Berns to remain a driver for SaaS throughout 2021. We additionally see signs of certain additional markets such as premise wiring, Berns.
Rail, Commercial Aerospace have potential to recover throughout the year as COVID conditions improve. While our Competitive position remains stronger than ever. With the COVID situation still with us and uncertainty regarding Berns. Some semiconductors and components that might be at your supply give us limited visibility Berns. In the meantime, the management team will remain focused on bottom line growth while integrating the announced Berns' acquisitions and actively looking at other strategies, avenues to better position Dow for the future.
And with that, I'd like to turn the call over to Craig for the financial update. Craig? Thank you, Dan. Sales by product segment for the Q4 of 2020 was as follows. Berns.
Power Solutions and Protection sales were $52,300,000 up 44.8% from last year's Q4. Berns. Connectivity Solutions sales were $34,200,000 a decline of 16.6 percent and Magnetic Solutions sales were 29.6 Bernsen's million down 22.1 percent from last year's Q4. Gross margin by product segment for the Q4 of 2020 Berns. Power Solutions and Protection had a gross margin of 27.8% in the Q4 of 2020, Berns, up from 19.7% in last year's Q4.
Connectivity Solutions gross margin was 24%, Berns, down from 24.5 percent in the 2019 quarter. And Magnetic Solutions gross margin Bernstein. Bernstein. On a consolidated basis, gross profit margin increased to 25.3% in the Q4 of 2020 Berns. As compared with 21.1 percent in the Q4 of 2019, the result of a combination of factors.
Berns. Overhead and indirect labor costs were $1,000,000 lower during the Q4 of 2020, primarily due to restructuring measures implemented during late 2019 Bernstein and a reduction in the cost structure for our Sensor Connectivity Solutions segment to align with current sales volumes within that segment. Berns. A portion of the margin improvement in the Q4 of 2020 related to the elimination of certain low margin pallet products from our portfolio. Berns.
Research and development costs were $5,700,000 during the Q4 of 2020, a decline of $1,000,000 from the Q4 Bernstein, primarily due to restructuring efforts implemented during the latter part of 2019. Berns. Our selling, general and administrative expenses were $19,600,000 or 16.8 percent of sales, Berns, flat from the Q4 of 2019. Lower travel expenses of $613,000 Berns. And savings from other cost containment efforts fully offset the $1,100,000 of incremental SG and A Spences associated with the CUI business acquired in December of 2019.
On a go forward basis, we would expect G and A to run between $19,000,000 $20,000,000 per quarter in the near term as we expect our T and E spend will continue to be lower than normal Berns for at least the first half of twenty twenty one. During the Q4 of 2020, we closed on the sale of our facility in Switzerland. Berns. This transaction resulted in a gain of $1,900,000 which is included in our 4th quarter results. Berns.
These factors resulted in income from operations of $5,600,000 in the Q4 of 2020 Berns. As compared to the loss from operations of $2,900,000 in the Q4 of 2019. Berns. Other expense net was $395,000 for the Q4 of 2020 Berns. As compared to $1,700,000 during the Q4 of 2019.
An increase in foreign exchange losses of $700,000 in the Q4 of 2020 was offset by a larger gain on the company's SERP investments, Berns, which are now included in this line item. The expense in the Q4 of 2019 largely related to a $2,100,000 loss on the liquidation of foreign subsidiaries. Interest expense was $900,000 in the Q4 of 2020, Berns, down from $1,300,000 in the same quarter last year. As a result of decreases in the LIBOR rate, Berns. The company's spread on its credit facility driven by EBITDA improvements and the overall reduction in our outstanding debt balance.
Bernstein. We had a provision for income taxes of $774,000 in the Q4 of 2020 compared to a provision of $392,000 during last year's Q4. Earnings per share for the Class A common shares Berns with earnings of $0.27 per share in the Q4 of 2020 as compared with a loss of $0.50 per share in the Q4 of 2019. Berns. Earnings per share for the Class B common shares was earnings of $0.29 per share in the Q4 of 2020 Berns.
As compared with a loss of $0.52 per share in the Q4 of 2019. Bernstein. On a non GAAP basis, which excludes certain unusual and other non recurring items, EPS for Class A shares Berns with earnings of $0.18 per share in the Q4 of 2020 as compared with a loss of $0.30 per share in the Q4 of 2019. Berns. On a non GAAP basis, EPS for Class B shares was $0.20 per share in the Q4 of 2020 Berns, as compared to the loss of $0.30 per share in the Q4 of 2019.
And now I'd like to go through some balance sheet and cash flow items. Berns. Our cash and cash equivalents balance at December 31, 2020 was $84,900,000 an increase of 12,700,000 Berns from December 31, 2019. During 2020, we generated cash flows from operating Bernstein activities of $46,100,000 and received $4,000,000 in proceeds from the sale of property. Berns.
We made net payments of $28,200,000 towards our outstanding debt balance and used cash for capital expenditures Berns of $5,500,000 dividend payments of $3,400,000 and interest payments of 4,100,000 Berns. Accounts receivable were $71,400,000 at December 31, 2020, Berns, as compared with $76,100,000 at December 31, 2019. Days sales outstanding decrease to 57 days at December 31, 2020 as compared to 60 days at December 31, 2019. Berns. The decrease in our accounts receivable balance is largely due to lower sales in Asia where payment terms tend to be the longest.
Berns. Inventories were $100,100,000 at December 31, 2020, down $7,100,000 from December 31, 2019. Berns. The decline you've seen in raw materials due to reduced material intake in anticipation of slower 4th quarter. Berns.
Accounts payable were $39,800,000 at December 31, 2020, down $4,400,000 from its level at December 31, 2019, primarily due to lower purchases of raw materials during the Q4 of 2020. Berns. Total outstanding debt balance was $115,600,000 as of December 31, 2020, net of deferred financing costs, Berns, a decrease of $28,100,000 since the 2019 year end balance. This primarily reflects voluntary debt repayments of 28,000,000 Berns. Book value per share, which is calculated as stockholders' equity divided by our combined Berns.
A and B classes of common stock outstanding was $15.04 per share at December 31, 2020, Berns. As compared to $13.69 per share at December 31, 2019. And with that, I'll turn the call back over to
Dan. Bernstein.
Thank you, Craig. At this time, James, can we open up the call for questions?
Bernstein. To Larsen, Oil and Tresher Equipment. Bernstein. We'll take our first question today from Jim Ricchiuti with Needham and Company.
Hi, good morning.
Bernstein. I'm wondering if you
could speak a little bit more about RMS Connectors and the EOS Bernstein. Share with us perhaps if you could just any details on their financial Berns' contribution or just the impact that we would anticipate in 2021. Thanks a lot. Berns. Okay.
Before I have Craig go over the numbers with you, but just to give you insight to both those companies, Berns. EOS, again, we've been product labeling their products for over 3 years. We have a very strong relationship with them. We know the people. Berns.
It was a market, it's the low medium market, mostly in the medical area and industrial area, which we felt we could grow with Burns. With a proper pricing structure and product portfolio. So we've been pestering them for many years if they were interested in saying. Berns. So we're very excited that again that we could put this deal together and close on March 31.
So Berns. Matt, Dale, as I said, and the key for us also is that we are overly dependent with manufacturing in China. Berns. And just to give us another area that we can have low cost manufacturing. And in addition to that, we do believe the Indian market Burns.
The other acquisition of RMS, when Cinch Bernstein. Boeing suggested very strongly that we approve a second source Berns. And that company was RMS. And over the past 10 years, we've contacted them every year to to see if they would be interested in selling because of the price pressure that we're feeling by the aerospace companies out there. Bernstein.
Because their medical sales were growing so fast, this wasn't a strategic product line for them any longer. Bernstein. So they allowed us to buy us and we came up with a very strong deal, almost close to book value. Berns. And the book value is a lot of automated high end equipment that we didn't have in house.
So besides eliminating a good competitor, Berns. We're able to pick up some state of the art equipment. So we think that also is going to be a Holdaround acquisition. Berns. We do think it's going to become profitable once we move it into our facility, which will take 3 or 4 months.
And once Bernstein. Well, he starts ordering again. We think it would be one of our most successful acquisitions. Craig, can you go over more the financials, Bernstein. Yes.
Starting with RMS, Bernstein. Obviously, they play in that commercial aerospace segment, so their revenues have been depressed over the last 12 months Berns with the cause in the manufacturing and also the aftermarket impacts. Berns. So for the coming 12 months, we're kind of expecting an incremental revenue Berns. Maybe $5,000,000 to $8,000,000 related to that.
And once we get back to a normal run rate, then Burns. And obviously, that revenue would certainly tick up. And because we're moving that entire Berns production facility into one of our existing facilities. There's no incremental G and A, Berns. And we'd be able to leverage our internal overhead structure.
And so we expect that business to be Berns. Fairly profitable. On the EOS acquisition, Bernstein. They've been obviously impacted by COVID like the rest of the industry. Berns.
They've been running at an approximate $12,000,000 revenue run rate over the past 7, 8 months now. Berns. So once they come on board, we expect that the incremental revenue Bernstein. Assuming a March close would be approximately $8,000,000 to $9,000,000 for 2021. Berns.
Margins there are similar to our other power margins. Berns. So we expect that business to be accretive right out of the gate. Berns. I'll probably answer his question, Jim.
It does.
And just one clarification,
Craig, is the margins will be more of the Bellpower and not like CUI? Berns. Yes, that's correct. The traditional Bellpower margin. Thanks for that.
Thanks for the color. And Berns. Dan, it sounds like nice acquisitions. Congrats. I wonder if you could also, to the extent we can, elaborate a little bit more Berns.
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 Berns. No, I think again, we're very fortunate because we do have long term Berns. Our relationship with our semiconductor companies we deal with and the component people we do deal with. Berns. So again, they came to us for example and said, hey, if you want support this year, you have to sign up for a yearly non cancel order.
Berns. And then I'd like to walk in the deliveries. Also, I think we do a good job in staying ahead of the situation because of all the relationships we have in the industry. Berns. So again, the major problem is that we don't have any pricing pressure Berns.
And we have seen some pricing increases during this shortage period. But I don't think it will affect our delivery, Berns. But in my effect, having price going forward, we have to increase pricing or not to our customers. Bernstein. Got it.
And just last question for me. Just in general, the level of activity you're Bern. Seeing across your markets, it sounds like with the exception obviously of commercial aerospace and potentially Burns. A couple of situations with 1 of your larger OEMs. Is it fair to say that the level of business Berns.
Well, and comparing to last year when we were in the middle of COVID and you had China shut down, Bernstein. I think going over that bar is not too high. Well, I'm thinking more in terms of as you're entering the year versus Bernstein. Obviously, year over year, we've been very successful. I wish I could I still think we just had such limited Berns.
I think there's still so much uncertainty out there with COVID, how the new government is going to affect Bern's policy. And I still think it's still a little bit a lot more positive than last year overall. Berns. However, I still think there's still a substantial amount of uncertainty where people are getting that infamous term are cautiously optimistic, Berns. But I don't see anybody opening up the champagne yet.
How about that? That's fair enough. Thank you. Thank you for that.
Bernstein. Next, we'll hear from Theodore O'Neil with Litchfield Hills Research.
Burns. Thanks very much. Two questions for you. First, on the margins, which continue to show improvement. Berns.
Last quarter, there was a $900,000 Chinese subsidy in there. Were there any one time items like that in this quarter? Bernstein. Craig, Lynn, can you address it?
Sure. Hi, thank you. This is Lynn. Berns. We did have a similar amount in Q4 this year related to those subsidies that was 830
Berns. And again, this is this may or may not continue into the next year.
Berns. We don't believe that it will continue.
Okay. My other question is about the EOS acquisition. Berns. 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 Bell brand? Bernstein.
That is one of the big questions we're debating constantly. I'll tell you how crazy of a situation we have. Berns. We private label EOS under the Bell brand, the company we acquired last year CUI private labels under Berns. EOS product under their brand and then EOS uses their brand.
So we have a couple of distributors Berns. So Berns. We are marketing. It's the number one thing our marketing group is working on is how do we brand EOS, Berns. We'll now Berns.
We'll now hear
from Hendi Susanto with Gabelli.
Berns. Good morning, Dan, Farrell, Craig and Liam. Good
morning. Good morning.
Bernstein. Dan, can you talk about your M and A pipeline now that you have follow-up in your team?
Bernstein. I'll let Farooq speak about our 7 pipeline. Farooq? Yes. Thanks, Dan.
Great to be with you here today. Bernstein. So coming from the industry, there is a good amount of activity that we expect to Burns. And our expectation is we will see more Berns, and I expect to have a robust pipeline. And obviously, we with the team at Bell here Berns.
And now in addition to myself, we'll be trying to cultivate our own proprietary side of the house, not to be similar to the kind of deals that get done here. Berns. So I would say it's definitely out there, and we just need to figure out where we want to be spending time Berns and go on after it.
Thank you. And I think with
the value also Palook brings besides knowing so many of our competitors or companies in the industrial market, which we were anticipating. I think how we deal with the banks going forward, where historically, because we have Bernsen. I've borrowed money 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 that through to the Board, I think that's going to be a major benefit that he brings to the party besides his acquisition knowledge.
Berns. Dan, I would like to repeat just the long lead times. Dan's been conference. I don't know whether you Bernstein to talk about inventories in the channel and inventories at OEMs are lower Berns. They're optimal and therefore they would purchase more and then build their inventories.
Berns. Do you see the same trends in among your customers or that doesn't apply in your area?
Berns. Again, I think the initial concern you have when you have long wait times, if someone has to wait 9 months Berns. For semiconductor, is he going to need a fuse in 2 months? Are they going to push back Berns. Your deliveries for the last item, generally, we never see that.
What we see generally when there are long lead times, we always Berns. 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're willing to pay that premium for pricing. Berns. So we think even though we do think it's beneficial again for all of us when we have long lead times Bernstein, how we prepare ourselves properly for it.
And I think the start of the our purchasing group has always kept our flood lines open with product Bernstein because of the long term relationship we have with our suppliers. So again, I feel with these lead times, we are Berns. Somewhat confident that we can manage it properly. And if we do face increased pricing, that we can offset it with our pricing to our customers.
Berns. Got it. And then I understand of EOS and the RMS Connector. Berns. What should be our expectation for operating expense?
Bernstein. Okay. Hendi, you're asking expectation for OpEx? Berns. Yes.
For RMS, there Burn's facility into our own, and we are not bringing any incremental SG and A along with that. Bernstein. On the EOS piece, the OpEx would be probably traditional about Berns. 13% to 15% of revenue. Maybe some synergy there, we're not anticipating
Berns. And then, Craig, can you share what kind of absolute dollars of SG and A we should expect?
Bernstein. Let's see. That would be revenue on an annualized basis of, let's Bernstein. $12,000,000 to $15,000,000 So I'd say, 14%, 15% of that.
Bernstein. Okay. And then I think for starting from Q1, you would see some benefit in R and D Berns. And then some of our co chairs also.
So on a comparative basis, Berns. We should see a positive comparison for R and D.
Berns. Okay. Thank you, Paul.
Are you asking about the consolidated business?
Yes, the consolidated business, yes. Berns. I think months ago, I think there's discussion that SDMA may run at between like 90,000,000 to 20,000,000.
Berns. Right. So for the consolidated business, we will Berns. The incremental cost savings in Q1 of about $1,300,000 The majority of that will be in R and D, Berns. About $750,000 related to the Switzerland closure and then the rest will be split between SG and A and Clarks.
Berns.
That's helpful. Thank you, man. Thank you.
Thanks, Andrew.
Burns. We'll now hear from Steve Cole with Mangrove.
Yes. Good morning, guys. Thanks for having the call.
Berns. I have
a few quick questions. First off, on Magnetix, I know you mentioned that one of the large OEMs is kind of sitting tight and now starting Burns to come back. Can you give a little bit more color on what else is happening there that gives you comfort that the order patterns are coming back? Are you seeing Berns. Based on we're using our backlog to make that judgment call Berns.
And the backlog has increased nicely in the Q4 in the magnetic side of the business. Okay. And turning, Dan, Berns. To the RMS business, I know you talked about the 5 to 8 bump in incremental revenues. If we kind of go back and look at what a more normalized Berns.
What is the expectation on where RMS could ultimately be if you look out a longer view? So if we don't look at Berns. I think the key is where Boeing planes are going to be. We were leasing Berns. Before COVID and before the 737 problems, they were looking at 49 to 51 Berns.
And that's and I think we have 5,000 connectors per plane. So there's been substantial balance in RMS versus Berns, the 2nd source at Boeing and to their suppliers. So again, and now I think Craig was hoping to get to 21 soon, Craig? Bernstein. Right.
Yes. Yes. It's going to be a expected to be a slower ramp up in their build schedule. So it's going to take a couple of years Berns. So they get back up to that run rate that we were anticipating earlier.
So again, if you look at I think Bernstein. We could await it and following it back to normal and say 40 2, 43 planes, we believe the buy RMS would probably be Berns. Maybe 2 to 3 times what we paid for today. So we feel very fortunate. We did take a big risk.
Berns. If the 737 doesn't come back, this is not the best acquisition we ever had. But even the fact that we picked up state of the art equipment that we needed anyway in our facilities. We're really pleased again with the acquisition Bernstein. Besides Boeing, the aftermarket and how it strengthens our relationship with some of our key aerospace distributors.
Berns. So for us, it just was again, it took me 8 years, I think 9 years from sending Christmas cards Bernstein, President of the company before he finally responded. And I thought he's going to take me from my Christmas card. Berns. By the way, so again, it's probably the best investment Belleci's has ever made, dollars 20 of business cards.
Berns. That's a pretty good deal. And it's probably $20 for a whole package. So not even the individual Berns. Well, maybe also exciting, we were able to complete this deal in a roughly 2 month period, less than 8 weeks, Bernstein.
Working closely with them. And I think that's a good time. When we do deal with a lot of acquisitions with TALUCE going forward, Berns. I don't think there's many companies out there that said that they can close a deal in that short time, Tim. So that's Berns.
No, our philosophy as we say, we've done a lot of divestitures with $1,000,000,000 companies. And I think if you look at PE, Safran, Berns. Some of the other companies we deal with, I think they decided to go with Belle Fuse not because we pay the highest dollar, it's because of Visa transaction and how we treat Berns. So I think we have competing against some of our competitors. We have a really good track record.
Berns. We can do a deal, we can do a fair deal, we can do quickly deal. So that's going to help Taruk a lot in his pursuit. Berns. I guess, I'm sorry.
One quick final okay, go ahead. I'm sorry. Bernstein.
I just wanted to quickly add that if we look back a couple of years, pre COVID, pre grounding, Berns. The RMS business was running around $15,000,000 to $16,000,000 a year in revenue, and that compares to where they were in 2020, which
Berns. When do you have their profitability?
Yes. So before all of this Berns. And in normal conditions, their EBITDA margin was around 20%, whereas right now, they've been running around 5%. Bernstein.
I would think under Bell without their overhead and without their building and so forth, Berns. We should be able to substantially improve those margins. At least kind of seem like an off the wall question. I'm sure you hear Bernstein. But the world you talked about obviously T and E has gone for everybody now.
But how do you Bernstein. When we look longer term, how in terms of how you're doing business, would you expect a structural change Berns. And T and E and things like this going forward or how in terms of how you're conducting your business or how do you view that? I think we're
Bernstein. I think we're going through a revolution.
And I think it's I
know you're not wrong, but I think the revolution would have taken maybe 4 or 5 years. Berns. I think the revolution is going to take 18 months or so. I mean the role of sales people, people working from home, how can you call on a customer Berns. 50% 60% of the people are working from home going forward and how do you connect with these people.
And that's why we made a major effort Berns. Over the last 3 or 4 months to consolidate our sales force. Historically, we had Berns. Salesperson for each company. So we had a salesperson at CUI, a salesperson for Bell Power Solutions, a salesperson for Signal Transformer, Bernstein.
Possibly all points on the same customer. We consolidated that into 4 people that cover the country. Berns. In addition to that, we are pushing our digital sales group substantially to add people on. So how do we connect to the engineer through LinkedIn, Berns.
And really, again, if you're dealing with young people, as you know, Berns. I don't think they like to use phone calls and I don't think they like to talk to people and they want their information quickly. They want it to happen. They don't want BS. Berns.
And so we clearly, we understand that and hopefully we'll be quick enough to address the new engineers. And for us, that's the key. Berns. I mean, for us to be successful, we have to be able to work with engineers before when they design the product. Berns.
If we come in as a second supplier or third supplier, it makes it extremely difficult. But if we come in, 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 that ultimately eliminates some of our competitors. So it's definitely Berns. I'm going to hit you with one last Bernstein. It was kind of your opening that brought a warm feeling to my heart.
So you mentioned about pointing out the valuation disparity Berns. Some of the pieces in the current marketplace. I guess, obviously, Farooq is coming on, and I guess, the best thing to do is throw him right into this task of Berns. How do we narrow that? So obviously, you've been successful to varying degrees on acquisitions as you've alluded to and Burns.
Running the company efficiently, but how do we narrow I'm still a little confused on how do we do that? So how do you get a fair price Okay, Farooq. Farooq, you want to earn your salary right now and explain how you're going to do it? Berns. We're pretty good, we're right out of the gate.
Yes. Got to start somewhere on day 3 here. Berns. So when I was on the other side of the table looking at Bell and kind of seeing kind of the same information that you're looking at, Bernstein. I would say you developed certain expectations and perspectives on the business and being slightly under the covers here on the other side, Bernstein.
I would echo Dan's sentiment, now that we're peeling back the onion. I would also say though Berns. The seat that I was sitting at on the other side of the table on the sell side, Berns. Bell represents a unique opportunity from a size, reach and global positioning, quite frankly, Berns with varying degrees, whether it be on the connectivity side or the power side and the magnetic side. So when I see what I'm looking at, I see a great base for us to build upon and drive growth faster, both I would emphasize, inorganically and organically.
Berns. So one of the benefits from my perspective is bring us a fresh set of eyes and asking questions for us to look at how Bell Berns. And where should we be and what do we want to do down the road. So to your question is, well, how do we bridge the gap? I think there Berns.
There's a consistency in kind of performance and the way we do business that we need to address. Bernstein. So we kind of
have a feeling, again, fitting
in your shoes talking to investors. And I would say that Dan had alluded to it Berns. Earlier, whether it be on the margin side, the way we just do business is simplifying and positioning ourselves for longer term sustainable growth. Burns. So, it is a tough question, but I think we know the answers and we need to just figure out how to get there.
Bernstein. We have a follow-up from Jim Ricchiuti with Needham and Company.
Hi, thanks. Just looking at the commercial aircraft Burns. The comparisons actually get much, much easier for you when Q3, is that when the business really started to
Berns. So on the commercial aerospace, Bernstein. Yes, it was actually in the Q2 of 2020 is when we saw the largest drop off. Berns. So there will be some incremental pressure on Q1 sales related to
Berns. And I'm
just looking at commented in your press release, I just want to make sure I'm not misinterpreting it. You talked about an additional Berns. $4,400,000 of cost savings in 2021. And I just want to make sure I'm not
Berns. Right. So the $4,400,000 that will be incremental in 2021, that is looking at full year 2020 costs So like of that $2,000,000 relates to the Switzerland facility closure. We have about $1,000,000 of that cost savings realized in 20 Berns. At the tail end of the year here, and the other $2,000,000 will be realized in 2021.
Other actions Bernstein that we had done throughout the year, the Germany sales office closing our North America sales reorganization. Berns. And we have a couple of other actions that were implemented in Q4 with moving some functions Berns. In Asia, that will result in another $1,000,000 of savings in 2021. So that 4,400,000 Berns.
Is incremental and I do have the detail of it by quarter, if that would be helpful. Sure.
Berns. Okay.
So again, these are year over year incremental Berns. So in Q1, it's $1,300,000 versus if you're looking at Q1 'twenty. On Q2, it's almost 1.4, and Q3, it's 1.1, and in Q4, it's about 600,000.
Bernstein. And Jim, just to add some more color on that. We still believe that we still got a ways to go Bernstein. Before we file our cost savings program, one of the key things was the implementation of our new software. And now it's having many different Berns.
ROI systems, we got it down to 2, 1 for Cinch Group and 1 for the Bell Group. So we can look at consolidating many functions Bernstein. Because we're all on 1 system now. Also our manufacturing footprint in China, we have 3 operations in China that we have to look at consolidating Berns. So we still think there's good opportunity to improve on our savings over the next Burns.
Terrific. Thanks very much. Thank you.
Berns. And and that will conclude today's question and answer session. I will now turn the conference over to Mr. Bernstein for any additional or closing remarks.
Bernstein. 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.