Q2 2020 Blonder Tongue Laboratories Inc Earnings Call
[music].
Good day, ladies and gentlemen, and welcome to your Blonder tongue laboratories second quarter 2020 earnings calls all lines have been placed on a listen only mode and the floor will be open for your questions and comments. Following the presentation. If you should require assistance throughout the conference. Please press star zero to reach a live.
Operator.
At this time, but it's my pleasure to turn the floor over to your host Ted Grout, Sir the floor is yours.
Thank you.
Good morning, everyone and thank you for joining us are participating in the blonder tongue laboratories, 2022nd quarter earnings call I'm, Chet Growl, the President and Chief Executive Officer as a company.
As we get all remarks. This morning, we'll be discussing certain subjects will contain forward looking statements, including management's view of our prospects and evolving trends in the market as you know the futures all but impossible to predict.
So I caution you that actual results may differ materially from those that may be projected in our comments, we would ask you to refer to our player as she she filings, including our form 10-K for 2019.
Filed form 10-Q for the first quarter 2020, and our second quarter 2020 results press release issued this morning, and our form 10-Q for the second quarter of 2020, which we anticipate to file on or before August 14th 2020.
All of which include additional detailed information concerning factors that could cause actual results to differ from the information we will be discussing this morning.
With me today are Steve shade, Chairman of the board of Blonder tongue laboratories, and Eric Skolnick, Our Chief Financial Officer, and senior Vice President.
Eric's remarks will follow mine and we'll focus on the financial results.
Following their presentations all three of us will be available to answer any questions that you may have during acuity session.
For the first half the 2020 the company has been working through a significant disruption in the markets that we serve caused by the global coded 19th and Dennis.
This disruption began to impact our business during the last week of February this year.
Eric Skolnick will review and provide details on the numbers.
But overall, our sales and digital video products were significantly lower compared to the same period last year and a large portion of this decrease is coming from several market segments that we serve namely the cable Telecommute communications and municipal fiber or service operator segment.
As well as the end do you and hospitality technology segment.
Both as an actively locking down their capital spending.
[noise] and Dwayne infrastructure and technology upgrades.
The swiftness of these changes in our customers buying patterns and the overall market slowed down in response to the onset of the global crisis, where incredibly fast at the end of Q1.
And have continued to impact our business since that time.
During the first half the 2020 and compared against the same period of 2019 or sales endpoint devices, otherwise known as consumer premise equipment CP as well as DOCSIS related data delivery in motor products.
Due to increased modestly.
This increase was associated with two main factors first is the trend that we've seen particularly in the second quarter of this year and service operators focusing their operations on supporting growth in the residential use of their services.
This is yield upgrades and C.P. as well as some active technology.
<unk> upgrades in that in that area. This growth appears directly in response to coated creating a higher demand on residential services.
But in very narrow and targeted ways.
The other factor is simply coming from the fact that RCP programs were initially launched in Q1 of 2019, and thus began with low levels of initial sales by comparison with the first half of 2020.
As a publicly discussed several times since moving into the CEO role in January 1st of this year. The company has been focused heavily on completing several major initiatives critical to managing through the current crisis.
First we recently completed and will be concluding in number of key features and functions associated with our next year next generation gateway.
Pete digital video processing platform.
And we are completing a few remaining product derivatives in our groundbreaking new video clear view encoding and transcoding platforms.
Second we've been focusing on reorganizing our U.S. based manufacturing organization.
Further streamlining our operations.
Research and development segments, and implementing updated sales and marketing strategies for the company [noise].
As previously discussed last quarter, our focus on operational efficiencies has yielded significant monthly savings.
Our cost of running the business [noise].
Portion of these savings are exceptional unexpected to be short term associated with the current gold at 19 situation, but the larger portion had been structured and are intended to lower our cost of doing business for the long term and to ensure that we were lowering the revenue levels associated with the company breakeven point [noise].
[noise]. These efforts are continuing.
And are being further expanded in August and September [noise].
The company has a number of additional operating expense areas. We're working on that we are confident will yield further improvements [noise].
[noise] on the topic of the health and wellbeing of our workforce.
Happy to report that the company has still not at a single employee report a positive coded case [noise].
And we believe that this is at least in part due to the seriousness our operations team so [noise].
With the situation back in February and proactively began enhanced cleaning and disinfecting practices in our facilities instituting changes in work location spacing personal distancing availability of hand cleaning stations within our factoring headquarters as well as educational processes and information shared with our entire staff.
[noise] as mentioned in our last call. We had previously transition many rolls capable of being performed as work from home to be done from home companywide.
We have now more recently began transitioning a portion of those rolls back to our headquarters facilities [noise].
When we felt it was well it's safe to do so as well as with a mine to increase the working efficiencies of those specific roles.
Only those roles are the need for closer interaction with other staff members on an hourly and daily basis have begun any partial partial or full transition back to our offices.
In conclusion, although we still cannot forecast any specific time frames for a return to our markets back to an expected to were normal level. The company has prepared for a wide range of eventualities and time frames for market recovery, including the possibility that we have an extended period of reduced economic activity in.
Our markets through the end of year or even into 2021 [noise].
Overall, the company is taking a very conservative the situation and we will watch and and report more on our quarterly earnings as things develop.
Next I will hand over the called Eric Skolnick, Our Chief Financial Officer, Eric [noise].
Okay.
Net sales decreased $1.606 million for 29.5% to $3.831 million <unk> second quarter of 20 $25.437 million for the comparable period in 2018.
Net loss for the three months ended June Thirtyth 2020 was a loss of 1 million and $194000 for 12 cents loss per diluted share compared to $891000 or a loss of nine cents per diluted share for the comparable period in 2019.
Decreasing sales is primarily attributable to a decrease in sales of digital video head end products.
Sales of digital video had their products were $745000 and $2.244 million and the second three months of 2020 and 2019, respectively.
For the six months ended Junethirty 2020, net sales decreased $1.638 million were 17.
0.2% to $7.881 million from that $9.519 million for the comparable period in 2019.
Net loss for the six months ended June Thirtyth 2020 was a loss of $3.274 million or a loss of 34 cents per diluted share compared to net earnings of 4 million 443, $4.434 million excuse me or 44 cents per diluted share for the comparable period.
2019.
The decrease in net earnings for the first six months of 2020 relative to the first six months of 2019 is primarily driven by the $7.175 million gain recognized in the first quarter 2018 from the sale and leaseback transaction over headquarters facility in Old Bridge, New Jersey.
[noise] decreasing sales was primarily attributable to a decrease in sales of digital video head end products offset by increasing sales of DOCSIS data products and CPD products sales of digital video head end products were $1.802 million and $4.190 million DOCSIS data products.
Were $1.572 million and $1.105 million and CB products were $1.672 million and $1.193 million in the first six months of 2020 and 2019, respectively.
As disclosed in the company's most recent annual report on form 10-K, the company experienced a decline in sales a reduction in working capital loss from operations and net cash used in operating activities and conduct in conjunction with liquidity constraints East factors raised substantial doubt about the company's ability to continue as it going can.
Sure as of June Thirtyth 2020, the about factor is still exist. Accordingly, there are still exist substantial doubt about the company's ability to continue as a going concern.
Financial statements, which will be filed next week do not include any adjustments relating to their will cover ability of their quoted assets, where the classification of liabilities that might be necessary should the company be unable to continue as it going concern.
Finally regarding the company's current liquidity as of June Thirtyth of Twentytwenty. The company had approximately $1.798 million of availability under our mid cap credit facility.
Now I'd like to open up the call to the question and answer session.
Thank you ladies and gentlemen, the floor is now open for questions. If you do have a question. Please press star one on your telephone keypad at this time, if you're using a speaker phone we asked well posing your question you pick up your handset to provide the best sound quality.
Again, ladies and gentlemen, if you do have a question or comments. Please press star one on your telephone keypad at this time.
Well take our first question from Gregory Urban private Investor. Please go ahead.
Good morning felt good morning, good morning.
Eric first I would you repeat that liquidity.
Available some mid cap.
Sure at June 30, if there was $1.798 million.
Uh huh.
Mobile now.
As of June June Thirtyth, yes.
Right.
What's the status or the draw on the subordinated loan.
We had the subordinated loan.
Where's it commit committed a million dollars 900000 has been drawn on it.
And so that means that the trends.
Let's see hasn't been drawn on it all.
Correct correct.
I think that's pretty much the same as a.
The prior quarter.
Correct that's right.
The current working cap.
The current working capital is that what you're asking yes.
Yes, one second let me just real quick.
[noise] working capital at June 30 is was approximately.
Threemillion, but merger and $18000.
Okay, Thanks, and finally with regard to balance sheet.
How do we stand on the a 1.7 plus million.
The <unk> either carries that well.
I'm happy to determine the up how much of that Mike.
Be forgivable.
No we have not and they're still in flux with regards to the application process with our bank. So that's not going to be probably until Q3 or Q4 before we would be able to provide that information. So the whole thing is showing up on the light on the liabilities <unk> co.
Rack they never stay there until it actually is approved for forgiveness.
Okay. Thanks, that's all I have on the balance sheet side.
Cash flow wise, the operating cash flow.
Yes.
Sure the cash flow from operations was approximately six months ended June was 2.029 million dollar cash used in operating activities.
All right.
Now to the what I regard the more positive side on the income.
And it's obviously really improved operating efficiencies I mean, the gross margins are going to something like and I'm comparing Q1.
Hey, going from something like 13% to around 32%.
Which is a move back toward normal.
And also given the fact that Ah I looked at the total revenue for the quarter again.
Two in Q1.
Quoted.
5%.
But the Oh, well not lost Oh was reduced 40 some percent again, both those tell me but.
Operating efficiencies and really.
Improved.
So.
Oh, that's obviously to your credit.
Incredible.
All of you.
Thanks, very much right.
The.
I see that the increase.
And the CP and goes this is particularly the C <unk>.
Seems to have really taken off as you said from low level.
That's a reasonable.
So it's it's specifically why I made the comment Greg on it to not get overly excited about that comparison because it is a comparison against a a period of time what were some just launching the product line right. So it's.
It's one of these sort of this numerical factors you kind of have to just regard a little bit in the same way you kind of disregarded divide by zero Kinda number right you got to start from somewhere right and you in your ramping it up and you're comparing it against a very very early section of time, we just launched the product. So that that's kind of what I was getting out there.
So I kind of separate the numbers that you're seeing from your question. Your question is is that sustainable. We currently believe it is sustainable we we not written on notes, but all sure you know verbally on this public call. We did have a decent June.
Well I I take it back I I did mention it briefly in the in the press release in the <unk> in the in the quotation section. We did have a decent June and it was very it provided us some some optimism.
In the Middle if you know what is otherwise the very very difficult situation for all companies.
Out there Oh, most most companies out there and us us as well so you know that.
That optimism did.
Ah was unfortunately short lived we we we did see sort of a leveling off and actually a decrease in weekly sales there at the very end of June and it did extend and ended July so.
You know, we're we're we don't want to get overly optimistic about any element of the revenue streams, the CP and the DOCSIS p. seem to be sustaining themselves better through the crisis than the others.
But separate from the crisis. So do you see set the crisis situation. Aside we are having a number of operators in a number of customers embrace RCP product line. We do believes that the economics on that product line, our sustainable when we know we need to get the margins.
Something we've been actively working on that for several months now.
So we do have optimism that at least that product line is sustainable and will grow in the future, but but you know there's just wait so many there's so many factors going on.
It's a complex market because of the crisis and there's a lot of things that you just can't predict now that you could have otherwise more more more reliably predicted in the past.
The you spoke of the margins and I think on a previous call you mentioned the the margins on both the CP and the dogs as compared to their head end products are lower but despite that.
As I stated.
Gross margins are up so something something is improved there.
Yes.
Yes, it is selling more in other words or the lower margin products.
Despite that.
Gross margins are up.
Yes.
That's absolutely right.
The next Gen. Do you have a wasn't listed in the press release, the numbers up quarter over the next young product.
Sure.
Second yeah, Eric I'll answer that.
Okay.
The next gen for the quarter.
Was approximately $285000.
Okay.
From the previous quarter the.
Final a pieces to that.
But that being held up in anyway, because you have to go up a pool one.
Logins or what.
Yes, yes, yes, there there's there are there.
There's a few factors related to that that I'll touch on the based on your question.
First it more primary is.
And I touched on this in my comments.
That product in particular is really focused on.
Fairly significant size service operators and we've won a couple of big companies would that product. We we've won a a number of midsized service operators as well and we're working on sales for pretty much everybody. You know of in terms of brand names in the service operator Bill.
Yes in North America, So and we're making significant progress in the process Oh getting position for future sales and so that that has always let us to had be optimistic about the product line in general.
The Covance situation, absolutely has had significant impact on the bigger operators locking down any.
Any part of their infrastructure and networking that that is not directly related to making it more cost efficient for delivery in residential services. That's the only.
Great Shining star in as a sub segment within the markets that we serve.
Everything else is they're being as tight as they possibly can because they're seeing the same uncertainty in their markets as we see and it's all flowing flowing through from the ultimate demand down to us as an equipment supplier. So that that's the biggest factored that has been slowing down the sale.
Sales of that particular product line in my opinion. There is as you as you built into your question absolutely. Some pent up demand for a modest quantity of units waiting on some features and functions to get finished.
We even have some orders on the books for things that are waiting pending.
Features and functions to get finished as well. So we know that there's a wider range of sales that we will achieve once those new.
And as new features and functions are released some of them. We're already released over the last 4456 weeks some are coming up in the next 48 weeks.
But we do believe in the next quarter that all the major R&D function is related to next gen or next Gen Gateway I will be completed and available for sale in the market. So that screen you know some internal optimism.
[noise], but I also don't want to exclude as I as I pointed out I believe in in my comments earlier.
We're getting a lot of of great interest in our in our nuclear view encoder and Transcoder product line.
Fundamentally the breaking the breakthrough elements of that product are more around the combination of video a high level of video quality a high level of reliability.
Sort of just you know the reputation of blonder tongue equipment for 40 50 years has been you you put them into closet, you, let them run and they just they sit there just jump junk along without a lot of you know a lot of involvement for years and years and years and years and years. So it's that's you know we've extended that that reputation of real.
Liability is its nuclear be product lines. The differentiation is high quality video Super high reliability and the and then the groundbreaking pieces, we're doing that at a very very attractive price at a very high value I don't want to see cheap, but compared to work our major competitors in that space, we're really well.
Really putting some pressure on them. So that has led to an awful lot of interest in that and those products will also all be completed and shipping.
All the derivatives of that product line before before [noise].
Well certainly before the end of year in more likely before before the early or middle part of Q4. So you know we know that even if even if the coated.
Market situation really continues in <unk> depressing the availability of of the market.
We do know that adding those products to the product line up are gonna help.
I don't want to sit here on on a public forum and try to estimate how much it's going to help but we know it will it will absolutely have help our revenues in some levels.
Alright.
You are being sold.
Or will be sold Standalone well part of the next gen.
Yeah and in fact, a in fact I'd say it.
The large majority that 80, 90% will be sold Standalone.
Okay. That's good to hear on thanks for your elaboration.
I always appreciate your thought your questions Greg.
And as I ask a last call regarding delays versus cancellation Oh.
Or delays.
Yeah.
Last week.
The things, we've had delayed or canceled though the very large majority have been delays.
I can't think of anything overly significant that was cancers off the top my head.
Well, that's all I haven't I want to and I'm glad to hear that no one is.
[laughter] has come down with.
But that again as to your credit apparently comfortable enough to bring those some of those folks back in house.
Yes, yes exactly.
Well good luck for the here in November.
We really appreciate your support Greg Thank you very much.
As a reminder, ladies and gentlemen, if you do have a question or comment. Please press star one on your telephone keypad at this time again, that's star wanted your telephone keypad at this time.
[noise] I'm sorry appear to have no further questions.
Okay.
I guess with that we conclude the.
The second quarter.
We are concluding the blonder tongue laboratories, 2022nd quarter earnings call.
Thank you all very much for your support I hope everybody stay safe.
And look forward to talking with.
Our investors analysts and a interested parties in the next quarter. Thank you.
Ladies and gentlemen, this does conclude today's teleconference. We thank you for your participation you may disconnect. Your lines at this time and have a great.
[music].