Q4 2020 Blonder Tongue Laboratories Inc Earnings Call
Good morning, ladies and gentlemen, and welcome to the Blonder tongue Laboratories' fourth quarter 2020 earnings call.
At this time, all participants have been placed on a listen only mode and the floor will be opened for questions and comments after the presentation.
And it's now my pleasure to turn the floor over to your host Ted Route Sir the floor is yours.
Alright, thank you.
Good morning, everyone and thank you for joining us and participating in our 2024th quarter and full year earnings call.
I'm Curt Growl, the Chief Executive Officer, and President of the company and.
We give our remarks. This morning, we will be discussing certain subjects that will contain forward looking statements, including management's view of our prospects and evolving trends and the market.
As you know the future is all but impossible to predict and 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 prior SEC filings, including our form 10-K for 2019 and.
Our filed and Q forms for the first second and third quarters of 2020.
For additional detailed information concerning factors that could cause actual results to differ from the information discussed this morning.
With me today are Steve Shea chair.
Chairman of the board of Blonder tongue laboratories.
And Eric Skolnik, our Chief Financial Officer, and senior Vice President.
Eric's remarks will fall in line and we'll cover our detailed financial results.
All of us will be available to answer questions. You may have during the Q&A session immediately following our prepared remarks.
As we all already know and as I have mentioned and the last three quarterly earnings calls most businesses and the U S, including Blonder tongue labs have been facing a very difficult pandemic affected marketplace since March of 2021 year ago.
In response to this crisis and the marketplace. We made specific decisions to focus the resources of the company during the last year to complete a number of major organizational changes R&D and intellectual property investments product development programs and a major inventory reduction program.
The acceleration of our operational restructuring in 2020 was completed in January of this year 2021.
Along with work to streamline both our manufacturing and engineering processes. The net result.
It has been a lowering of the companys operating costs.
By approximately $940000 during the full year of 2020 versus 2019 and additional reductions that have been implemented in Q1.
2021, so far.
The Companys operating expenses are now reduced by approximately $192000 per month versus one year ago, and we are planning to at least maintain that level of operational efficiency going forward.
At least.
Our initiatives to complete IP investments yielded the company several patent grants in 2020.
And which covered a number of unique aspects of our flagship and xg digital video signal processing platform and our DOCSIS data delivery product lines.
And 2020, our experienced engineer organization completed over 15, new product introduced introductions and.
And a wide range of data and video delivery technologies that included content security, including DRM and conditional access technologies high speed data delivery advanced video Transcoding technologies.
Support of the latest <unk> also known as <unk> $2, six five and for K Oar high definition codec support and our new encoder and Transco for product lines and.
And technologies that we developed for specific tier one telco and cable service operator requirements and that we are now shipping to those customers.
Across 2020, we also completed a number of targeted product cost reductions towards the goal.
Achieving future margin improvements.
As we've stated in our 2020 Q2, and Q3 releases and calls and April of 2020. The company was able to secure a cares act PPP federally backed loan and the amount of $1 $76 9 million.
These funds along with the results of the company's inventory reduction program that improved our cash used in operating activities by four $4 million to $1 million last year together taken together enabled the company to implement and complete the other programs that I've mentioned.
This included substantial organizational changes that carried onetime costs of approximately $220000 as well as the implementation of our major intellectual property investments.
And all of our engineering and product development initiatives that I've already discussed.
During 2020 the company. Additionally, directed sales efforts towards expanding direct relationships with telco cable and fiber optic based service operator.
And that work yielded an increase and our overall service operator relationships of over 35% year on year and the company also added for new integrator and distributor relationships last year.
Although the first quarter of 2021 has presented some of the same challenges as 2020 all of these investment decisions and the significant progress from 2020.
We're designed to prepare the company to emerge from the Covid induced pandemic stronger and better prepared for growth opportunities throughout the remainder of 2021 and beyond.
We believe that a major indicator of a fundamental change and the company structure and strength is indicated by the reduction and cash used in operating activities last year, while managing the company with a 17, 5% reduction and sales last year and 2020, the company had a negative $3 212 million.
Cash and cash used in our operating activities in 2020 versus a negative $6 five $3 8 million and cash used in operations and 2019.
At this point I would like to pass the floor to Eric Skolnik, Our Chief Financial Officer to cover the detailed financial results for the fourth quarter and the full year of 2020, Eric.
Thanks Ted.
Blonder tongue laboratories, Inc. Net sales decreased $718000 or 14, 2% to $4 million $327000 for the fourth quarter of 2020 from $5 million and $45000 for the comparable period in 2019.
Net loss for the three months ended December 31, 2020 was a loss of $2.413 million or.
Phase III losses, 23, and loss per share compared to a loss of $3 million $842000 for a 41 loss per share for the comparable period in 2019.
The decrease in sales is primarily attributed to a decrease and sales of our DOCSIS data products digital video head and products HFC distribution products and our Nx Gi P video signal processing products offset by an increase and our sales of our transco their products.
Sales of DOCSIS data products were $420000 and $828000 digital video head and products.
$1 million and $4000 and $1 million $232000.
FC distribution products were $364000 and $637000 and xg products were $135000 and $378000 and trans coated products were $606000 and $38000 and the for three months of 2020 and 2009.
<unk> respectively.
For the year ended December 31, 2020, net sales decreased $3 million 463000.
For 17, 5% to $16 million $379000, and 2020 from $19 million $84202019 and.
And net loss for the 12 months ended December 31, 2020 was a loss of 7 million for $74000 or a loss of <unk> 76 per share compared to $742000 loss for an 8% loss per share for the comparable period in 2019.
The decrease in sales is primarily attributed to a decrease and sales of digital video and products DOCSIS data products and contract manufacturing products HFC distribution products and analog video head and products offset in part by a decrease and sales of Transco and our products sales of digital.
Video and and products were $3 million $607000 and $6 million $714000 sales of DOCSIS data products for $2 million $227, and 2 million and $817000 sales of contract manufactured products were $145000 and 600.
And $2000 sales of HFC distribution products were $2 million $133000, and 2 million and $509000 sales of analogue video head and products were $1 million $232000 and $1.532 million and sales of transporter products were $1 million.
$543000 and $71000 and 2020 and 2019, respectively.
The company's primary sources of liquidity have been its existing cash balances cash generated from operations amounts available under the mid cap business credit LLC revolving credit facility by the way is known as the Midcap facility. The proceeds received from a PPP loan.
It's available on the subordinated loan facility and cash generated from the private placement of common stock.
Company has completed all available draws under the current terms of the subordinated loan facility.
During 2020, the company received approximately $1 million $769000 under the PPP loans approximately $900000 under the subordinated loan facility and approximately $812000 and net proceeds from the private placement of common stock.
Our ability to continue as a going concern is dependent upon our becoming profitable and the future and having access to sufficient capital to execute our business plan and to meet our payment obligations and our debt financing arrangements and other financial obligations when they become due.
On a going forward basis, the company expects its primary sources of liquidity will be its existing cash balances cash generated from operations and amounts available under the midcap facility. The company also may seek to raise additional capital through the issuance of shares of common stock or other securities convertible into or exercised.
<unk> for shares of common stock over the company cannot provide any assurances that this type of additional financing will be available on reasonable terms for at all.
The company had approximately $609000 and approximately $800000 availability for borrowing under the midcap facility as of December 31, 2020, and 2019, respectively.
We currently plan to apply for forgiveness of the PPP loans during April of 2021, and believe that our use of the PPP loan proceeds will meet the conditions for forgiveness.
And if our application for forgiveness is not approved in whole or and part we may be required to use a substantial portion of our available cash and our cash flow from operations to pay interest and principal on the PPP loans, which will limit the funds available to.
Us to operate.
Our business or otherwise adversely affect our financial condition and results of operations.
The company plans to file its annual report as soon as practicable, but not later than December 31, 2021, excuse me and pardon me in March 31, 2021, and the annual report the company expects that the report of its independent registered public accounting for farm will include an explanatory paragraph cash going concern.
And although.
Though the company is actively taken steps to address operating expenses and liquidity there can be no assurances that these actions and others that the company intends to take and the future will be sufficient to address the concerns related to the explanatory paragraph going concern.
Now I would like to open up the call for the question and answer session.
Ladies and gentlemen, the floor is now open for questions. If you have any questions or comments. Please press star one on your phone at this time.
We ask that while posing your question you. Please pickup your handset is listening on speaker phone to provide optimum sound quality once again and that is star one to ask a question.
Please hold while we poll for questions.
Your first question is coming from Dave call. Please announce your affiliation and pose your question.
Hi.
And calling on behalf of any company.
Shareholder.
And.
A few questions.
For first what is the likelihood that you're going to meet the NYSE Americans.
Listing requirements to regain.
Compliance.
Do you want me to answer that.
Yes go ahead, Eric Yes, sorry, yes, I apologize.
Because of Covid, we're not all and the same location. So it's hard to get visuals and I'm sorry.
Yes.
We have a current plan in place obviously, we cannot be we cannot give any assurances at this time, but.
As of right now.
And plant and placed at the NYSE American.
And has granted us to become an appliance by December I believe it to 10th of this year. So.
Yes, it does it look like you're on track.
Two.
Regained compliance.
Yeah.
Well.
Okay.
I'm not sure what the plan is I haven't seen it post COVID-19 anywhere and the check NYSE.
NYSE is this.
Public.
Being public information now.
Okay.
And with the.
I mean I like.
What I heard.
But I didn't really see anything about the growth of the products and.
What the.
And the reason for the drop in sales of some of the DOCSIS and other products.
Is that because of competition coming into the market or the <unk>.
Technology is becoming obsolete and whether the trans coated products.
As sustainable sales to carry.
The company through.
And have more growth through.
To regain the compliance.
Sure. Thanks.
Thanks, Dave So I'll answer that last part of the question directly and this is Ted.
So from what we have seen.
And I've covered this on and on the last couple of quarterly calls.
I've been personally.
Pretty amazed at.
And how closely our growth or shrinkage of sales.
Corresponds directly to the general sentiment.
And that's been out there since March of last year related directly to the impacts of Covid on our customers either being locked down we are opening up closing or opening and theyre being active activity of people being able to the people who work for our customers being able to go out there and install new equipment and.
Service places that are out in the field and service operators that are letting their technicians go out and.
And make updates and changes and check on equipment. So it's a very very.
At least what I've seen so far since March.
Now 12 months of data.
And when things have opened up we've seen a dramatic and very quick.
Week on week positive or negative change and our sales and so that has led me to believe that the specific impacts on things like our DOCSIS product line.
On on our Nx G and some of our other head and product lines. These seem to be directly related to simply people walking down or opening up and.
So we personally I don't see it being.
Those changes being directly competitive related at all if anything we're seeing that we're potentially gaining some market share against some other of our competitors because they have been affected.
More harshly than us or they may and not prepared for some of the supply chain disruptions.
And we can talk about and this Q&A session that are hitting some parts of the industry that are not currently affecting us we're able we're open for business enable to produce all of our products today, which some of our competitors are not able to do.
Because of some of the chip chipset shortages that are out there.
<unk>.
So we don't think it is a competitive issue we think its entirely.
And again from the data that I've seen it seems to be directly related to the activities of our customers to shut down and we're open up based on what they see as the general sentiment and their ability to function based on the situation with Covid.
And their and their particular locations.
But maybe and then finish up book to finish up on your other part of your question in terms of okay in compliance with the.
And requirements to remain a listed company, we have put a plan together and we revise that plan once and for the NYSE American and they accepted our plan and we're executing against that plan. There are some things on that play and we're tracking very well.
Against and others that were not.
I am personally optimistic for this year.
But as Eric mentioned, we can't give any particular assurances because they have.
And we actually NYSE American has latitude to make decisions that we can control.
Okay.
Uh huh.
Yes.
Once again, if there any questions or comments, please press star one.
There are no more questions in queue.
Okay.
Okay.
Okay.
If there are no more questions, yes is there and one more question.
Yes, you do have another follow up from Dave call. Dave Your line is live.
Okay. Thanks.
And what that might be able to questions I'm not sure. How many people are on the line but.
And there weren't any.
That's kind of it sounds like and and a few question, but I was wondering where you'd like to see the company and.
Three years five years and.
And.
Hmm.
Basically is this.
Going to <unk>.
<unk> remain a product manufacturing company or are there other lines of business that are being explored.
Right. So I think the best way to characterize it is.
During during 2020, we completed.
A really significant set of product.
Enhancements product updates and in some cases completely new.
<unk> introductions that were meant and which and which were the.
Effectively the end of a long series of three years of investments to modernize the company's video processing and delivery video transmission product lines and they were updated to be more modern and.
And in light of most service operators, making their transition to IP TV or IP TV.
Yeah.
Produce different technologies.
And then.
They were updated to be more cost effective and more and more dense.
To be more competitive and the marketplace as it has changed over the last three or four years, they have been updated to cash.
From a wider range of inputs and outputs and technologies, including the new the new codec technologies. So the end of 2020 was effectively the end of a major set of.
Investments and the company to modernize our IP.
Sorry to modernize our video technology, what we're doing now is we're now broadening.
And.
Engineering to be focused a lot more on day to delivery technologies.
And we're looking.
And wireless technologies, and we're looking to do some product introductions and 2021 that are that are more along those lines and we're putting more of our investments and day to deliver because effectively that's a more relevant set of technologies for.
For service operators.
And media companies and anybody delivering and.
The types of content into the home the big focus over the last few years has been a transition.
The service operators.
Those are big telcos cable operators.
Fiber optic municipal fiber optic companies and others that deliver services telecommunication services into People's homes around the country.
The big focus is data delivery right. So we're investing in technologies and that space now.
We're going to be planning to do some product introduction releases in the coming months.
And that's that's the most immediate shift in the companies for.
Focus and the short term and the longer term.
And when and by longer term some of those will actually some of these next things on that dimension will start to show up later in the year, we are going to be expanding services that we offer related to both our video and our data delivery products, we are going to be expanding.
In some other areas that we're investigating right now and doing business plans on that would have more.
Incremental revenue and more recurring revenue elements.
To those products. So we're not we're not going to be focused entirely on just been equipment manufacturing, but that transition will take some time and will be.
I think it's I think it's fair to say some of these transitions will be done opportunistically and.
And the analysis on the precision of some of those initiatives is not finished yet.
But we know long term as a company.
And the best assets, we have right now are our U S based manufacturing, which we've gotten now to be very efficient over the last $12 $14 15 months.
For a considerable amount of work.
Make it more efficient.
Through those efficiencies were effectively cost reducing some for some products.
To manufacture them in the United States and keep that manufactured in United States to the point, where we will have the potential for better margins on those products from what we can see.
And then.
And that's.
That was the set of activities that was going to yield the fastest shortest term.
Return on investment.
No longer term, though the company has got to be focused on what's the more relevant technologies and the more relevant and movement of our customers, which is data delivery over the top video streaming services.
And and and software software and cloud technologies and platforms.
And I'm glad to hear you say that the longer right Im saying it but I'm also speak in generalities right I don't want to Miss represent that we have.
We're close to doing any sort of groundbreaking cloud based platform. We know that that's where the company should be going long term and eventually and we're looking into different things.
Yes, because there are certain.
Technologies that are key to growth for these days and you hit on.
Couple of them as being cloud aware and.
And.
And.
Yes.
Providing a service more and more than just.
Warranty and so.
The port.
Shortly.
A service that.
Okay.
It can be used.
Globally.
And.
And that that.
Keith.
Business growth for these days.
And there's a couple of other things but.
Yes, right now.
Good point Im glad you brought it up.
Thank you for the question Dave I appreciate it.
Okay.
Once again.
Again, if there are any questions or comments, please press star one.
There are no more questions in queue.
Okay.
Well. Thank you everybody for attending the Blonder tongue laboratories, Q4 and 2020.
Full year.
Earnings call.
I appreciate everybody's attendance and look forward to hear from you and the near future.
Thank you very much.
Thank you ladies and gentlemen, this does conclude today's conference call. You may disconnect. Your phone line at this time and have a wonderful day. Thank you for your participation.