Q1 2022 Blonder Tongue Laboratories Inc Earnings Call
Good morning, ladies and gentlemen, and thank you for your patience Your conference will begin shortly.
Again, thank you for your patience the conference will begin shortly.
[music].
Good morning, ladies and gentlemen, and welcome to the Blonder tongue Laboratories' first quarter 2022 earnings call.
At this time, all participants have been placed on a listen only mode and we will open the floor for your questions and comments after the presentation.
It is now my pleasure to turn the floor over to your host Ted ground, Sir the floor is yours.
Thank you hi.
Hi, Good morning, everyone and thank you for joining us this morning, and participating in Blonder tongue laboratories 2022.
First quarter earnings call.
I'm, Ted Grout, President and Chief Executive Officer of the company.
As we give our remarks. This morning, we will be discussing certain subjects that will contain forward looking statements, including the management's view of our prospects and evolving trends in the market.
As you know futures, all but impossible to predict so I caution you that actual results may differ materially from those that maybe projected in our comments.
We would ask you to refer to our prior SEC filings, including our Form 10-K for the years 2019 2020 in 2021.
And our filed form.
10, Qs for the four quarters of 2020 for the four quarters of 2021 and for the first quarter of 2022.
Each of those filings include additional detailed information concerning factors that could cause actual results to differ from the information discussed this morning.
With me today.
As Eric Skolnik, our Chief Financial Officer.
And senior Vice President.
Eric's remarks will follow mine and will 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.
In the first quarter of 2022, Blonder tongue laboratories had a net loss of $1 million $154000 compared with a net loss of $414000 for the first quarter of 2021.
Beginning in late January the company experienced delays and disruptions in the supply of several specific semiconductors.
That are required to produce a portion of our product lines. We responded during the quarter to these disruptions in several ways.
First with engineering work to adapt the most affected product lines to use alternative parts that remain available.
Changes, we made to those products in February and March to work around scarce parts completed during April and all of the Companys product lines are or will be back in production during April and back.
We are seeing a general improvement in the semiconductor supply chain situation overall.
You need to have new disruptions and delays in areas that had not been previously effect.
The company also implemented additional operational expense reductions in the form of staff compensation reductions.
Services and in a range of other areas.
Comparing Q1 of 2022 to the fourth quarter of 2021, the company reduced its operating expenses by $187000 from these actions while.
While maintaining its production capacity.
Research and development and new product development capabilities.
During the first quarter. The company saw continued steady demand for a broad range of our products with strongest demand in our latest highest technology video encoding video transcoding and Xg IP video signal processing platform and DOCSIS high speed data delivery product lines.
And our DOCSIS product lines, we are seeing particular growing interest in our DOCSIS three one.
Our latest generation multi gigabit data delivery product from our customers and the recovery in hospitality market segment.
During the first quarter the company implemented additional targeted product price increases in order to compensate for specific.
Several specific chipset cost increases through the same period again, we are seeing a general improvement in the overall supply chain situation and this has included better stability in the pricing.
Situation compared with the environment that we saw in Q3 and Q4 of 2021.
We are and will continue to deal with exceptional increases as needed.
Overall, the company's backlog for our products remains strong at over $10 million at the end of Q1.
On the product side of the business with Tivo partnership and Tivo specific and X gene platform configuration that we announced during the first quarter of 2022 began shipping to operators during the quarter and we began shipping higher quantities of our Drake Peg plus video encoders to large cable and telco operators this year.
As many of them continue the process of converting their nationwide network infrastructures to an all IP TV technology set.
We have been growing our backlog of that product as well.
We've been growing our backlog of that product at several operators.
As they have standardized on using the Drake peg plus further video backhaul requirements.
We also recently announced a new two channel version of the Drake Peg plus with updated technology and new features targeting the video backhaul and IP TV network conversion trends.
<unk> demand remained strong for our clear view product lines within the Directv dealer and distributor markets.
The company's biggest challenges have remained consistent over the last eight months managing unexpected and in some cases last minute raw material availability problems.
While at the same time working to take advantage of growing demand in the marketplace.
Now I would like to pass the call over to Eric Skolnik, Our Chief financial officer to cover our detailed financials.
Sure.
Thanks Ted.
Our net sales increased $90000 or two 8% to $3.341 million for the first quarter of 2022 from $3.251 million for the comparable period in 2021.
Net loss for the three months ended March 31, 2022 was a loss of $1 million $154000 or eight 9% loss per share compared to a loss of $414000 or a loss of <unk> <unk> per share for the comparable period of 2021.
The increase in sales is primarily attributable to an increase in sales of DOCSIS data products and quarter trends coda products digital modulation products and an extra IP video signal processing products offset by a decrease in sales of CPE products coax distribution products in analog modulation products.
Sales of DOCSIS data products were $454000 and $24000 and coda trans coated products sales were $1.518 million and $1 million $167000.
Sales of digital modulation products were $377000 and $121000 and xg product sales were $501000 and 421000.
CPE product sales were $27000 and $695000 coax distribution product sales were $129000 and $353000 and analog modulation products sales were $99 and $244000 in the first three months of 2000.
22, and 2021, respectively.
The company experienced a reduction in CPE products due to the continued de emphasis of this product line, which the company expects to continue during the remainder of 2022.
The company experienced an increase in DOCSIS data products due to the pent up demand caused by the pandemic. Because these products are used primarily in the hospitality and assisted living environments. The.
The company expects sales of these products to May return to more historical levels during 2022.
The company experienced a reduction in analog modulation products due to the continued market shifting away from analog modulation solutions. The company experienced a reduction in collects distribution products due to the reduced demand for legacy products.
Company expects the sales of the analog modulation of coax distribution products to continue to decline during 2022.
The company experienced an increase in uncoated trends quota products and NXT IP video signal processing products as these product lines represent newer products and newer technologies with higher demand from customers.
Company expect sales of these product lines to remain at these levels or increase during the remainder of 2022.
Although the company does not expect overall sales to return to pre pandemic levels. During 2022. The company does expect overall sales to be higher during 2022 due to the approximate $10 million $194000 of sales backlog as of March 31 2022.
The company's primary sources of liquidity have been its existing cash balances cash generated from operations amounts available under our midcap facility and amounts available under the subordinated loan facility as of March 31, 2022, the company had approximately $2 million $180000 outstanding under the Midcap facility and 204.
$243000 of additional availability for borrowing under the same facility.
As disclosed in our most recent annual report on Form 10-K, the company experienced a decline in sales a reduction in working capital a loss from operations.
And cash used in operating activities in conjunction with liquidity constraints. These factors raise substantial doubt about our ability to continue as a going concern as of March 31, 2022, those factors still exist accordingly, theres still exists substantial doubt about our ability to continue as a going concern the panera.
Statements do not include any adjustments relating to the recoverability of the recorded assets or did the classification of our liabilities that might be necessary should the company be unable to continue as it going concern.
Now, we'd like to open up the call to the question and answer session.
Certainly 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 do ask that while posing a question. Please pickup your handset if you're listening on speaker phone to provide optimum sound quality.
Once again, if you have any questions or comments. Please press star one on your phone.
Please hold balibo for questions.
Your first question is coming from Gregory Irvine Your line is live.
Good morning, Eric and good morning, Greg.
Good morning, Greg on the supply chain.
Has it changed since our last call it five or six weeks ago.
Yes, we have seen a broad range of improvements in certain availability and a lot of the larger <unk>.
Semiconductors from people like Intel and a lot of other sort of high complexity semiconductors are greatly improved.
What we've been surprised with them.
Cause the majority.
If not all of the problems in Q1 were from unexpected sources smaller.
Net controllers power management chips things that were sort of came out of the blue very small parts parts that cost.
$3 $5 $8 kind of range.
That we didn't have any warning from our distributors were from the suppliers.
And as you commented.
Have you found replacement solutions for those that are very hard to come by correct.
Yes, and so I think in line with the comment I just made in Q4, when we were having disruptions that are coming from the bigger larger complex higher technology for example, Intel style.
Technologies those are much more difficult to work around they tend to be.
Either single source or if there was a second source, it's very difficult very expensive.
Expensive and time consuming to redevelop a product under different suppliers technology in contrast to that the kinds of issues that we've had.
But really started at the very end of January and accelerated in the middle of February they are they're generally replaceable parts, we're finding alternatives readily easily but it still requires a redesign of our board.
Ben.
Normal QA cycle et cetera in order to get back in production, we've been doing that as rapidly as we can.
You could see from the comments, we've been able to get products back into production over approximately an eight or 10 weeks.
Period, one when we've seen the specific disruption, sometimes a little faster than that.
Well given the work around then the improvement you mentioned in the supply chain.
Is it reasonable to expect that you could meet the backlog now where things stay stable from this point through the end of the year.
So my answer has to have a little bit of a caution to it.
If nothing else changed and we were not surprised by anything else, which has not been what's been happening over the last few months.
Is that but if that were to be the case then.
We're confident that the backlog we have will be delivered this year.
With the majority of it over the next say four to five months, but.
But that makes it a fairly big assumption that we keep being surprised about so I just want to caution that's not a statement that saying <unk>.
Scenario.
Well, let's let's hope that.
Let's hope that proves true.
Greg.
The margins, where you mentioned that you've been able to.
Pass along some price increases.
Suppose that the margins will improve for the remainder of the year the gross margin.
So the product margins.
Are definitely improving but that's counterbalanced the last few months by us.
Not being able to produce.
As much in our factory as we should be producing and so we have sort of an overhead.
Absorption effects were not were not able to absorb all the overhead costs at a decreased production level and so some of those end up being expensed on a monthly basis and that affects our actual.
Margins that Youre seeing so that's that's the challenge we're seeing on a product basis, when we sell a product.
Cheating a little more margin.
Then it was a few months ago across the board.
Across the board price increases in December and January and then targeted price increases in November December January February March and even April so.
<unk>.
It is certainly helping the situation, but we wont be ahead of the woods until we can actually produce.
Out of monthly level.
It's fully absorbing our overhead rate.
Alright.
Let's see.
Don't have much else other than.
The 515 or so thousand of the E. R. T C.
That show anywhere on the balance sheet.
Yes, it's currently sitting in prepaid and other assets.
And do you expect that to.
To occur this quarter.
Yes.
We are hopeful but again the expectation sometimes is dampened.
Dampened because of the fact that we're relying on our government to give us the money and if you read anything.
In the news lately the IRS is way behind on processing a lot of this stuff. So we're.
We're hopeful, but obviously theres no assurances.
Well hopefully.
Hopefully that'll come through I'm waiting myself, but not optimistic.
Yeah, hopefully small small firms.
Yourself Wouldnt have some priority.
Yes.
Well, that's all I have today and look forward to hearing.
Our second quarter results.
Thank you so much Garry can very much correctly, okay. Good good day guys.
Take care.
Thanks, Greg.
Thank you. Your next question is coming from Dave Cole Your line is live.
Good morning.
Good morning.
I was wondering what the purpose of requesting the increase in shares outstanding.
And if that's in preparation of.
Sort of solution.
And how you came up with that number.
Uh huh.
I can answer that.
The.
Yes, the intent of that proposal to increase the shares just because.
We realized that if we were to do any types of transactions in the future. We may be limited in how many shares we have available to issue. So that's the whole purpose of it and as far as predicting a dilution event in the future. Obviously, we can't comment on that and we don't have any.
The things that we can report at this time.
Alright, thank you.
Thanks.
Thank you. Your next question is coming from George Gasper. Your line is live.
Thank you good morning.
George Good morning, George.
Just like that can you.
Relate.
In terms of your product development.
That you come up with that you've put in the market.
Recent say three months or so or four months.
Compared to previous product offerings.
How would you judge the market size for these particular products versus what you had been doing.
Previously.
And I'm trying to drive that the idea.
Where you are on the possibility of building your sales.
Our sales volume.
Okay.
So.
I think the best way to describe it is to break it down and I'll try to be brief. So we have some new derivative configurations of our NXT product line.
One of which is associated with the Tivo relationship that we press released a few months or couple of months ago.
And the market size for that or a large number of small.
Cable and telephone operators around the country that are.
That are that are current tivo platform customers.
I believe the latest data that's public.
Well in excess of 100.
100 125.
Co operators around the country.
Each of which have some number of <unk>.
B to B business to business video delivery locations and so that's we're going after that market.
Market with that product derivatives.
Similar product derivatives are going after.
Similar.
Of the next year going after similar needs of some larger operators.
Both in the U S and Canada and that market size could be.
<unk>, but I don't want to you know I don't want to provide any optimism we're in various stages of <unk>.
Discussions with a number of operators on those kinds of products those derivative products and these are for for handling.
The ingestion conversion.
More IP TV signal sources, and turning them into some of the legacy.
Formats that are needed at places like hospitals hotels campuses et cetera.
And then we have derivatives of our encoder product line.
We believe that what we're doing with those is going after a wider range of.
Customers.
Including the broadcast market, which we have a few older products that cover that market, but I would not say are market share leaders.
As well as just an expanding set of features that will.
That will drive some of our current customers that are buying some of our current encoders will drive them to our newer technology with.
The combination of advanced feature sets and functionality.
So it's a combination of expanding the Tam that we're going after and and also serving the existing customer base.
Okay.
And just you may have.
Spoken to this point, but I'd like to clarify it again.
The.
In terms of the newer technology that you've introduced recently.
What has been.
In the market.
By you or by the company for years.
Okay.
Is that is there do you are you finding less problem in getting.
<unk> parts.
For the newer developments versus the previous or is that too difficult to try to measure.
Well I think the problems are really not focused on.
One particular class of product versus another they've really.
Problem since the focus since August September last year have really moved from more.
Different types of technology in the different semiconductors. They started at the very high complex technology.
Mrs in that that that could.
That's associated with a wide range of different products, both current products new products and some of the older products. So I don't think anybody.
Any product categories been spared.
I see.
General.
Alright, and then I have a question.
The added financing availability now I know that there's going concern situation is is obviously.
Obviously an issue.
But that is is that it.
Is there added financing availability.
Are you at this point in time and would you not really tried to reach out and generate.
Uh huh.
Minor couple of three $4 million to try to give you.
Some flexibility.
Oh.
Eric do you want to cover that one.
Sure.
Well.
Obviously, we're always looking for additional financing currently we have nothing on the horizon.
The.
Additional financing that you're referring to has to do with the $1 million over advanced facility that was.
<unk> provided to us by one of our largest shareholders.
And so we've been able to utilize some of that cash to help bridge us over the current cash flow issues, but we don't have anything else to report currently on the horizon.
For additional financing at this point.
I see okay, well it it appears as though your.
Is that you have a lot of potential in terms of adding your new product.
To the marketplace there already.
Seemingly impressive for the short time that you've been in the market with them and it would seem like this.
Your company has a lot to offer and hopefully you can you.
You can gain a sufficiently some ongoing momentum that will give you.
More availability to finance and get the company back to where it should be in the market and.
It's.
It's with the historical.
Historical perspective of this company.
And what Youre doing in the market.
I think <unk> got a lot to offer yet and I hope that you all.
Continue to.
The push forward on it thank you.
Thank you. Thanks, George Yes, that's exactly what we're all working for and working.
Working to achieve.
Right.
Thank you once again, ladies and gentlemen, if you have any questions or comments. Please press Star then one on your phone at this time.
Please hold while we poll for questions.
Thank you that concludes our Q&A session I will now hand, the conference back to ground for closing remarks. Please go ahead.
Thank you.
I would like to thank everyone for attending the blonder tongue Laboratories' first quarter 2022 earnings call.
Also thank you for your questions today.
That concludes our call for the day.
Hope everybody has a good day, thank you and goodbye.
Thank you ladies and gentlemen. This concludes today's event you may disconnect at this time and have a wonderful day. Thank you for your participation.