Q3 2022 Blonder Tongue Laboratories Inc Earnings Call

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Good morning, ladies and gentlemen, and welcome to the Blonder tongue Laboratories' third quarter 2022 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. It is now my pleasure to turn the floor over to your host Mr. Ted Grout CEO of Blonder tongue tied to the floor is yours.

Thank you.

Good morning, everyone and thank you for joining us this morning, and participating in blonder tongue laboratories'.

Third quarter 2022 earnings call on Ted Brown, 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 management's view of our prospects and evolving trends in 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 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, and 2021 and our filed Form 10-Qs for the four quarters of 2024 quarters in 2021, and the first and second quarters in 2022, and our upcoming third quarter.

<unk> 2022 10-Q.

Each of those filings include additional detailed information concerning factors that could cause actual results to differ from the information we are discussing this morning.

With me today is Eric Skolnik, our Chief Financial Officer, and senior Vice President.

Eric's remarks will follow mine them cover our detailed financial results.

Both of US will be available to answer questions. You may have during the Q&A session immediately following our prepared remarks.

In the third quarter of 2022, Blonder tongue laboratories had a net loss of 703.

Dollars due to being held to monthly allocations with several key semiconductor suppliers.

Two elevated raw materials costs, and the chipset broker markets that have persisted the last nine to 12 months.

Over the last quarter the company has been.

<unk> has seen a continued stabilization in the semiconductor markets and a general improvement in future lead times.

For parts, including specific improvements and some chipset allocations that will begin before the end of the year with further improvements expected in the early part of 2023.

Demand for the company's highest technology and highest margin products are currently strong with very healthy new bookings during Q3 as well as October and in an overall sales backlog in excess of $7 million at the end of September and growing.

With supply chain stabilizing over the last three months, we are happy to report that our R&D has been able to refocus more time and effort in product development and product customization in support of customer acquisition activities.

We recently announced that our Drake pig plus product with standardized by a major tier one cable operator in North America.

Two features and functions that we created specifically for use in large scale video backhaul.

Apologies, ladies and gentlemen headline appear to have children.

He should be calling back in any sector.

Okay.

So I think we have cut back in the conference can you hear me Ted.

Yes, I can sorry go.

We're all here.

Yeah.

Okay. Your line is live.

Hi, everybody sorry about that my line dropped here.

Eric where did that where did that get to large scale video backhaul.

Thank you.

Yep.

Yeah.

Alright, we recently announced that our Drake peg plus product with standardized by cable by major tier one cable operator in North America <unk> features and functions, we created specifically for Houston large scale video backhaul architectures as well as our strong reputation for reliability.

In addition to that press release, we continue to win smaller deals with other service operators as well as becoming network certified and approved support our equipment.

Some of the largest telecommunication systems in North America.

Our Nx gene video processing platform has experienced a 52% revenue growth year on year, and our video encoder and transcoding products, including our Drake and clear view lines have seen just over 9% year on year revenue growth. During the first nine months of 2022 versus the same period in 2021.

At the current time demand for these products continues to be strong despite the current macroeconomic climate.

Our DOCSIS high speed data product lines have also seen a recovery this.

Primarily from pent up demand in the hospitality markets.

Demand had been exceptionally suppressed during the initial 18 months of the pandemic.

In the coming months, we are planning for additional product releases.

Okay.

Our clear view in our Drake lines as well as expanding features and functionality in a range of products that match, our customers' transitions into various forms of IP television distribution and streaming technologies.

As we look forward to the end of the year and into 2023, we are working to take advantage of additional semiconductor allocations and availability expected between now and the end of the year and continuing to work on our manufacturing and operating efficiencies towards improving performance in the upcoming quarters.

Now I would like to pass the call over to Eric Skolnik, Our Chief Financial Officer to cover our detailed financial results.

Yeah.

Thanks Ted.

The company's net sales increased $1 million $90000 or 26, 1% to $5.262 million for the third quarter of 2022 from $4 million $172000 for the comparable period in 2021.

Net loss for the three months ended September 32022 was a loss of $703000 or a loss of <unk> <unk> per diluted share compared to a net loss of $201000 or a loss of <unk> <unk> per diluted share for the comparable period in 2021.

The increase in sales in the third quarter is primarily attributable to an increase in sales of our <unk>.

Xg IP video signal processing products, our DOCSIS data products, and our coax distribution products offset by a decrease in sales of CPE products. The.

The company experienced an increase in next and Xg IP video signal processing products as these product lines represent newer products and newer technologies with growing demand from customers.

The company expects sales of these product lines to remain at these levels or to increase during the remainder of 2022.

The company experienced an increase in DOCSIS data products due to the pent up demand caused by the pandemic. As these products are used primarily in the hospitality and assisted living environments. The company expects sales of these products to remain at these levels during the remainder of 2022.

The company experienced a reduction in CPE product sales due to the continued de emphasis of this product line, which the company expects to continue 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.

Direct to be higher during 2022 due to the approximately $7 million $162000 of sales backlog at September 32022.

For the nine months ended September 32022, net sales increased $1.076 million or 92% to $12 million $837000 in 2022 from $11 million $761000 for the comparable period in 2021.

Net loss for the nine months ended September 30 of 2022 was $3 million $10000 or 23 cents per diluted share loss compared to net income of $1 million $11000 or eight cents per diluted share for the comparable period in 2021.

The increase in sales for the first nine months of 2022 is primarily attributable to an increase in sales of Nx Gi P video signal processing products, and <unk> products and DOCSIS data products offset by decrease in sales of CPE products in analog modulation products.

The company experienced an increase in Nextgen IP video signal processing products as these product lines represent newer products and newer technologies with higher demand from customers. The company as I said earlier expect sales of these product lines to remain at these levels or increase during the remainder of 2022.

Company experienced an increase in encoding transcoding products that these product lines also represent newer products and newer technologies with higher demand from customers. The company expects sales of these product lines to remain at these levels or to increase during the remainder of 2022.

The company experienced an increase in DOCSIS data products due to the pent up demand caused by the pandemic as these products are used primarily in the hospitality and assisted living environments.

The company expects sales of these products made to remain at these levels during the remainder of 2022.

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 a reduction in analog modulation products to discontinued market shifting away from analog modulation solutions. The company expects sales of analog modulation products too.

<unk> declined during the remainder of 2022.

The companies.

Loss from operations was a loss of $475000 in the third quarter of 2022 compared to a loss of $703000 for the comparable period of 2021.

This also represents an improvement from the $962000 loss from operations, which was incurred in the second quarter of 2022.

The company's net cash used in operating activities was 220.

In dollars in the third quarter of 2022 compared to cash used in operating activities of $753000 in the comparable period of 2021.

It also represents an improvement from the one.

Net cash used in operating activities of $1.450 million, which was incurred in the second quarter of 2022.

The company's primary sources of liquidity have been its existing cash balances.

Amounts available under the makeup facility at amounts available under the subordinated loan facility as of September 32022, The company had approximately $4 million $318000 outstanding or does it make that facility and $520000 of additional availability for borrowing under the midcap facility.

On October 28, 2022, the company entered into the 14th Amendment to the Midcap facility to among other things extend the expiration date of the loan agreement to June 32023, modify the definition of borrowing base to extend the companies with advance and the amortization of the company's over advanced facility until December .

<unk> 2022 and to increase the 2022 over advance facility to $1.500 million.

As discussed in the company's 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 net cash used in operating activities in conjunction with liquidity constraints. These factors raise substantial doubt about the company's ability to continue as a going concern as of September 30 of <unk>.

22, the above factors still exist accordingly, theres still exists substantial doubt about the company's ability to continue as a going concern. The financial statements do not include any adjustments relating to the recoverability of the recovered recorded assets or the classification of the liabilities that might be necessary should the company be unable to continue as a going concern.

Now I'd like to open up the call to 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 handset.

Also while posing your question. Please pickup your handset if listening on a speaker phone to provide optimal sound quality.

Lastly poll for questions.

Yes.

Thank you. Your first question is coming from William Vulva.

Advisory William your line of life.

How are you guys doing good.

Good call.

A couple of points I'd like to make.

We have featured your company so publications so we follow you.

I am impressed and probably the most impressive well was a few things that most impressive side of the company is the continual strong insider buying that I've seen in this company, which indicates to me that the.

The future of the company presents opportunity to investors because obviously.

Obviously insiders wouldn't be buying as much stock as they have bought.

The company was going on there so I like that I like the fact, you're introducing new products like that of course.

But what we need to do is somehow get to profitability. I mean, you just can't keep losing tons of money.

I mean, your revenues went up $1 million for the quarter and you still lost a bunch of cash.

You just got to somehow either raise prices or reduce staff or.

I know you've got to keep R&D in place, but you just can't keep losing money.

So in.

So my one question is do you have any kind of guidance was 23.

So first of all thanks for the question and thanks for the.

The positive comments and yes, I think the management.

Remains very optimistic about the future and the opportunities that the company has going forward.

We absolutely understand the company cannot continue to be turning and performance numbers like this and we've been doing.

A tremendous amount if you followed the company over the last two years, we have had a tremendous number of.

The operational expense reductions across a wide range of areas.

And.

A wide range of aggressive.

Activities to get the the operating costs down the efficiencies up.

The thing Thats really been the headwind for us for the last nine months as I wrote in that.

In the in the.

The press release, and we said a couple of times this year in different quarterly.

Earnings calls is is the semiconductor industry right is just.

There is there's been very little latitude, we have been able to do it.

In the timeframe that these costs and an allocation.

Limitations on the quantity of chips that we can get we've renegotiated.

A lot of these.

Certainly all the most important deals have been renegotiated to the extent that can be done.

We're hearing better than some of our competitors.

We know that.

Our lead times on products are much less than some of our competitors.

At the same time Youre absolutely right. There is no argument for.

Four four.

Anybody being happy with the kind of performance that we've been doing last year.

And we do see like the end of that tunnel.

But I can I can say specifically we're doing.

And we're pushing the envelope pretty much as hard as we feel like we can.

Still operating the company with firing on all cylinders with the staff and with the availability of raw materials at this moment in terms of 2023, the company doesn't normally give guidance.

For future quarters.

All I can say are the things that we that we insured in the in the press release in the comments. This morning, which is we're very happy that we start seeing significantly higher allocations on semiconductors. When you couple that with the fact that the demand on our.

All of that.

A very large portion of our revenue.

<unk> two the most modern products that we have in our portfolio. Those are the growing products those have significant demand in those that demand has not yet shown any decline based on the current overall economic conditions that we're seeing around in the U S and around the world.

In other words, the recessionary pressures are not impacting the demand for our products. We're simply limited to the quantity that we can produce based on the raw materials we have.

So as that starts to lessen because we have specific.

Indications from semiconductor companies that our allocations are increasing on specific dates coming forward.

In the very near future.

This quarter.

Then we have optimism for next year, but beyond that we would.

Prefer not to speculate and specifics.

Can I ask you one other question.

Sure.

So.

It appears that and I'm not an expert but it appears you have some really cutting edge technology in regards to your product mix.

Is there a certain point in time, where I mean, I'm, assuming you had to be <unk> hasnt been approached by other companies to maybe merge into them or take advantage of selling the company in order to survive or Prost, not even just survive but prosper.

That is still a possibility I assume.

So we did a press release in the first quarter that said that we are open to those kinds of strategic alternatives for the company, whether they be mergers acquisitions or other types of strategic investments we've talked to a number of companies. We are currently actively talking to a number of companies. So that is not off the table.

And it's absolutely something that the.

But the management and the board would invite.

The right financials that maximize shareholder value, even though your your numbers aren't the greatest at this point with respect to income, which there isn't any.

The goodwill of the technological advances that you have is got to be worth a lot more than what's indicated in your balance sheet. So.

It looks like it could be a very juicy acquisitions were a company that would that has the need for what you offer on a larger scale. So okay well. Thank you very much for your time it was very good call.

Thank you.

Really appreciate the questions.

Thank you very much. Your next question is coming from George Gaspar.

George Your line is now yes, thank you kindly.

Craig Good morning could you.

Outline the amount of total sales that you have for this year.

From products that have been introduced into the market.

In the last 12 months versus what you had before can you give us a level of percentage increase.

The new products to the total.

It might be hard to do maybe but yes.

Yes, I think in the lay off the top of our heads. This quickly look I can say that.

The <unk> product line, and our Encoders and transporters and our digital modulation products taken together NR in our DOCSIS products taken together are.

Our a significant share of the company's revenue and those are the products that have grown the most of this year.

Yes.

Yes.

It's hard for me to give you a precise number but certainly we've already we.

Reported the 52% increase on an ex Jeep sales in the nine 1%.

Kris on our.

On our encoder and transport product lines.

So you can see with that.

Those products, which do have the higher margins overall.

And our mix.

Our growing the fastest and those are the products that we're actively bromine outs either new versions of those products to hit different.

Parts of the market.

We're adding new features or functions to zero in on some very specific sales opportunities that are out there is technology.

<unk> demand changes.

Different cable satellite and.

And telco operators around North America.

Okay.

The next question in the year.

First questioner did a really good job of covering an enormous amount of cross section.

But can.

Can you just drill in a little bit more on.

And why you haven't tried to establish a brighter financing program considering the prospects that you have moved into the market and that those that are still coming it would seem.

That you would should be confused me asking about going ahead and trying to.

Establish a broader financing program at this point in time.

I think the fact that you haven't done it.

What's not.

He's holding shareholders and potential buyers of your stack back and.

Are you doing this on purpose not to finance.

Because of negotiate because of conversations youre having.

Possible.

Acquisition or merger or whatever.

But it seems that there is some real momentum here and you've really done a marvelous job of bringing new products into the market that look like they have a much broader scale and it would just seem logical that you would.

And set up a broader financing program to get this.

Situation in the market place stock market turned around can you comment on that.

Sure Eric.

Eric is that something you feel like you can comment on where I can take a crack at it I'm sure.

Obviously, a company of our size is limited and the opportunities that we have in both the debt and equity market. So yes. We are constantly exploring these types of opportunities, but unfortunately due to our size and the market conditions, there's not.

Always a lot of opportunity available to us.

And as I reported earlier, we were successful.

Extending our existing revolving line of credit through June 30th.

They increased.

The 2022 over advance to a million and a half from the current million, which would which would allow us another $500000 of additional monies to come into the company under that facility.

So that's that's the extent that we have currently and where other as I said earlier, we are absolutely always entertaining other opportunities.

Okay and then just.

And a view and.

The increase in <unk>.

You are.

Product line that <unk> introduced and in America, and I know early on as far back as maybe last two calls or three.

You've already indicated that.

Some of the device generation is because.

You had committed to sell products that were in backlog, but that the cost of the.

The raw materials.

Chips whatever.

We're increasing and you were having to absorb.

Those costs.

Being able to increase.

The sales price of your products.

That has been going on for.

A couple of three quarters that laser Florida, maybe.

It sounds like this is starting to moderate.

Yes.

One there's the raw.

Raw material products are more available and there might be some reductions in cost.

Cost structure and that you've moved the prices that youre getting further products higher.

Are you close to a transition where all of a sudden it's just going to be really quick and over to the positive side.

So we do believe let me break apart some of the things you said and answer them more directly so.

We're not seeing any cost decrease on raw materials, yet, but what we have seen the positive things that I mentioned in the press release in the comments this morning.

We're more in line with the cost structure has stabilized we're not seeing many.

New.

Hmm.

New things coming up on our supply chain that we didn't expect.

In the last quarter.

So that's really really positive because it puts the surprises and the redirection of resources and allocating time and money to just work around the problem didn't know it was going to happen until the week before until we can happen.

That had been consuming an awful lot of our engineering and our operations overhead.

Buying new PCB I don't want to get into all the gory details, but you get the point that had been really a big drag on.

Moving the ball forward from an from an R&D and new product development perspective earlier this year that stabilized in Q3 for sure.

Now the other thing.

But I can say is yes, we have increased prices on our products across the board.

Multiple occasions since the fourth quarter of last year.

In.

And direct relationship with our increasing cost structure for building these products.

Since those have not gone down we certainly not reduced any prices. We have continued to increase prices even during the third quarter in a targeted way.

And we do believe that that here.

Now into Q4, we've we've either caught up were almost completely caught up on.

Delivering on products that were sold at and we have on.

Purchase orders that were at the previous pricing levels.

Which I think you're referring to some of the previous comments yesterday evening's earnings calls the time lag between when we increase.

Our price on a product and when we can actually realize the increase in the margin on that product because of the backlog. So we're in a good position there were also.

Finishing the amortization of some one time expedite fees that we had to incur about a year ago with some semiconductor products to get on some allocation.

Big guys, so thats going to have a positive impact on our margins going forward and when those when those get finished.

Okay.

<unk> when you get through the end of the year and into 2023.

Current view unless something else happens in the supply chain markets.

Looks pretty positive both on a margin and availability and a total topline revenue.

Number correct, yes could I could I ask one additional question and Jay if you could you divide out.

The backlog that you have now is an addition.

$7 million quest.

How much of that backlog relates to products that have been introduced into the market.

2022 versus products that we're in.

The market before that.

You annualize that for us.

I don't have the data in front of me for that I mean, it's it's a healthy portion of it is our products and the X gene for your viewing and great product lines, So those and coders transco, the newer products basically great a very.

Very helpful to that yet.

Yeah, Okay, because I just comment that that's very important in it.

It's even more positive view for shareholders to be thinking about improvement in the company's operations that could really get too.

A black line at the bottom.

Right.

Okay, Alright, thank you kindly.

Thank you so much I.

I appreciate your questions.

Thank you ladies and gentlemen, if you do have any further questions I will comment. Please indicate so now by pressing star one on your phone.

Okay. We appear to have no further question in the queue I will now hand back over to Todd for any closing comments.

Great. Thank you.

I'd like to thank everyone for attending Blonder tongue Laboratories' third quarter 2022 earnings call.

And for all of your questions today, Thank you and goodbye.

Thank you ladies and gentlemen, this does conclude today's conference call. You may disconnect. Your phone lines at this time and have a wonderful day. Thank you for your participation.

Okay.