Blonder Tongue Laboratories, Inc.

Good day, ladies and gentlemen, and welcome to your Blonder Tongue Laboratory's third quarter 2020 earnings call. 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, it is my pleasure to turn the floor over to your host, Ted Grau. Sir, the floor is yours.

Thank you. Hi, and good morning, everyone. Thank you for joining us and participating in the Blonderton Laboratory's 2020 Third Quarter Earnings Call. I'm Ted Grau, 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 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 Forms 10-Qs for the first and second quarters of 2020, as well as our third quarter 2020 results press release issued this morning. Also note, we anticipate filing our Form 10-Q for the third quarter of 2020 on or before November 16, 2020, which is this coming Monday. All of these filings, press releases, and documents include additional information concerning factors that could cause actual results to differ from the information we will be discussing this morning. With me today are Steve Shea, 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 will focus on the financials of the company. Following our presentations, all of us will be available to answer your questions during a Q&A session. During the third quarter of 2020, the company has continued to work through a very difficult market for telecommunications and cable television transmission and distribution equipment. due specifically to the effects from the global COVID-19 pandemic. Eric will review and provide details on the numbers shortly, but to summarize, we have had an overall 21% decrease in sales in Q3 of 2020 versus Q3 of 2019. The majority of that decrease was focused on our traditional HFC, or hybrid fiber coax, technology in digital video transmission, as well as our DOCSIS data delivery equipment. Our Q3 DOCSIS products were particularly impacted as our customers for DOCSIS equipment are overweighted in the hospitality industry, which has been heavily impacted by travel restrictions and overall limited consumer travel brought on by the virus. The DOCSIS segment is starting to come back, but it's only been recently that we've seen that uptick in shipments or any evidence of a positive trend. We also experienced a decrease in our contract manufacturing business for the quarter. This is a small segment where we produce products for two specific customers, and we believe the impact will be short-lived and recover back to previous levels in the near term. Despite the overall lower sales levels in HFC and DOCSIS products, we have seen positive initial market reception for our new Clearview video encoder and transcoder product lines that have brought in $937,000 in new revenue from the beginning of the year through the end of Q3. And we're now getting very close to our end of 2020 monthly revenue targets for those specific product introductions. We are also about to introduce several more products in that same product line with a focus on trying to bolster late Q4 and early 2021 sales and build upon the initial Clearview product success that began in Q2 and Q3 of this year. Our CPE or consumer premise equipment related business was steady during the early part of Q3 and then grew modestly by the end of the quarter. Sales of those products are demonstrating reasonable growth as Q4 develops and as we transition into 2021. On the company's flagship NXG, or Next Generation Gateway Video Digital Signal Processing product line, we're in the final processes of completing the company's more than three-year investment cycle. into that product, and we have now begun redirecting a portion of our R&D team into other product areas that will focus on newer and growing technology segments within the cable and telco service operator businesses. Those last few projects on NXG technology include some video security improvements to qualify the NXG for deployment in some larger markets we're going after, as well as increasing the number of conditional access technologies, also known as video scrambling technologies, that we are interfacing with. And that will be in order to help a large number of smaller operators transition their networks into an all IP or what's also known as IPTV video delivery. One of the main things we've learned through Q3 2020 This year is just how dynamic and reactive the markets that we serve have been to changes in the overall sentiment associated with the COVID situation. We actually saw a very rapid market recovery through the majority of June. and then have that turn very quickly into a very cautious and slow market in July and August as COVID effects began to be seen more widely in suburban and rural areas across the Midwest, South, and Southwest at that time. In response to these situations, we've had to take a number of aggressive actions inside the company during Q3 to reduce our operating costs. Those included an extended factory shutdown for over six weeks, as well as our short-term furloughs and additional reorganization measures, which will bring longer-term financial benefits. Overall, we've now eliminated in excess of a quarter million dollars per month in manufacturing and operating expenses, compared with similar timeframes since the end of Q2 2019. We believe these changes to be sustainable into and beyond 2021. On the topic of the health and well-being of our workforce, I do have to unfortunately report that the company saw our very first employee test positive for COVID last week. That person does not work in a factory or production environment, and we currently believe that the possibility of exposure to other employees was either very low or zero. To take the same conservative approach as we have been doing since February, we've asked all staff working in the same general areas to work from home for a period of time to err on the side of caution. We believe our policies on workspace distancing, mandatory mask usage, and wide availability of personal protective equipment such as hand sanitizers and masks, as well as other policies we've put in place, continue to keep our workplace safe. Next, I will hand over the call to Eric Skolnick, our Chief Financial Officer. Eric?

Thank you, Ted. Net sales decreased $1,107,000, or 21%, to $4,171,000 for the third quarter of 2020, from $5,278,000 for the comparable period in 2019. Net loss for the three months ended September 30, 2020, was a loss of $1,787,000, or a loss of 18 cents per diluted share, compared to a loss of $1,334,000, or a loss of 14 cents per diluted share for the comparable period in 2019. A decrease in sales is primarily attributed to a decrease in sales of digital video head-end products, DOCSIS data products, and contract manufacturing products, offset by an increase in our transcoder products. Sales of digital video head-end products were $801,000 and $1,292,000. DOCSIS data products were $235,000 and $884,000. Contract manufacturing products were $28,000 and $319,000, and transcoder products were $543,000 and zero in the third three months of 2020 and 2019 respectively. For the nine months ended September 30th, 2020, Net sales decreased $2,745,000, or 18.6%, to $12,052,000 in 2020 from the $14,797,000 for the comparable period in 2019. Net loss for the nine months ended September 30, 2020, was $5,061,000 loss, or $0.52 loss per diluted share, compared to net earnings of $3,100,000, or $0.31 per diluted share, for the comparable period in 2019. The decrease in net earnings for the first nine months of 2020 relative to the first nine months of 2019 is primarily driven by the $7,175,000 gain recognized in the first quarter of 2019 upon the consummation of the sale and leaseback transaction of our headquarters facility in Old Bridge, New Jersey. The decrease in sales is primarily attributed to a decrease in sales of digital video head-end products, contract manufacturing products, and analog video head-end products, offset by an increase in sales of transcoder products and CPE products. Sales of digital video head-end products were $2,603,000 and $5,482,000 Contract manufacturing products were $101,000 and $393,000. Analog video products were $838,000 and $1,249,000. Transcoder products were $937,000 and $33,000. And CPE products were $3,000,000. and $2,691,000 in the first nine 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 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, 2020, the above factors still exist. Accordingly, there 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 recorded assets or the classification of the liabilities that might be necessary should the company be unable to continue as a going concern. Regarding the company's current liquidity, as of September 30, 2020, the company had approximately $1,403,000 of availability under the mid-cap credit facility. Now I'd like to open up the call to question and answer session.