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spk01: Good morning, ladies and gentlemen, and welcome to the Blonder Tongue Laboratory's fourth quarter 2020 earnings call. At this time, all participants have been placed on a listen-only mode, and the floor will be open for questions and comments after the presentation. It is now my pleasure to turn the floor over to your host, Ted Rao. Sir, the floor is yours.
spk06: Hi, thank you. Good morning, everyone, and thank you for joining us and participating in our 2020 earnings fourth quarter and full year earnings call. I'm Ted Grau, the Chief Executive Officer and President 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 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 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, 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 cover our detailed financial results. All of us will be available to answer questions you may have during a Q&A session immediately following our prepared remarks. As we all already know, and as I have mentioned in the last three quarterly earnings calls, Most businesses in the U.S., including Blondertongue Labs, have been facing a very difficult pandemic-affected marketplace since March of 2020, one year ago. In response to this crisis in 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 has been a lowering of the company's operating costs by approximately $940,000 during the full year of 2020 versus 2019, and additional reductions that have been implemented in Q1 2021 so far. The company's operating expenses are now reduced by approximately $192,000 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 NXG digital video signal processing platform,
spk03: and our DOCSIS data delivery product lines.
spk06: In 2020, our experienced engineering organization completed over 15 new product introductions in 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, the support of the latest HDDC, also known as H.265, and 4K ultra-high definition codec support in our new encoder and transcoder product lines, and technologies that we developed for specific Tier 1 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 of achieving future margin improvements. As we've stated in our 2020 Q2 and Q3 releases and calls, in April of 2020, the company was able to secure a CARES Act PPP federally backed loan in the amount of $1.769 million. These funds, along with the results of the company's inventory reduction program that improved our cash used in operating activities by $4.421 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 one-time costs of approximately $220,000, 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 operators. That work yielded an increase in our overall service operator relationships of over 35% year on year. And the company also added four 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 in 2020 were 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 in the company's structure and strength is indicated by the reduction in cash used in operating activities last year. While managing the company with a 17.5% reduction in sales last year in 2020, the company had a negative $3.212 million in cash used in our operating activities in 2020 versus a negative $6.538 million in cash used in operations in 2019. At this point, I would like to pass the floor to Eric Skolnick, our Chief Financial Officer, to cover the detailed financial results for the fourth quarter and the full year of 2020. Eric? Thanks, Ted.
spk04: Blonderton Laboratories Inc's net sales decreased $718,000 or 14.2% to $4,327,000 for the fourth quarter of 2020 from $5,045,000 for their comparable period in 2019. Net loss for the three months ended December 31st, 2020 was a loss of $2,413,000 or a 23 cent loss per share compared to a loss of $3,842,000, or a $0.41 loss per share for the comparable period in 2019. The decrease in sales is primarily attributed to a decrease in sales of our DOCSIS data products, digital video head-end products, HFC distribution products, and our NXG IP video signal processing products, offset by an increase in our sales of our transcoder products. Sales of DOCSIS data products were $420,000 and $828,000. Digital video head end products were $1,004,000 and $1,232,000. HFC distribution products were $364,000 and $637,000. NXG products were $135,000 and $378,000. and transcoder products were $606,000 and $38,000 in the fourth three months of 2020 and 2019, respectively. For the year ended December 31, 2020, net sales decreased $3,463,000, or 17.5%, to $16,379,000 in 2020, from $19,842,000 in 2019. The net loss for the 12 months ended December 31st, 2020 was a loss of $7,474,000 or a loss of 76 cents per share compared to a $742,000 loss or an 8 cent loss per share for the comparable period in 2019. The decrease in sales is primarily attributed to a decrease in sales of digital video head-end products, DOCSIS data products, contract manufacturing products, HFC distribution products, and analog video head-end products offset in part by an increase in sales of transcoder products. Sales of digital video head end products were $3,607,000 and $6,714,000. Sales of DOCSIS data products were $2,227,000 and $2,817,000. Sales of contract manufacturer products were $145,000 and $602,000. Sales of HFC distribution products were $2,133,000 and $2,509,000. Sales of analog video hand-in products were $1,232,000 and $1,532,000. And sales of transcoder products were $1,543,000 and $71,000 in 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 MidCap Business Credit LLC revolving credit facility, otherwise known as the MidCap facility, the proceeds received from a PPP loan, amounts available under the subordinated loan facility, and cash generated from the private placement of common stock. The company has completed all available draws under the current terms of the subordinated loan facility. During 2020, the company received approximately $1,769,000 under the PPP loan, approximately $900,000 under the subordinated loan facility, and approximately $812,000 in net proceeds from the private placement of common stock. Our ability to continue as a going concern is dependent upon our becoming profitable in 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 mid-cap facility. The company also may seek to raise additional capital through the issuance of shares of common stock or other securities convertible into or exercisable for shares of common stock, although the company cannot provide any assurances that this type of additional financing will be available on reasonable terms or at all. The company had approximately $609,000 and approximately $800,000 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 loan during April of 2021 and believe that our use of the PPP loan proceeds will meet the conditions for forgiveness. If our application for forgiveness is not approved in whole or in part, we may be required to use a substantial portion of our available cash and our cash flows from operations to pay interest in principle on the PPP loan which will limit the funds available to us to operate our business or otherwise adversely affect our financial condition and results of operation. The company plans to file its annual report as soon as practicable, but not later than December 31, 2021. Excuse me, pardon me, March 31, 2021. In the annual report, the company expects that the report of its independent registered public accounting firm will include an explanatory paragraph dash going concern. Although the company has actively taken steps to address operating expenses and liquidity, there could be no assurances that these actions and others that the company intends to take in the future will be sufficient to address the concerns related to the explanatory paragraph going concern.
spk03: Now I'd like to open up the call to the question and answer session.
spk01: 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 pick up your handset if listening on speakerphone to provide optimum sound quality. Once again, that is star one to ask a question. Please hold while we poll for questions. Your first question is coming from Dave Cole. Please announce your affiliation, then pose your question.
spk05: Hi. I'm calling on behalf of any company. I'm a shareholder. And I had a few questions. First, what is the likelihood that you're going to meet the NYSE American listing requirements to regain compliance?
spk04: Do you want me to answer that, Ted?
spk06: Yeah, go ahead, Eric. I'm sorry.
spk04: I apologize. Because of COVID, we're not all in the same location, so it's hard to get visual clues. I'm sorry. We have a current plan in place. Obviously, we cannot give any assurances at this time, but as of right now, we have a plan in place that the NYSE American community has granted us to become in compliance by December. I believe it's the 10th of this year.
spk05: Yeah, does it look like you're on track to regain compliance? Well, I'm not sure what the plan is. I haven't seen it posted anywhere. I checked NYSE. Is this public?
spk04: No, it's not public information, no.
spk05: 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 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 technology is becoming obsolete? and whether the transcoder products has sustainable sales to carry the company through and have more growth to regain the compliance.
spk06: Sure. 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 the last couple of quarterly calls, I've been personally pretty amazed at how closely our growth or shrinkage of sales corresponds directly to the general sentiment that's been out there since March of last year related directly to the impacts of COVID on our customers either being locked down or opening up closing or opening and there being active activity of people being able to, 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 make updates and changes and check on equipment. So it's a very, very, at least what I've seen so far since March, we now have 12 months of data When things have opened up, we've seen a dramatic and very quick week-on-week positive or negative change in our sales. And so that has led me to believe that the specific impacts on things like our DOCSIS product line, on our NXG and some of our other head-end product lines, they seem to be directly related to simply people locking 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 of our competitors because they've been affected more harshly than us, or they may have not prepared for some of the supply chain disruptions we can talk about in this Q&A session that are hitting some parts of the industry that are not currently – affecting us. We're open for business and able to produce all of our products today, which some of our competitors are not able to do because of some of the chipset shortages that are out there. So we don't think it's a competitive issue. We think it's entirely, again, from the data that I'm seeing, it seems to be directly related to the the activities of our customers to shut down or open up based on what they see as the general sentiment and their ability to function based on the situation with COVID in their particular locations. But maybe to finish up on the other part of your question, in terms of in compliance with the requirements to remain a listed company. We have put a plan together and we revised that plan once for the NYSE American and they accepted our plan and we're executing against that plan. There are some things on that plan we're tracking very well against and others that we're not. I'm personally optimistic for this year, but as Eric mentioned, we can't give any particular assurances because they have The NYSE American has latitude to make decisions that we can't control.
spk03: Okay.
spk01: Once again, if there are any questions or comments, please press star 1. There are no more questions in queue.
spk03: Okay. Okay.
spk01: If there are no more questions... Yes, you do have another follow-up from Dave Cole. Dave, your line is live.
spk05: Okay, thanks. I thought there might be other questions. I'm not sure how many people are on the line, but since there weren't any. This kind of sounds like an interview question, but I was wondering where you'd like to see the company in three years, five years, and... basically, is this going to remain a product manufacturing company or are there other lines of business that are being explored?
spk06: Right. So I think the best way to characterize it is during 2020, we completed a really significant set of product enhancements, product updates, and in some cases, completely new product introductions that were meant and which were effectively the end of a long series of three years of investments to modernize the company's video processing, video delivery, video transmission product lines. They were updated to be more modern in light of most service operators making their transitions to IP television or IPTV style, which introduced different technologies. They were updated to be more cost-effective and more dense, to be more competitive in the marketplace, as it has changed over the last three or four years. They've been updated to handle a wider range of inputs and outputs and technologies, including the new codec technologies. So the end of 2020 was effectively the end of a major set of investments in the company to modernize our video technology. What we're doing now is we're now broadening our engineering to be focused a lot more on data delivery technologies. And we're looking at wireless technologies, and we're looking to do some product introductions in 2021. That are that are more along those lines are putting more of our investments in data delivery, because effectively, that's a more relevant set of technologies for service operators, and media companies and anybody delivering any types of content into the home. The big focus over the last few years has been a transition by the service operators. Those are big telcos, big 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 in that space now. We're going to be planning to do some product introduction soon. releases in the coming months. And that's the most immediate shift in the company's focus in the short term. In the longer term, and by longer term, some of these next things I'm about to mention 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 going to be focused entirely on just being equipment manufacturing, but that transition will take some time and will be, 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, you know, the best assets we have right now are U.S.-based manufacturing, which we've gotten now to be very efficient over the last 12, 14, 15 months of a considerable amount of work to make it more efficient. Through those efficiencies, we're effectively cost reducing some products to manufacture them in the United States and keep that manufacturing in the United States to the point where we'll have the potential for better margins on those products from what we can see. And then that was the set of activities that was going to yield the fastest, shortest term return on investment. We know longer term, though, the company's got to be focused on what's the more relevant technologies and the more relevant movement of our customers, which is data delivery, over-the-top video, streaming services, and software cloud technologies and platforms. Right, I'm glad to hear you say that. Right, I mean, I'm saying it, but I'm also speaking in generalities, right? I don't want to misrepresent that we're close to doing any sort of groundbreaking work. cloud-based platform. We know that that's where the company should be going long-term, and eventually we're looking into different things.
spk05: Yeah, because there's certain technologies that are key to growth these days, and you hit on a couple of them as being cloud-aware and providing a service more than just warranty and support. but actually a service that can be used globally. And that's key to business growth these days. And there's a couple other things. But, yeah, right now that's a good point. I'm glad you brought it up.
spk03: No, thank you for the question, Dave. I appreciate it. Thank you.
spk02: Once again, if there are any questions or comments, please press star 1. There are no more questions in queue.
spk06: Okay. Well, thank you everybody for attending the Blonder Tongue Laboratory's Q4 and 2020 full-year earnings call. I appreciate everybody's attendance and look forward to hearing from you in the near future.
spk03: Thank you very much.
spk01: 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.
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