Blonder Tongue Laboratories, Inc.

Good morning, ladies and gentlemen, and welcome to the Blondertongue Laboratory's third quarter 2021 earnings call. At this time, all participants are in a listen-only mode, and the floor will be open for your questions and comments following the presentation. It is now my pleasure to turn the floor over to your host, Ted Grau. Sir, the floor is yours.

Thank you. Hi, everybody. Good morning, and thank you for joining us and participating in our 2021 third quarter and first nine months earnings call. I'm Ted Grau, 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 the evolving trends in the market. As you know, the future is all but impossible to predict, 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 2020, and our filed 10-Q forms for each quarter of 2020, and for the first and second quarters of 2021, and our upcoming 10-Q for the third quarter of 2021. 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 are Stephen Shea, Chairman of the Board for Blondertongue 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. Overall sales for the third quarter increased slightly by $1,000 to 4.172 million from 4.171 million in the third quarter of 2020. This yielded a net loss of $201,000 for the quarter compared with a net loss of 1.787 million for the third quarter of 2020 last year. Despite this quarterly loss, the fundamental change from one year ago is the product mix being sold and the expanded customer base of the company. Overall, we made strong progress in the third quarter on several fronts. First, we've had strong sales growth of our newer high technology products. This has yield higher margins on a large portion of our sales. Those include our video encoding, transcoding, digital video transmission, video security, and video signal processing product lines, such as our NXG, our Clearview and our AirCaster product lines. Second, on the sales front, we've performed very well in the quarter turning a number of customer relationships into longer term, more consistent supply arrangements. And we greatly increased our bookings and multi-month product backlog in the process of doing that. Additionally, we've had a couple of significant product design wins at major service operator accounts that have yielded bookings last quarter during Q3 for delivery in Q4 and Q1 2022. And these design wins also have the possibility of yielding some longer term sales. The overall sales performance and slow but steady market recovery are providing us with current optimism in increasing sales for future quarters. Third, we've been able to maintain the gains that we made in 2020 in terms of lowering our overall operating expenses while at the same time continuing to invest in the company's long tradition of engineering and R&D. We've continued to release a number of new products and product enhancements this year, including during the third quarter. On the negative side, like most companies in the electronics industry worldwide, we are starting to see some operational impacts from the global supply chain situation. In our case, we experienced a very specific short-term semiconductor disruption late in the quarter of Q3. This disruption and the related increase in the cost of some semiconductors had a material adverse impact on the results of operations for the quarter. The unexpected increase in material costs negatively affected our margins and delays in obtaining a portion of our semiconductor supply resulted in delayed product shipments of several products by as much as a month. Based on negotiations with and the agreement from several key customers, we've been able to successfully implement certain product price increases on the affected products that have offset our higher material costs. We were also able to resume full production of the products that were affected by the end of the quarter. Overall, as we enter the fourth quarter, the company is seeing growing bookings and a recovering telecommunications cable TV and fiber optic technology marketplace. But at the same time, we are seeing a tightening of the supply chain situation on a range of semiconductor and other electronics components. During Q3 and even earlier, we have been compensating for these challenges by performing longer look ahead planning on our manufacturing jobs. Right now, it appears that disruptions in supply chain will continue to provide us and many other companies with challenges into 2022. Now, I would like to pass things over to Eric Skolnick, our Chief Financial Officer, to cover our detailed financial results. Eric.

Thanks, Ted. Blunder Tongue Laboratories net sales increased $1,000 or 0.02% to $4,172,000 for the third quarter of 2021 from $4,171,000 for the comparable period in 2020. Net loss for the three months ended September 30, 2021, was a loss of $201,000, or a two-cent loss per diluted share, compared to a net loss of $1,787,000, or a diluted loss of 18 cents per share for the comparable period in 2020. The third quarter included an increase in sales of IP video transcoder products and next-gen IP digital video processing products, offset by a decrease in sales of analog video head end products, consumer premise equipment CPE products, and hybrid fiber coax, HFC, distribution products. Sales of transcroter products were $1,732,000 and $543,000. Next gen products were $420,000 and $89,000. Analog video head end products were $176,000 and $323,000. CPE products were $113,000 and $1,379,000, and HFC distribution products were $404,000 and $599,000 for the third three months of 2021 and 2020, respectively. For the nine months ended September 30, 2021, net sales decreased $291,000, or 2.4%, to $11,761,000 in 2021, from $12,052,000 for the comparable period in 2020. Net income for the nine months ended September 30th, 2021 was $1,011,000 or eight cents per diluted share compared to a net loss of $5,061,000 or a 52 cent loss per diluted share for the comparable period in 2020. Net income for the nine months ended September 30th, 2021 included $1,769,000 worth, which is related to a gain on our debt forgiveness of the company's PPP loan, and $1,804,000 of other income related to the employee retention tax credit. Net cash used in operating activities was $627,000 for the first nine months of 2021, compared to net cash used in operating activities of $2,000,000 $149,000 for the comparable period of 2020. The decrease in sales for the nine months is primarily attributable to a decrease in sales of DOCSIS data products, digital video head-end products, HFC distribution products, CPE products, and analog video head-end products, offset by an increase in sales of video transcoder products and NXG products. Sales of DOCSIS data products were $681,000 and $1,807,000. Digital video head end products were $2,348,000 and $2,603,000. HFC distribution products were $1,327,000 and $1,769,000. CPE products were $1,096,000 and $3,051,000. Analog video head end products were $657,000 and $838,000. Transcoder products were $3,805,000 and $937,000. And NXG products were $1,311,000 and $570,000 in the first nine months of 2021 and 2020, respectively. The company expects bookings of transcoded products to remain healthy as market exposure to and acceptance of those products continues. The company expects sales of CPE products to continue to trend lower than in prior periods as the company, consistent with its business plan, transitions these products into a higher margin but lower revenue services, fulfillment, and support business model, and works to promote an expanded array of distribution, content delivery, and processing technologies to those service provider customers. The company's primary sources of liquidity have been its existing cash balances, cash generated from operations, amounts available under its revolving credit facility, which is the mid-cap facility, amounts available under the subordinated loan facility, and cash generated from sales from its common stock, as well as funds made available to the company through participation in several federal government financial assistance programs, implemented pursuant to the Coronavirus Aid Relief and Economic Security Act, including the Paycheck Protection Program and the Employee Retention Tax Credit. At September 30, 2021, the company had $516,000 available under the MidCap facility. As disclosed in the company's 2020 Annual Report on Form 10-K last year, 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. Certain of 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. Now I would like to open up the call to the question and answer session.