Blonder Tongue Laboratories, Inc.

Good day, ladies and gentlemen, and welcome to the Blonder Tongue Laboratory's second quarter 2022 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 Grau. Sir, the floor is yours.

Hi. Good morning, everyone, and thank you for joining us this morning and participating in Blonder Tongue Laboratory's second quarter 2022 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 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 the years 2019, 2020, and 2021, and our filed Form 10-Qs for the four quarters of 2020, the four quarters of 2021, the first quarter of 2022, and our upcoming second quarter 2022 10-Q as well. 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 Skolnick, our Chief Financial Officer and Senior Vice President. Eric's remarks will follow mine and will cover our detailed financial results. Both of us will also be available to answer questions that you may have during the Q&A session immediately following our prepared remarks. In the second quarter of 2022, Blonderton Laboratories had a net loss of $1,154,000 due primarily to continued semiconductor supply chain shortages and disruptions and raw material cost increases. The company continued the work that we have discussed in last quarter's earnings call, including further planning for future operating expense reductions and focusing our engineering activities on rapid responses when parts supplies are disrupted or delayed. Our efforts in engineering resulted in a number of products being able to go back into production within approximately six, eight, or even ten weeks of unexpected chipset delivery problems. We've accomplished those projects by changing our product designs to use semiconductor parts that remain available and designing out parts that are not available in the short term. Dealing with raw material cost increases, we have continued to raise product pricing on impacted product lines, but we also continue to see a time delay in the realization of those price increases as we end up delivering products against backlog that was booked in the past at previous pricing. The company saw continued healthy demand for our products during Q2, with the strongest demand coming from our NXG IP video processing products, our Clearview IP encoders and transcoders, and our DOCSIS CMTS high-speed data delivery product. We were also able to produce our BIDA indoor broadband amplifier product line again during late Q2 after a long delay due to parts availability. On the sales and product fronts, Blonderton Laboratories has been taking advantage of the return of in-person trade shows where we've been able to demonstrate our new products and technologies recently. This has included a new version of our Clearview IP video encoder that allows large tier one cable operators to create locally produced channels on their network, onsite, at apartment buildings, hotels, campuses, and other small and medium business locations without having to carry that content back to their central offices or national operation centers. We've also recently began shipping a HD SDI video format input function for our NXG IP video platform that expands the usable market of that product line, the NXG product line, to broadcasters, TV studios, and some industrial users such as the cruise ship industry. As I mentioned last quarter, the demand has remained strong for our Clearview IP video transcoder product line in the direct TV dealer and distributor networks. The company's biggest challenges have continued to be those that we've discussed in the last three quarterly earnings calls. managing last-minute raw material availability, including shortages and allocation issues, while at the same time working to take advantage of growing demand in the marketplace. And second, managing raw materials costs that have put stress on our product gross margins and therefore impacting our operating margins by extension. We do expect to see some relief in the near future on product gross margins, potentially increasing on a few important but we do not want to predict any specific larger-scale supply chain recovery until we actually see the dynamics and the availability and the parts pricing begin to change across the board, which we have not seen happen yet. Now I would like to pass the call over to Eric Skolnick, our Chief Financial Officer, to cover our detailed financial results. Eric?

Thank you, Ted. Our net sales decreased $104,000 or 2.4% to $4,234,000 for the second quarter of 2022 from $4,338,000 for the comparable period in 2021. That loss for the three months ended June 30th, 2022 was $1,154,000 or a loss of 9 cents per share diluted share compared to a net income of $1,626,000 or 11 cents per diluted share for the comparable period in 2021. The decrease in sales is primarily attributed to a decrease in sales of digital modulation products, CPE products, and analog modulation products, offset by an increase in sales of DOCSIS data products and encoder-transcoder products. Sales of digital modulation products were $45,381, TPE products were $0 and $288,000. Analog modulation products were $138,000 and $238,000. DOCSIS data products were $686,000 and $284,000. And encoder transcoder products were $2,163,000 and $1,940,000 in the second three months of 2022 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 a reduction in analog modulation products due to the continued market shift away from analog modulation solutions. The company expects the sales of the analog modulation products to continue to decline during the second half 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 may return to more historical levels during the second half of 2022. The company experienced an increase in encoder-transcoder products as these product lines 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 increase during the second half 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 approximately $9,783,000 of sales backlog at June 30, 2022. The six months ended June 30, 2022, net sales decreased $14,000 or 0.2% to $7,575,000 in 2021 from excuse me, from 2022 from the $7,589,000 from the comparable period in 2021. Net loss for the six months ended June 30th, 2022 was $2,307,000 or 17 cent loss per diluted share compared to net income of $1,212,000 or 8 cents per diluted share for the comparable period in 2021. The decrease in sales is primarily attributed to a decrease in sales of CPE products, analog modulation products, and coax distribution products offset by an increase in sales of DOCSIS data products and encoder-transcoder products. Sales of CP products were $27,000 and $983,000. Analog modulation products were $237,000 and $482,000. Coax distribution products were $620,000 and $783,000. DOCSIS data products were $1,140,000 and $308,000, and encoder-transcoder products were $3,681,000 and $3,107,000 in the first six months of 2022 and 2021, respectively. The company experienced, as I mentioned earlier, a reduction in our CPE products due to the continued de-emphasis of the product line, and as I said earlier, we do expect that to remain the rest of 2022. We also, as I said earlier, experienced a reduction in our analog modulation products due to the continued market shifting away from the analog modulation solutions, and we do expect the sales of these products to continue to decline in 2022. We do expect that 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. and the company does expect sales of these products to return to more historical levels during the second half of 2022. The company experienced an increase in encoder-transcoder products. As I said earlier, these products represent newer products and newer technologies with higher demand from customers. We expect the sales of these product lines to remain at these levels or increase during the second half of 2022. The company's primary sources of liquidity have been its existing cash balances cash generated from operations, amounts available under our mid-cap facility, and amounts available under our subordinated loan facility. As of June 30, 2022, the company had approximately $3,918,000 outstanding under the mid-cap facility and $389,000 of additional availability for borrowing under the mid-cap 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 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 June 30, 2022, these 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 classifications 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 our question and answer session.