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Edited Transcript of BDR earnings conference call or presentation 14-Aug-18 3:00pm GMT

Q2 2018 Blonder Tongue Laboratories Inc Earnings Call

Old Bridge Aug 30, 2018 (Thomson StreetEvents) -- Edited Transcript of Blonder Tongue Laboratories Inc earnings conference call or presentation Tuesday, August 14, 2018 at 3:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Eric S. Skolnik

Blonder Tongue Laboratories, Inc. - Senior VP, CFO, Treasurer & Assistant Secretary

* Robert J. Pallé

Blonder Tongue Laboratories, Inc. - CEO, President & Director

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Presentation

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Operator [1]

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Greetings, and welcome to the Blonder Tongue Laboratories Second Quarter 2018 Conference Call. (Operator Instructions) As a reminder, this conference is being recorded. It's now my pleasure to introduce your host, President and CEO of Blonder Tongue Laboratories, Bob Pallé. Please go ahead, sir.

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Robert J. Pallé, Blonder Tongue Laboratories, Inc. - CEO, President & Director [2]

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Good morning, everyone. Welcome to Blonder Tongue's 2018 Second Quarter Financial Reporting Teleconference.

Before we begin this morning with any details of performance, I'd like to preface my remarks and those made by other Blonder Tongue representatives who may be speaking today by reminding you that we will be discussing certain subjects which will contain forward-looking statements, including management's view of our prospects and evolving trends in the marketplace. As you know, the future is impossible to predict, and so I caution you that actual results may differ from those that may be projected in our comments this morning.

I would ask that you refer to our prior SEC filings, our Form 10-Qs for the first and second quarters 2018 and prior quarters, 10-Ks for years 2017 and 2016 and the 10-K/A filed on April 30, 2018, for additional information concerning factors that could cause actual results to differ from the information that will be discussed this morning.

With me today are Steve Shea, Chairman of the Board; Bruce Gureck, Chief Operating Officer; and Eric Skolnik, Chief Financial Officer. All of us will be available to answer any questions you may have following our presentations. Following my remarks, Eric will provide his financial report. And following Eric, we will open the call up to a question-and-answer session.

Before I continue with any new information, the essence of my first quarter press release comments bear repeating. Although we are disappointed in the decrease in second quarter revenues, the decrease was not unexpected given the softer-than-anticipated bookings experienced during the first quarter. Purchases of certain data products by one of our largest customers was reduced, due in part to slower-than-expected installation rates for such products by the customer. While we expect order input from that customer to increase during the fourth quarter as earlier purchases carried in their inventory are deployed, we do not expect sales to that customer to resume at 2017 levels.

On the positive side, we are pleased to report that the NeXgen Gateway MSO laboratory testing and approval phases are progressing well. The product has been approved for purchase by 5 service providers, and initial orders anticipated to ship during 2018 have been received from 4 of those 5. Sales growth from our NeXgen products is expected to be a key contributor to the overall growth and success of the company.

As previously reported, we remain concerned about the third quarter revenues, but anticipate that revenues will return to 2017 levels during the fourth quarter and that improvement will continue into 2019.

Following up on the status of the sale of the Old Bridge, New Jersey property. The company filed an 8-K on August 6, 2018, disclosing that we have entered into a contract to sale and lease back the property from a new owner. The documents filed with the 8-K speak for themselves. If the sale of the property closes in early November, as we anticipate that it will, our company will be debt-free with significant cash reserves and positioned to invest more aggressively in the development and promotion of new products.

Now I'd like to turn the call over to Eric Skolnik. Eric?

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Eric S. Skolnik, Blonder Tongue Laboratories, Inc. - Senior VP, CFO, Treasurer & Assistant Secretary [3]

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Thank you, Bob. Net sales decreased $887,000 or 14.4% to $5,277,000 for the second quarter of 2018 from $6,164,000 for the comparable period in 2017.

Net loss for the 3 months ended June 30, 2018, was a loss of $335,000 or a loss of $0.04 per share compared to a loss of $231,000 or a loss of $0.03 per share for the comparable period in 2017.

The decrease in sales is primarily attributed to a decrease in sales of data products, HFC distribution products and contract-manufactured products, offset in part by an increase in digital video headend products. Net sales of data products were $1,055,000 and $2,256,000; HFC distribution products were $761,000 and $905,000; contract-manufactured products were $155,000 and $267,000; and digital video headend products were $2,542,000 and $2,059,000 in the second 3 months of 2018 and 2017, respectively.

Net sales decreased $1,497,000 or 12.3% to $10,640,000 for the 6-month period ended June 30, 2018, from $12,137,000 for the comparable period in 2017.

Net loss for the 6 months ended June 30, 2018, was a loss of $398,000 or a loss of $0.05 per share compared to a loss of $487,000 or a loss of $0.06 per share for the comparable period in 2017.

The decrease in sales is primarily attributed to a decrease in sales of data products, analog video headend products, HFC distribution products and digital video products -- video headend products. Net sales of data products were $2,454,000 and $3,386,000; analog video headend products were $823,000 and $1,036,000; HFC distribution products were $1,502,000 and $1,707,000; and digital video headend products were $5,085,000 and $5,230,000 in the first 6 months of 2018 and 2017, respectively.

Now I'd like to turn the call over to our Q&A session.

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Questions and Answers

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Operator [1]

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(Operator Instructions) Our first question today is coming from [Dale Norton], a private investor.

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Unidentified Participant, [2]

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May I ask you -- obviously, gross margin is better than it had been in the past. Would you be anticipating that the future outlook for gross margin or the percentage margin would be more akin to what we've seen this quarter than it might have been over the last year or couple?

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Robert J. Pallé, Blonder Tongue Laboratories, Inc. - CEO, President & Director [3]

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I actually thought the gross margin was hanging in just above 40%, although it may reflect it was better than this time last year. I think that we -- in fact, in the last call, we talked about an improvement in gross margin and how we were able to mitigate the loss in revenue by better gross margins and tighter expense controls. That's still true. But to say that it's going to hang at 41.5%, which I think it was this quarter, that would be hard to predict because the product mix swaps around from one product to the other.

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Unidentified Participant, [4]

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I understand that. Yes, I understand that. But that having been said, given that you're doing well in newer product areas, I would look forward to be closer to 40% than it would 30%, okay, if I can be overly demonstrative in that.

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Robert J. Pallé, Blonder Tongue Laboratories, Inc. - CEO, President & Director [5]

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Yes. I understand your point, and I would rise in support of your point if I was confident that the product mix wasn't going to bite us and we could be having the same little chat next quarter so...

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Unidentified Participant, [6]

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No, I understand that. Second quick question here. G&A was up considerably. I think I've got an understanding of it, but I would appreciate a discussion as to why that's higher and what we might look for going forward.

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Eric S. Skolnik, Blonder Tongue Laboratories, Inc. - Senior VP, CFO, Treasurer & Assistant Secretary [7]

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I think it would be probably at the same current run rate that it is now. We had some increases in headcount. It was part of the reason why we have the increase in the G&A.

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Unidentified Participant, [8]

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Okay, one final question. You referred to bookings to the extent that bookings do tend to reflect ultimately in sales, which, of course, we know they do. I've never seen anything discussing bookings in the Q or the K. And I'm curious if you would at least go down to what extent are bookings shipped within the next quarter. How far out does it give you some sense of where things are going?

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Robert J. Pallé, Blonder Tongue Laboratories, Inc. - CEO, President & Director [9]

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Okay. The -- that's a good question. We have several long lead time items that we enjoy decent order input for future periods, but not much beyond 6 or 9 months. So the -- depending on the timing of when those waves of those orders are received, then you can catch a quarter that looks down. But really, we received 3 quarters' worth of orders for a large commitment just the quarter before. So there are some timing issues, but the point is that last year, we had a very large uplift in order input for deployments in the hospitality area, and that has turned out to be the main customer bought a little bit too much and now has to work off that inventory that we sold them. So I guess, maybe that -- if that wasn't clear from what I've said in my prepared remarks and in the quote in the press release, is it pretty clear now?

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Unidentified Participant, [10]

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Yes, no, and you had indicated earlier. You did not identify a customer really in the segment, now I don't know that that's particularly relevant, last year that there were some sales that you might find that would not be repeated this year. And I certainly built that into what I look at. But I would wonder, would it be worthwhile in addressing the bookings issue within your Qs and Ks going forward?

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Robert J. Pallé, Blonder Tongue Laboratories, Inc. - CEO, President & Director [11]

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I guess because almost everything that we have been getting orders for is immediately shippable or nearly so within the next quarter or 2 or 3, that I would like to stay away from that and actually, regret mentioning bookings were softer in the first quarter than we had expected them to be and opening that topic up because it's -- unless things change. Like, if we get a 3-year commitment and -- for something or a 5-year commitment, a major rollout, then we would definitely put the details of that type of a deal in our public disclosures. But we -- yes, I guess, we've discussed this topic in the past and things that we are getting a little bit -- our order input is getting, where it's booked out, where it's 3 months, 6 months, 9 months. And in the past maybe 5 years ago, it was always almost all immediately shippable. We really couldn't predicate much, but I think the -- apart from the fact that some of the stuff is coming in from offshore, other than that, lead time -- manufacturing lead time from offshore and transit time, it's still the same idea. We have -- we get orders from customers we know that they are real and that they can ship in the time frame and the delivery dates they've given us, and it's not much beyond 3 -- the most distant ones are 3 months -- delivery dates are 3 months or 6 months or out.

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Unidentified Participant, [12]

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Okay, one final question here. Have the announced tariffs had any impact on you? And do you expect that they will have any impact on you?

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Robert J. Pallé, Blonder Tongue Laboratories, Inc. - CEO, President & Director [13]

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They could have -- if they're -- as we understand them, if they're implemented as we understand them, they could have a dramatic effect on us. I don't know whether that means a dramatic effect on us relative to our competition or whether we'd be kind of on equal footing there. But we will have some plans to mitigate the impact of those and will be actively working that, and we're actively working it now. But my -- our understanding is there's 25% on everything coming from China. We don't know whether that's going to hold in the final analysis or the final implementation. But if it does, it would be important.

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Operator [14]

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(Operator Instructions) We have reached the end of our question-and-answer session. I'd like to turn the floor back over to management for any further or closing comments.

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Robert J. Pallé, Blonder Tongue Laboratories, Inc. - CEO, President & Director [15]

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Thank you very much for your participation, and have a great day and a great next 3 months, and we'll talk to you at the next call.

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Operator [16]

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Thank you. That does conclude today's teleconference. You may disconnect your line at this time, and have a wonderful day. We thank you for your participation today.