Robert Palle - CEO Eric Skolnik - CFO Steven Shea - Chairman of the Board

Richard Greulich - Regional Capital Advisors

Good day, ladies and gentlemen. And welcome to Blonder Tongue Laboratories’ 2017 First Quarter Earnings Results Conference Call. All lines have been placed on listen-only mode and the floor will be open for questions following the presentation [Operator Instructions]. At this time, it is my pleasure to turn the floor over to Bob Palle. Sir, the floor is yours.

Thank you. Welcome to Blonder Tongue's first quarter 2017 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, so I caution you that actual results may differ from those that maybe projected in our comments this morning. I would ask you that you refer to our prior SEC filings, our Form 10-Q for the first quarter 2017, 10-Ks for years 2015 and '16, and our Form 10-Qs from prior quarters for additional information concerning factors that could cause actual results to differ from the information discussed this morning. With me today are Eric Skolnik, Blonder Tongue's Chief Financial Officer; and Steve Shea, Chairman of the Board. All of us will be available to answer any questions you may have following our presentations. First, the essence of the press release comments, bear repeating. Although, the first quarter 2017 financial results show modest bottom line improvement compared to first quarter 2016, we are disappointed that we are again reporting a loss for the first quarter 2017. We are, however, encouraged by the positive swing in our operating income, which was in the black for the first time since the second quarter of 2016. There are other bright spots as well. Sales of recently introduced headend and data delivery products are increasing due to the approval and adoption of these products by certain large CATV, telecommunications, and satellite based operators. We remain cautious with regard to the market outlook and therefore continue to anticipate that sales are likely to remain flat for the remainder of 2017. To add a little color to the foregoing, the total order input in January and February exceeded expectations. Orders for immediate delivery exceeded expectations, and in addition, we received several blanket orders with future delivery dates throughout 2017. However, order input for the second half of March and all of April has been less than expected. We are sensing a higher level of market uncertainty from our customers, especially our premier distributors. These counter balancing data points are what is driving us to forecast flat sales for the remainder of 2017. On the positive side, a major telecommunications operator committed to using our PET encoder solution throughout their systems, and the initial orders from and shipments to that operator contributed to our better than expected order input in January and February. We also believe that certain new products currently in development by our research and development teams will be the right products at the right time to restore the Company to more meaningful sales growth and profitability, beginning in late 2017 and carrying into 2018. Finally, as more fully described in note six to the financial statements included in our first quarter 10-Q, the amendment to our senior subordinated convertible debt agreement by which we eliminated the price protection provision contained therein adversely affected our net income by $319,000, all of which was a non-cash item. Now, I would like to turn the call over to Eric Skolnik, the Company's Chief Financial Officer. And following Eric, we’ll have an open question and answer session. Eric?

Thank you, Bob. Net sales increased $30,000 or 0.5% to $5,973,000 for the first quarter of 2017 from $5,943,000 for the comparable period in 2016. The net loss for the three months ended March 31, 2017 was a loss of $256,000 or $0.03 loss per share in 2017 compared to a loss of $288,000 or a loss of $0.04 per share for the comparable period in 2016. The increase in sales is primarily attributed to an increase in sales of data products offset by a decrease in contract manufacturing products and digital video headend products. Sales of data products were $1,130,000 and $759,000, contract manufacturing products were $88,000 and $236,000 and digital video headend products were $3,171,000 and $3,291,000 in the first three months of 2017 and 2016 respectively. Now, I would like to turn the call over to our question-and-answer session.

Thank you. The floor is now open for questions [Operator Instruction]. And our first question comes from Richard Greulich from Regional Capital Advisors. Please state your question.

Bob, when you mentioned the first quarter was adversely affected by about $300,000. So I see where 140,000 of that were in the change in derivative liability, and so was the remaining 160,000 or so, as part of other expense net?

Correct.

So on a normalized basis, the interest expense should have been running around 130,000 or so for the quarter?

That is correct.

Okay, thank you.

Thank you [Operator Instructions]. We have our next question from George Gaspar, Private Investor. Please state your question.

Can you give us a little more overview on how you’re seeing the market, and your product areas of activity and where do you think you can innovate to broaden your market and how long might that take?

So I think we’re pretty complete with our description of which product areas are doing what by exactly how much, and the research and development efforts in the new products that we’re working on will be in the same genre, same area of concentration where we've been known for many-many years. And we're just going to do a next generation, if you will, of those products and expand our market penetration by doing so. So we're probably as always we said it will take us until the fourth quarter to complete those and introduce them and start shipping them, get orders and start shipping them, so.

Okay, all right.

Okay, was that not very clear from what my prepared remarks?

No, I apologize. I jumped on the call here just at the end of your formal comments, so I apologize [multiple speakers]. Just a particularized what's going on in the cable side of the market, and it seems like there is more reduction in the cable area. And the cable providers seem to be slowing down their innovations on the cable side of the market. But as we get into the Wi-Fi wireless area, do you see real opportunities? I would think that the business herein might really open up some new doors for you?

Well, I think we've had the same discussion if not with you with others in previous calls. We think that there is a lot of business in the Blue Chip, CATV, and telecommunications, satellite based operators. And we just need to continue our innovation there and complete our projects and take a greater market share. So that's what our plans are and we don’t have, we have some expectation in the wireless area; but I don’t think it's the areas that we discussed in prior class was like; okay, so let's do a wireless coverage of an entire metropolitan area similar to the way the telecommunications operators or satellite operators and the CATV cover those metro areas today instead reach the last mile via wireless. And those are -- that may evolve as something that's very positive, but that's not the product areas where we have expertise or enough resources to attempt to, in other words compete with, what are right now our key customers and engagements that we have now.

And then lastly you got your Annual Meeting coming up a month here, the May month. For any particular reason if there's any commentary that comes out of that, that would be different than this call. Would you be releasing an update to shareholders?

Well, we've never released the meeting minutes or notes or just the results of board, and stuff like that. And we've fielded in the Q&A session questions from shareholders directly, but it's similar to this kind of a Q&A session. And so, we haven’t really published the results of those; but they've been from the sublime to the ridiculous; and it goes to the whole gamut of the people show up that; if some of them bewilder me and those are the most remarkable and the ones that I can remember; but we're going to stay the course; we've got a plan, we're not going to change our plan; and we don't foresee changing our plan dramatically from. But I think if we made any dramatic changes in direction, we might consider releasing it, but I don't think they'll come up at the Shareholders Meeting; pretty mundane stuff.

Thank you. And we have our next question from Craig [Boots], Private Investor. Please state your question Craig.

I guess what I was really wondering, I know you had said you were kind of disappointed in something here in regards to the first quarter that more or less contributed to our $0.03 loss that we had. And I'm just wondering what you might have in mind for the upcoming two quarters before things ramp up in fourth quarter in regards to cutting back on our loss that we may otherwise have the next two quarters, if there's anything in cost cutting measures that I guess is what I'm trying to say that would sort of cut back on what loss we might have the next two quarters before things ramp up in fourth quarter?

Well, the important thing about not having a loss is to continue sales at a similar level, but then not have the derivative based calculations that this quarter's results suffered from. And so the price protection provision that was in the subordinated debt and then subordinated loan agreement has been removed. So this calculated to about $319,000 in negative way to the net earnings results for this quarter. And those types of -- those calculations will not be going forward because the price protection provision has been removed from a loan agreement.

So, then in light of what you just said, would that be accurate then to maybe think that the next two quarters might be pretty close to breakeven before we do start ramping up in fourth quarter?

Well, if sales hold up, sure. We did talk about the degree of uncertainty of sales, right. So if sales hold up then I think you’re correct, in fact you'll be correct.

No, that would be great; that's good to hear that at least if we could breakeven for two quarters before we ramp up, that's definitely positive in my mind.

Yes.

Thank you [Operator Instructions]. And there appears to be no other questions, at this time.

Thank you very much for your participation. And look forward to speaking with you next quarter.

Great, thank you. This does conclude today’s teleconference. We thank you for your participation. You may disconnect your lines at this time and have a great day.