Greetings. Welcome to the Blonder Tongue First Quarter 2020 Earnings Call. [Operator Instructions] I will now turn the conference over to your host, Edward Grauch. You may begin.

Great. Thank you. Good morning, everybody. Welcome to Blonder Tongue's First Quarter 2020 Financial Reporting Conference Call, and thank you, again, for joining us this morning. Before we begin our presentation, I'd like to remind all callers that my statements and those made by other Blonder Tongue representatives speaking today will contain forward-looking statements regarding future events, including the management's view of our prospects, financial performance, technology development 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. For additional information concerning factors that could cause actual results to differ from the information that we will be discussing this morning, I would ask you to refer to our prior SEC filings, including our current 10-Q, our 10-Q filings for all the quarters of 2019 as well as prior years and our recent 10-K for 2019 as well as past years 2018, 2017 and our 8-Ks. With me today are Steve Shea, the Chairman of our Board of Directors, of Blonder Tongue Laboratories; and Eric Skolnik, our Chief Financial Officer and Senior Vice President. Eric's remarks will follow mine and dig a bit deeper into some of the numbers. Following our presentations, all of us will be available to answer questions you may have during the Q&A session. Our net sales for the first quarter of 2020 of $4.05 million were slightly lower than our net sales of the comparable quarter in 2019, and our reported net loss in the first quarter of $2.08 million was substantially lower than the net income of $5.325 million that we reported in Q1 of 2019. It should be noted, however, that the decrease in net earnings for the first quarter of 2020 relative to the first quarter of 2019 is primarily driven by the onetime gain recognized from the sale and leaseback transaction of our headquarters facility in Old Bridge, New Jersey, during the first quarter of 2019. If we subtract out that gain, the decrease in net earnings quarter-to-quarter is closer to $230,000, providing a much clearer comparison. Our sales of digital video headend products and analog video headend products were lower compared to the same period last year. This was offset by relatively higher sales of DOCSIS, data products, CPE products and our NeXgen, NXG video signal processing products. As discussed in our 2019 year-end financial reporting call only a few weeks ago, we are committed to and have already begun implementing a number of significant changes to the company's operational expenses and organizational structure with the goal of significantly improving our future performance. I will touch on the progress of these initiatives during the call. Before getting into more specifics of our quarterly performance and progress, I would like to remind those attendees who may not regularly follow Blonder Tongue Laboratories that as a U.S.-based manufacturer of telecommunications equipment to a large number of key service providers around the country, we are categorized as an essential business and have been able to continue operations throughout all phases of the current COVID-19 crisis although, not without some schedule adjustments and adapting to a new normal. We have been fortunate in having an operations team that proactively began enhanced cleaning and disinfecting practices in our facilities as well as initiating changes in our work location spacing, personal distancing and availability of hand-cleaning stations within our factory and headquarters weeks ahead of formal government and CDC recommendations being released. We are also -- we also were able to make available gloves and nonmedical-grade masks to both staff and guests immediately after authorities issued updated workplace guidelines related to Personal Protective Equipment. We are happy to report, very happy to report that at least so far, we have not had a single COVID-19 case confirmed by any of our staff. As mentioned in our last call, we also transitioned all roles capable of being performed as work-from-home to be done from home company wide, in early March. And we have adapted our operational processes to accommodate those changes similar to many other companies around the country. The COVID-related impact from the markets we serve began to adversely affect our sales efforts beginning in the last week of February and increasing through March and April, and they continued into the current month. It has only been in the last week that we've started to see some of our most impacted customers beginning to show signs of returning some staff to work and reengaging with us at increased levels. Although, we cannot forecast any time frames for a return to normal, we are, this week, having specific customers schedule meetings with us for the end of May and early part of June on programs that they had put on hold at the beginning of the crisis in early March. Although, these anecdotes indicate some initial signs of increased business activity, we expect the recovery process to be protracted, and we are planning accordingly. As previously reported, the company worked diligently at the beginning of the crisis to improve our liquidity. As a result of these efforts, in April, we obtained a subordinated debt facility from both internal and external sources, yielding aggregate commitments of $1 million thus far. And our application to the Federal Care Act Paycheck Protection Program, or PPP, was recently approved, yielding an additional $1.76 million in low interest debt, a portion of which is anticipated to be forgiven. As mentioned during our last earnings call, despite these funds now being made available, we are operating the business in the most fiscally conservative way possible, recognizing that we are in a period of great economic uncertainty for our country and for our industry. Our CFO, Eric Skolnik, will cover additional details of the fundraises and our PPP program debt following my remarks. To close on few additional status points. During the early part of Q1, the company began a program aimed at streamlining and improving our working relationships with our major distribution and integration company customers as well as further expanding our sales initiatives with major telecommunications companies. Our distribution partners have, in some cases, multiple-decade relationships with us, and they will remain key partners for us in our potential growth in 2020 and 2021. To this end, over the past year, we have built stronger relationships with these customers to better align our product offerings with their respective distribution channels, and as a result of which, we anticipate increased opportunities as our recovery process begins in the markets we serve. We have also made adjustments to our production and procurement processes that began in the second quarter of 2019 with the specific goals of enhancing our liquidity and increase our average inventory turns per year for all our products. These efforts will be ongoing, but should produce tangible improvements in our working capital during 2020. Further on this point, we mentioned in our recent 2019 investor call that we had achieved monthly cash savings of approximately $200,000 on an annualized basis. Let me say that again, monthly cash savings of approximately $200,000 on annualized basis during the second half of 2019 and early first quarter 2020. Our efforts along these lines to increase our overall operational efficiency are continuing and will help us achieve improvements in our bottom line performance during this year. Now I would like to turn over the call to our Chief Financial Officer, Eric Skolnik. Eric?

Thank you, Ted. Net sales decreased $32,000 or 0.8% to $4.05 million for the first quarter of 2020 from $4.082 million for the comparable period in 2019. Net loss for the 3 months ended March 31, 2020, was a loss of $2.080 million or $0.21 loss per diluted share compared to net earnings of $5.325 million or $0.53 per diluted share for the comparable period in 2019. The decrease in sales is primarily attributable to a decrease in sales of digital video headend products and analog video headend products, offset by an increase in sales of DOCSIS data products, CPE products and NeXgen products. Sales of digital video headend products were $1.057 million and $1.946 million. Analog video headend products were $339,000 and $474,000. DOCSIS data products were $871,000 and $540,000. CPE products were $646,000 and $191,000. And NXG products were $196,000 and $82,000 in the first 3 months of 2020 and 2019, respectively. A decrease in net earnings for the first quarter of 2020 relative to the first quarter of 2019 is primarily driven by the $7.175 million gain recognized in the first quarter of 2019 upon the consummation of the sale and leaseback transaction of our headquarters facility in Old Bridge, New Jersey. As disclosed in the company's 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 raised substantial doubt about the company's ability to continue as a going concern. As of March 31, 2020, 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 recovered assets or the classification of the liabilities that might be necessary should the company be unable to continue as a going concern. In an offer to mitigate the company's liquidity constraints, as mentioned on the previous conference call, we'd entered into a senior subordinated convertible loan and security agreement, which provides up to $1.5 million upon mutual agreement of the lending parties. As of today, we are pleased to report $900,000 has been funded. Finally, and as Ted mentioned in his remarks, we received approximately $1 million -- $1.76 million, excuse me, of funds under the Paycheck Protection Program, PPP. As you might be aware, there's been a lot of negative publicity concerning publicly traded companies receiving such funds. On May 13, 2020, the SBA released an update to its frequently asked questions, addressing borrowers required good faith certification concerning the necessity of their PPP loan request. The SBA issued a safe harbor, which states that any borrower that together with its affiliates received PPP loans with an original principal amount of less than $2 million will be deemed to have made the required certification, concerning the necessity of the loan request, in good faith. The SBA determined that this safe harbor is appropriate because borrowers with loans below the threshold are generally less likely to have access to adequate sources of liquidity in the current economic environment that -- than borrowers that obtain larger loans. As our loan is less than $2 million, we are covered by the safe harbor. Now I'd like to open up the call to the question-and-answer session.

[Operator Instructions] Our first question is from [ Gregory Irvin ], who is a private investor.

First, regarding the financing, Eric, you said that $900,000 of the $1 million and the $1.5 million has been drawn on?

That is correct. We've received the funds, yes.

So there is -- $100,000 on tranche be still available?

It's part of our tranche A, and it's committed, and it hasn't been drawn yet.

All right. Any movement toward using the tranche C, D, remaining $500,000?

Not at this time, no.

All right. Regarding the PPE loan, can -- any idea how much of it percentage-wise might be forgivable?

At this point, it would be a little premature to try to quantify that. We'll have a better number at -- in Q2.

I ask that because knowing that there have been furlough, I'm not sure -- and I assume, you probably know. How those would be regarded, the folks that have been furloughed?

Well, we've taken steps to, as Ted mentioned, to bring -- we have brought some people back that we felt were appropriate, and we are wisely utilizing our headcount appropriately during this period.

All right. Has there been a permanent reduction in headcount?

I think -- I can touch on that, Eric. So as we touched on the last call, we've done a combination of permanent reductions that were already in process due to our overall work that we started last year on reducing operational costs and increasing operational efficiencies. So those permanent steps were already in the process, were already in sort of independent decisions, regardless of the current COVID situation. Within the COVID situation itself, in response to that particular crisis, we have not made any permanent headcount reductions related to the crisis situation, right? So we've got a combination of permanent decisions we made that were not related to the crisis and short-term decisions we made that were related to the crisis.

Do you have a number -- the total headcount now? I didn't see it. I maybe overlooked it in the Q or maybe it wasn't there?

We don't generally report headcount.

Okay. I thought it generally was reported in the 10-K, but...

Only -- correct. You're right, only on an annualized basis. On annual basis, we do. So not in the Qs.

All right. Now turning to income. You say, in the last week or so, you've seen, maybe hints, that the interest is starting to come back from what you've witnessed over the prior 6 weeks to 2 months?

Yes. I could speak anecdotally on a couple of points, but I do want to make sure I emphasize the point that I mentioned in my prepared remarks, which is that the sort of initial anecdotal indications we have of a potential increase in activity, it's very early and very premature to make any kind of predictions on this. But that said, what we have seen is, overall, about 85% or 90% roughly of the customers we normally deal with on a day-to-day, week-to-week basis, 85%, 90% of those customers remained open and had some level and have continuing to have some level of activity in their businesses, which are then reflected into the sales in our business. What we have seen are 2 things just in the last week, 1 week, 1.5 weeks at the most, number one, a few of the businesses that were completely closed have started to either reopen or indicate to us that they will be coming back to work at the end of May or the early -- first half of June, right? So we're actually getting schedules for meetings with companies that have been closed since some part of March. So that's very encouraging, although early. And then the other thing is the companies that were open through the crisis, we're starting to see them bring back some of the people that they had taken temporary actions on because of the crisis. Not in a big way, but in a small way. So again, it's encouraging. It's great. We've been looking for these kinds of signs on a daily basis because as you can imagine, the current situation for everyone is very fluid. So we're encouraged, and it's good anecdotal information, but we can't lead from this level of information into anything concrete related to timing or any kind of a slope on a recovery, but it is encouraging.

All right. Looking at one of the last paragraphs in the Q today, the -- what you've seen the fall-off in -- of 45% to 50-plus percent, that's got to be scary.

I wouldn't use the word scary. I would use the word...

Concerned?

Of course, any business that has a fall-off of that level is absolutely concerning. The thing that we have to our advantage is, we prepared last year for having a lot more flexibility in the way we can move temporary and long-term actions on our staff and our offices. And some of our -- a big chunk of our operating costs and adjust them up or down based on what the economic conditions are. So I feel very comfortable that we have the levers in place to move our operating costs up or down on a monthly basis. Those are not infinite, of course. No business has them. But to look a little bit on the positive side, we're in a business that is an essential service, telecommunication services across the United States are an essential service. A lot of the service operators that are either our direct customers or our end customers through distribution channels are holding up very well. So relative to some other areas of business out there that have been really hammered horribly and don't have a lot of good prospects for any kind of foreseeable future. We see the downsides currently as -- at least, from what we can tell currently from our customers and from their reactions and the way they're acting and the way that they're speaking with us, we believe these are temporary, and we're planning accordingly. And -- but we are managing our operating costs associated with our revenue levels. And that goes beyond just running a factory, it extends into sale staff, management staff, operational staff, et cetera.

Right. And looking at the decrease in sales, is it more delays rather than cancellations?

It's a combination, and I'm glad you asked that question because that is a good point. I don't want to characterize on percentage basis, but absolutely, we've had very specific orders that were on the books that were planned to be deployed. By deployed, I mean, shift out of our facilities and deployed into customers' homes, in the April time frame and in the May time frame, even in the June time frame, and there is absolutely a percentage of those POs that have been put on hold and asked to be shipped in later months. Some have actually already been scheduled for later months such as July and August, but for the most part, when the customer has put things on hold in the current crisis situation, they have not indicated a precise shipping date.

And given that I assume that anyone and everyone in this business has taken a hit, have you got any sense into lost market share to competition?

Another great question. We're seeing -- I don't want to say the opposite because I don't have enough data to really predict how much market share we gained or lost. But the sense I have from our customers, in fact, and the activity and the kinds of questions that they're asking us is that our competition is suffering the same or possibly much worse than us, frankly. I have no indication we've lost any market share and, quite frankly, the opposite. We're seeing a lot of customers that we've never with – pick up a phone and call us and inquire about availability and different topics.

Any sense or suspicion that the going concern issue is weighing on sales relationships with any...

No, no, we haven't had it come up with any customer that I'm aware of. No. I mean we see that statement is an assessment buyer. It's a proper assessment by our accounting organization. We believe we've been taking the steps to right that situation with liquidity points that we raised, both the internal and external raise we've done, the additional availability in the tranche C, that you've already mentioned. And we've been very fortunate and happy that the government was able to extend this Cares program, specifically for the reasons that we've used that we've applied for and received acceptance for and have used the funds was to keep a substantial number of people off of the unemployment rolls and allowing us to keep operating in a diminished revenue situation. So we believe that we are sort of the kind of target audience, we believe, that the government intended for that program to benefit, and we're taking advantage of that. And we're using the funds as wisely and as an investment -- and we're viewing the funds as an investment into both product completion, accelerating product completions and accelerating our ability to produce some products that will be prepared for shipping to customers when the economic recovery turns around. So we've sort of been using that money in a way that it can be held as additional value inside the company and redeployed when the recovery starts to happen.

And finally, regarding income. I was somewhat surprised, comparing Q1 across various segments to Q4 of '19 to see that the NeXgen and the CPE, both -- there were declined there in a quarter-to-quarter -- why I'm saying I'm surprised is because those are the newer introductions. And it seems that the legacy, sales of the legacy that's the digital and audio headend and the HFC and whatnot didn't -- there was actually, in some cases, an increase in sales quarter-to-quarter, but with the NeXgen and the CPE, both of those are off about 50% from the prior quarter.

I think you may have read them backwards from year-to-year. Eric, do you want to comment on that? I think he got it backwards.

No, he's referring to Q4, Ted, not Q1.

Okay. I thought he was referring to the information we shared today.

No. For my purposes, looking back not a whole year, I'm just looking back quarter-by-quarter.

Oh, for that, I can touch on that very easily. So some of the products we ship, such as the NeXgen, are targeted towards some of the larger customers. And those larger customers tend to budget on a yearly basis. And the kind of activity we end up seeing from a Q4 to Q1 is, we have this -- and you probably -- I know your voice, and I've heard you, you've been on our earnings calls on a consistent basis over the last year. So I know you follow the company very, very closely. We have this tendency in our markets and with our customers that there is a little bit of a boost in the end of the year, every year. And some of that has to do with the fact that with these larger customers, they want to use up their budgets before the end of the year. So we do see in some product categories, especially the ones targeted to the bigger service operators. They want to use up budget in Q4, and then they're holding that in their inventory. It's not used up very quickly, and we start to see the recovery of the more consistent sales to those guys starting more in Q2. And then again, another bump in Q4. So I would put the NeXgen and CPE-related decreases, I'd put them in that category.

Okay. And finally, turning to marketing. Has -- how much of a change has that been given what restrictions COVID has placed on, particularly face-to-face? Are you still able to do most of that by the web or by phone? Has that impacted the ability to sale and market?

Well, it's clearly affected our ability to market. I don't necessarily see that as by itself having a huge impact on our business because if we did have the ability to market, the reality of the situation is, everybody is out there mostly inwardly focused for the most part. Nobody is out -- our customers are not out casually looking for information on new products and new technologies. They're all very focused on very short-term operational and keeping the lights on kind of activities. So most of the sales that we're getting are for sort of bread and butter products, things that are -- should be shipped out to replace or fix a network problem or to implement a network expansion that an operator might have in a certain geography or whatnot. We're not seeing the kinds of things you pick up from a trade show, for example, where someone is coming by a booth of Blonder Tongue to find out what the latest technology is in coding technology, transcoding technology or whatnot. People are not in that mode of exploring what could be done. They're in the mode of running their businesses as efficiently and as cost effectively as possible in getting through operational issues. So from that perspective, I don't think we're losing a lot in prospective sales of new technology by having the marketing activities not be there in the form of trade shows and things. What we have done on marketing, though, is we have flipped over to start to greatly expand, in fact, free webinars, educational services. We're running one every couple of weeks now. The latest one actually just happened yesterday and previous one. And we're getting fantastic turnout for those like we've never seen before. So for example, webinar we did on -- just basic operational educational event drew like 200, 205 attendees. We've never had attendance like that on any of our webinars in the past before. So we're using every single one of our service people that are capable of doing that kind of stuff as the "talent" for going out there and try and get people to reinforce the brand, reinforce what we're good at, what we're known for and just keep the brand alive and people's names. I'll finish up quickly now. On the sales side of that, though, it has not hindered us in reaching out to customers, and in fact, it's been a curious kind of new normal. I know it's an overused term at this point, but I think it's effective in this context. We're getting people -- we're getting customers and potential customers a lot more on the phone than we had been previous to the COVID situation. People who were very busy with their normal pre-COVID situation activities or finding that they've got additional time on their schedules for taking calls with us, for dealing with potential projects or for talking about what-if scenarios and things like that. So in fact, we're actually pretty encouraged by the overall dialogue and activity and discussions that we're having with customers. That has not decreased, it's actually increased. Although, actual sales on a month-to-month and a week-to-week basis have been in the levels that we've reported and discussed in all the filings and press releases.

That level of participation is good to hear.

It is.

And I assume you're going to be participating virtually with InfoComm or any of the other upcoming trade shows? Did you hear me?

Yes. I'm sorry, I was speaking on mute. For every virtual version of a trade show that was missed because of the current situation, we've had a dialogue with those trade show coordinators and made an independent decision whether we felt like it was worth the time and effort. And I shouldn't say time and effort, it's worth the time and effort. It was worth the money to attend, the actual expenditure. I do not believe -- yes, I'm pretty sure we did not have anything significant that we involved ourselves in for the NAB virtual show because we felt like that was put together relatively quickly and wasn't going to have enough time. For the InfoComm one, I believe, we are putting in a lot more effort, and we'll be much more involved. So we're kind of taking a case-by-case scenario. I know, right now, for example, we're also looking to see if we should be attending some of the few trade shows that were actually rescheduled for the fall. We're a little bit concerned that even if things are recovered, the customers are likely to still be very focused on their operational activities and may not be spending the money to attend. So the cost versus benefit for each one of those expenses is very important. We don't want to go to an empty trade show where all we're doing is just seeing all of our friends and our competitors in partner booths. We want to go to some place where there's customers, right? So that's the assessment we're doing on a case-by-case basis.

And there might be some reluctance to jump on the airplane.

Great reluctance. Exactly, exactly.

Thanks for your time. And I'm glad to hear that no one has been affected with COVID, and hopefully, that will stay the case.

Thanks for pointing that out. That -- we feel exactly the same way. We feel very blessed or lucky that for whatever combination of both, our own activities and the efforts of our employees and partners. That's the case, yes.

[Operator Instructions] And there are no more further questions. Therefore, I will now return the call back to management for any closing remarks.

Great. Thank you. So thank you, everybody, for -- I want to thank everybody for attending our call and for the questions. And if there is any other follow-up or calls, you have the contacts of Eric and myself in our press releases and our filings. So if there is no other questions, then we can wrap it up for today. Thank you.

This concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation.