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BT

BLONDER TONGUE LABORATORIES INC (BDRL)·Q3 2022 Earnings Summary

Executive Summary

  • Q3 revenue rose 26.1% year over year to $5.262M, but the company posted a net loss of $(0.703)M (−$0.05 EPS); operating loss improved sequentially vs Q2 as supply chain conditions stabilized and pricing actions flowed through .
  • Management highlighted strong demand and bookings for higher-margin NXG, ClearView and Drake lines (NXG +52% YoY for 9M’22; ClearView/Drake +9% YoY) and a sales backlog of ~$7.167M at 9/30, constrained by fixed monthly semiconductor allocations rather than demand .
  • Liquidity remains tight: $4.318M outstanding under the MidCap facility with $0.520M additional availability; going-concern uncertainty persists despite a 14th amendment extending the facility to June 30, 2023 and over-advance availability up to $1.5M .
  • No formal guidance was issued; management cited improving chip allocations into Q4 and early 2023 as the main near-term catalyst to convert backlog and rebuild margins; Street estimates via S&P Global were unavailable, likely due to limited coverage .

What Went Well and What Went Wrong

  • What Went Well

    • Demand strength in advanced products; NXG +52% YoY for 9M’22; ClearView/Drake +9% YoY; bookings healthy and backlog supports H2/Q1 conversion. “Our NXG product revenues have grown over 52% year on year and our Clearview and Drake product line revenues have grown over 9% year on year” .
    • Product wins: Drake PEG PLUS standardized by a Tier 1 North American cable operator; continued operator certifications and approvals. “Our Drake PEG PLUS product was standardized by a major Tier 1 cable operator” .
    • Sequential operating improvement vs Q2 as supply chain disruptions stabilized; cash burn improved. “Loss from operations… an improvement from the $962,000 loss… in Q2 2022” and “net cash used in operating activities was $220,000 in Q3 vs $1,450,000 in Q2” .

  • What Went Wrong

    • Profitability still negative; gross profit declined YoY despite higher sales due to elevated broker-market chip costs and allocations. Net loss $(703)k and gross profit $1.408M vs $1.499M prior-year on $5.262M sales .
    • Semiconductor supply constraints a binding cap on shipments; monthly allocations and high spot prices pressured margins and volumes. “Semiconductor supplier fixed monthly allocations and continued raw material cost increases… had the largest negative impact” .
    • Liquidity/going-concern overhang remains; dependence on credit facility and amendments. “Substantial doubt about the Company’s ability to continue as a going concern” .

Financial Results

Quarterly P&L snapshot (oldest → newest)

MetricQ3 2021Q1 2022Q2 2022Q3 2022
Revenue ($M)4.172 3.341 4.234 5.262
Net Income ($M)(0.201) (1.154) (1.154) (0.703)
Diluted EPS ($)(0.02) (0.09) (0.09) (0.05)
Operating Income ($M)(0.703) (1.021) (0.962) (0.475)
Consensus Revenue ($M)N/AN/AN/AN/A
Consensus EPS ($)N/AN/AN/AN/A

Note: S&P Global consensus estimates not available for BDRL for these periods (limited coverage).

Margins (Q3 YoY)

MetricQ3 2021Q3 2022
Gross Profit ($M)1.499 1.408
Gross Margin (%)35.9% (1.499/4.172) 26.8% (1.408/5.262)
Net Margin (%)(4.8%) (−0.201/4.172) (13.4%) (−0.703/5.262)

Segment/Product mix (Q3 2022 vs Q3 2021)

Product CategoryQ3 2021 ($000s)Q3 2022 ($000s)
NXG IP Video Processing420 1,028
DOCSIS Data Products326 951
Coax Distribution311 537
CPE Products113 2

KPIs and Liquidity

KPI/LiquidityQ1 2022Q2 2022Q3 2022
Backlog ($M)10.194 (3/31) 9.783 (6/30) 7.167 (9/30)
Cash Used in Ops ($M)N/A(1.450) (0.220)
MidCap Outstanding ($M)2.180 (3/31) 3.918 (6/30) 4.318 (9/30)
MidCap Availability ($M)0.243 (3/31) 0.389 (6/30) 0.520 (9/30)

Guidance Changes

The company does not provide formal financial guidance; management reiterated no specific 2023 outlook while noting improving semiconductor allocations into late 2022/early 2023.

MetricPeriodPrevious GuidanceCurrent GuidanceChange
RevenueFY 2022/FY 2023NoneNone (no formal guidance provided) Maintained
Gross MarginFY 2022/FY 2023NoneNone; pricing increases implemented; cost stabilization noted Maintained
OpExFY 2022/FY 2023NoneContinued cost control/efficiencies Maintained
LiquidityThrough 6/30/2023N/AMidCap facility extended to 6/30/2023; 2022 over-advance up to $1.5M N/A

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 2022, Q2 2022)Current Period (Q3 2022)Trend
Supply chain/semiconductorSevere disruptions, design respins to alternate parts; broker-market chip inflation; backlog >$10M Stabilization over last 3 months; fixed monthly allocations still a cap; improvements expected late 2022/early 2023 Improving but constrained
Pricing actions/marginsBroad price increases since late 2021; margins pressured by overhead under-absorption Continued targeted price increases; nearing completion of backlog at old pricing; expedited fee amortization rolling off Positive for margins
Demand/backlogStrong demand across NXG/ClearView/Drake and DOCSIS; backlog $10.2M (3/31) and $9.8M (6/30) Persistent demand; bookings through H1’23; backlog ~$7.167M (9/30) Backlog normalizing as supply improves
Hospitality/DOCSISRecovery supporting DOCSIS demand DOCSIS strength persists (hospitality/assisted living) Steady
Financing/liquidityGoing-concern flag and limited availability; delisting to OTCQB to reduce costs MidCap 14th amendment; facility extended; going concern remains Stable access, ongoing risk
Strategic alternativesCompany open to strategic options; discussions ongoing Still engaging in discussions (M&A/strategic investments) Ongoing

Management Commentary

  • “Although we continue to make significant progress in strategic bookings and new customer engagements… it has been semiconductor supplier fixed monthly allocations and continued raw material cost increases in the broker markets that have had the largest negative impact on our third quarter results.”
  • “Our NXG product revenues have grown over 52% year on year and our Clearview and Drake product line revenues have grown over 9% year on year… bookings now run through the first half of 2023.”
  • “We recently announced that our Drake PEG PLUS product was standardized by a major Tier 1 cable operator in North America…”
  • “The company’s loss from operations was a loss of $475,000 in the third quarter of 2022… an improvement from the $962,000 loss… in the second quarter of 2022.”
  • “These factors raise substantial doubt about the company’s ability to continue as a going concern… as of September 30, 2022, the above factors still exist.”

Q&A Highlights

  • Path to profitability and 2023 outlook: Management stressed cost reductions and efficiencies already executed; primary headwind remains chip allocations/costs; no formal 2023 guidance but optimism tied to increasing allocations and robust demand mix .
  • Strategic alternatives: Company remains open; actively talking to multiple parties; would consider mergers/acquisitions or investments that maximize shareholder value .
  • Pricing/margins: Multiple price increases since late 2021; nearing completion of shipments at prior pricing; expedited chip fees rolling off should benefit margins going forward if supply stabilizes .
  • Financing: Limited options due to size/market conditions; MidCap facility extended and over-advance expanded to provide additional near-term liquidity .

Estimates Context

  • Wall Street consensus (S&P Global) for Q3 2022 revenue and EPS was not available for BDRL at the time of analysis (limited/no analyst coverage). The company does not provide formal guidance, making near-term estimate setting dependent on supply-chain conversion of backlog .

Key Takeaways for Investors

  • Backlog conversion is the near-term driver: improving chip allocations into late 2022/early 2023 are the key catalyst to lift shipments and margins as pricing resets flow through .
  • Mix shift to NXG/ClearView/Drake remains favorable for gross margin once supply constraints ease (NXG +52% YoY 9M’22; ClearView/Drake +9% YoY) .
  • Liquidity is tight and going-concern risk persists, but the MidCap amendment extends runway to mid-2023 and increases over-advance capacity, reducing immediate refinancing pressure .
  • No guidance and limited sell-side coverage elevate uncertainty; execution on pricing/margin recovery and backlog burn will shape sentiment in the absence of formal outlooks .
  • Strategic alternatives provide optionality; management is engaged with potential partners/bidders, which could surface value independent of organic turnaround timing .
  • For trading: monitor monthly/quarterly color on allocations and backlog burn, gross margin progression as expedited costs roll off, and any updates to credit facility terms; positive surprises on supply or margin could be significant catalysts .