Blonder Tongue Laboratories Stock

Blonder Tongue Laboratories, Inc. (Blonder Tongue), together with its subsidiary R. L. Drake Holdings, LLC (Drake), operates as a technology research and development (R&D) company that delivers a wide range of products and services to major telecommunications, cable and fiber optic service delivery operators, as well as broadcasters and media production companies. For over 70 years, Blonder Tongue Labs and Drake Digital products have provided the latest technology for telecom company Central Offices (COs), cable operator headends, broadcaster studios (together Telecom), as well as to lodging/hospitality, multi-dwelling units/apartments (MDU) and a range of business to business (B-B) customers at a wide range of locations, including university campuses, healthcare/hospitals, fitness centers, government facilities, military bases, prisons, airports, sports stadiums/arenas, entertainment venues/casinos, retail stores, and other small-medium businesses. These applications are also variously described as small and medium sized businesses in commercial, institutional, or enterprise environments, and will be referred to herein collectively as SMB. The customers the company serves also include business entities distributing and installing private data delivery, broadband and video networks in these environments, including the world's largest cable television operators, telecommunications providers and satellite providers, as well as integrators, architects, engineers of the next generation of Internet Protocol Television (IPTV) streaming video service providers.

The company continues to be focused on the needs of an expanding group of customers, providing high quality, ultra-high reliability technology products to meet their needs and supporting those products following deployment. Blonder Tongue continues to keep abreast of evolving technologies, from analog to digital television, Hybrid-Fiber Coax (HFC) networks with Quadrature Amplitude Modulation (QAM) edge devices, High Definition (HD) and Ultra HD (4K) and (UHD) video encoding and transcoding, IPTV processing and distribution, and most with the introduction of multiscreen Adaptive Bit Rate (ABR) technologies and high-speed data delivery and reception technologies.

The company has expanded its video product line portfolio to address the growth of Internet Protocol (IP) streaming. The company has collaborated with large telecommunications operators and with leading cable television (CATV) Multiple System Operators (MSOs) to produce new cost-effective video encoder and transcoder products for IP support of both traditional broadcast and Public, Education and Government (PEG) video content. The company has also been involved in initiatives for regional content acquisition for backhaul, ingest and redistribution from centralized facilities using modern IP, IPTV and CDN video distribution architectures, these technologies taken together are referred to as Over The Top or OTT. In 2018, the company introduced the NeXgen Gateway (NXG) digital video signal processing platform to specifically address the service provider challenges of migrating from traditional CATV HFC based topologies and technologies to Internet Protocol (IP) and IPTV based topologies and technologies. As the industry has begun to adopt UHD, 4K, and High Efficiency Video Coding (HEVC) encoding, the company has begun to produce products to support these emerging requirements. IPTV growth worldwide is projected to result in 398 million subscribers by 2026.

The company has entered into and/or renewed several agreements through which it has acquired rights to use and incorporate certain proprietary technologies in its digital encoder, transcoder and NXG lines of products, including:

Widevine/Google LLC, DRM License Agreement for content partners and OEMs (Google LLC).

Verimatrix ViewRight IPTV and ViewRight IPTV Professional License to Distribute, License to Integrate and Client Integration Agreement.

Implementation and System License Agreement with Dolby Laboratories Licensing Corporation (Dolby Labs) for Dolby Digital Plus Professional Encoder, 5.1 and 2 channel licensed technology.

License Agreement with LG Electronics as a Pro:Idiom content Protection System Manufacturer.

Ownership from the Motion Picture Experts Group of an MPEG-2 4:2:2 Profile High Level Video Encoder IP core.

The Widevine/Google LLC License Agreement grants the company the right to manufacture, label and sell professional Digital Rights Management (DRM) enabled products that include certain Widevine DRM technologies.

The Verimatrix ViewRight IPTV, ViewRight IPTV Professional License to Distribute, License to Integrate and Client Integration Agreement grants the company the right to integrate the company's products with Verimatrix ViewRight IPTV and ViewRight IPTV Professional DRM technologies and to sell and distribute the resulting integrated products to Service Operator customers that hold Verimatrix licenses to deploy the associated DRM technologies.

The Dolby Labs License Agreement grants the company the right to manufacture, label and sell professional digital encoder products and consumer digital decoder products and to use the Dolby trademarks. This technology has a number of improvements aimed at increasing quality at a given bit rate compared with legacy Dolby Digital (AC-3). Most notably, it offers increased bit rates, support for more audio channels, improved coding techniques to reduce compression artifacts, and backward compatibility with existing AC-3 hardware.

The LG Electronics license agreement provides the company with certain technology necessary for the provision of Pro:Idiom encryption and decryption devices for the hospitality industry. Almost all of the high value content owners require that service providers protect the content by employing this technology. Consequently, content can be transferred through and among these devices only if incorporating this technology.

The Pro:Idiom digital technology platform provides the hospitality market with a robust, secure DRM system, ensuring rapid, broad deployment of HD television (HDTV) and other high-value digital content to licensed users in the lodging industry. Lodging industry leaders, such as World Cinema Inc. have licensed the Pro:Idiom DRM system. A growing number of content providers have demonstrated their acceptance of Pro:Idiom by licensing their HD content for delivery by Pro:Idiom licensees.

The MPEG-2 Encoder IP core has a unique compression engine capable of creating HD MPEG-2 real-time encoding of a single channel of 1080i/720p/480i video. The use of this real-time encoding technique enables the company to provide broadcast MPEG-2 HD and SD encoding. MPEG-2 is widely used as the format of digital television signals that are broadcast by terrestrial (over-the-air), cable, and direct broadcast satellite TV systems.

The H.264/AVC is a video compression standard that enables a compelling solution for growing IP video services. The H.264 HD Encoder core has the capability to cut the bandwidth requirement for digital video delivery in half when compared against MPEG-2 encoders. This essentially facilitates the transmission of twice the number of programs in a given bandwidth. The use of this H.264 encoding technology enables the company to provide high quality video at higher resolutions like 720p, 1080i and 1080p. H.264 is a widely used format for transmitting high quality digital television signals over IP and Wi-Fi networks. The company started shipping the H.264 capable encoders in 2012.

The H.265/HEVC technology is a video compression standard that enables IP and IPTV video services to be better prepared for transmission and streaming over even narrower and less robust networks as compared to both MPEG-2 and H.264 technologies. HEVC is and is expected to be primarily used by current and future internet based and private IP based over-the-top video streaming services and in the near future for satellite and terrestrial transmissions. The company began to ship High Efficiency Video Coding (HEVC) capable encoders and transcoders in 2020.

Secure Reliable Transport (SRT) technology is a video and IP network oriented forward error correction (FEC), security and reliability application level protocol designed to allow for high confidence transmission of compressed video and audio content over the open internet or over privately owned IP networks. SRT has been standardized by the SRT Alliance, consisting of a group of international participating companies. The company completed its implementation of SRT and began shipping SRT capable products supporting video encoder, transcoder and IP network interfaces in 2021.

The Advanced Encryption Standard (AES) technology is the U.S. National Institute of Standards and Technology (NIST) standard for the protection of electronic data, including data based content, such as digitized audio and video transmissions. Blonder Tongue Laboratories has broadened the use of and implementations of AES technology across a wide range of product lines and use cases over the course of 2020 and 2021.

MPEG-DASH and HLS are the two primary Adaptive Bit-Rate (ABR) technologies used in internet, IPTV and Wi-Fi based video delivery in the world today, enabling multi-screen delivery and optimization of video quality to the available bandwidth of an internet connection to television, phone, tablet or other viewing locations. The company completed initial ABR technology and product implementations in 2021.

In 2019, the company initiated a consumer premise equipment (CPE) sales initiative. The products were primarily consisted of Android-based IPTV set top boxes targeted to the Tier 2 and Tier 3 telecommunications and fiber optics based service providers.

Strategy

Telecom

The company provides a wide range of products to meet the special needs of these applications, and it serves many types of customers, from large Telco and cable companies to distribution channels, integrators and private contractors. The company sells to companies installing or distributing video and data delivery products including:

Telephone and fiber optics telecommunications operators (both large and small) that design, package, install and in most cases operate, upgrade and maintain the systems they build; cable system operators (both large and small) that design, package, install and in most instances operate, upgrade and maintain the systems they build;

Television broadcasters and video production facilities that create signals for redistribution and require digital encoding, transcoding, transmission and encryption/security technology;

Telephone, fiber optics, and cable-based telecommunications operators who deploy their services in the Lodging, Hospitality and Assisted Living Markets; and

SMB system operators that operate, upgrade, and maintain the systems that are in their facilities, or contractors that install, upgrade and maintain these systems in a wide variety of applications.

The key elements of the company's strategy include providing multiple source inputs and different output formats, including simultaneous IPTV, QAM, and NTSC analog television capability; recognizing that even if an operator is not utilizing IPTV, QAM and NTSC analog outputs today, these features may be needed tomorrow; and identifying high-quality, cost-effective, innovative solutions with a strong performance-to-cost ratio, is the key to ensure that the service provider can offer a competitively priced package to their residential, business and enterprise customers by focusing on the features required and its management, including remote setup, monitoring and diagnostics through an IP interface and potentially providing a hot spare, hot swap or automatic failover capability.

Key Products

Blonder Tongue's products can be separated according to function and technology. Five key categories account for the majority of the company's revenue-Encoders and Transcoders, NXG, Coax Distribution, CPE and Digital Modulation:

Encoder/Transcoder Products are used by a system operator for encoding and transcoding of digital video. Transcoders convert video files from one codec compression format to another to allow the video to be viewed across different platforms and devices. The company offers a broad line of 4K/UHD, HD and SD, MPEG-2, MPEG-4/H.264, and HEVC/H.265 capable encoders and transcoders optimized for Telecom customers and environments. One example is a line of enhanced encoders optimized for the extreme demands of broadcasting live sports, another is a cost-effective MPEG-2/H.264 encoder for IP support of PEG channels tailored to receive and groom regional content and deliver it across the open internet to centralized locations for ingest into OTT / CDN and other distribution systems. Yet another is a new highly cost-effective bulk IP to IP digital video Transcoder that supports 24 channels of format and rate conversion in a single Rack Unit (1RU) size and corrects digital television compatibility issues.

The QPSK and 8PSK to QAM transcoders (QTM Series) are used for economically deploying or adding a satellite-based tier of digital or HDTV digital programming. The units transcode a satellite signal's modulation from QPSK to QAM or from 8PSK modulation format to QAM format. Since QPSK and 8PSK are optimum for satellite transmission and QAM is optimum for fiber/coax distribution, precious system bandwidth is saved while the signal retains its digital information.

Encoders accept various input sources (analog and/or digital) and output digitally encoded 4K, UHD, HD or SD video in various output formats, such as IP, QAM modulated, or Asynchronous Serial Interface (ASI). ASI is a streaming data format which carries the MPEG-2 Transport Stream. The IP output format allows operators to stream video over private data networks with greater reliability and content security. The QAM outputs can be used for digital video distribution over typical coax and HFC networks to serve a variety of Telecom environments (i.e. CO's, headends, stadiums, broadcast and cable television studios, hospitals, university campuses, etc.). As a complement to this encoder line, Blonder Tongue also provides digital QAM multiplexers which take multiple inputs (ASI or 8VSB/QAM) and delivers a single multiplexed QAM output, thereby optimizing the HD channel lineup by preserving bandwidth. The company's QAM output MPEG encoders support low latency and superior motion optimization for content, such as fast-paced sporting events, which is ideal for live events within a stadium or arena. The company's new Clearview transcoder product line supports high density highly cost-effective bulk re-encoding functions to support a wide range of service operator use-cases, such as creating digital television universal reception of signals, professional Dolby audio encoding and format conversions, or conversion of broadcast to IPTV expected video formats. The company's Encoder/Transcoder Products accounted for approximately 50% of the company's revenue in 2022.

NXG IP Digital Video Processing and Headend Products were introduced by the company in 2018 and were a culmination of the company's product development efforts of an advanced next-generation-enterprise series of products and solutions.

The NXG is a powerful, two-way, forward-looking digital video signal processing platform and series of modular add-on products that are ideal for delivering the next generation of entertainment services for residential and enterprise applications, including IPTV format conversions and simulcast use cases and is actively deployed in education, MDU, healthcare, business parks, campuses, institutions, hospitality, cruise ships, professional sports stadiums and government facilities. The goals of the NXG product line is to addresses the service provider challenges of (a) migrating from traditional CATV transmission, such as fiber and coaxial cable, to fully IP-based transmission and delivery, and migrating from traditional content protection, such as Commscope/Arris DigiCipher, Cisco PowerKEY, Verimatrix CAS, and LG Pro:Idiom, to IP-based digital rights management (IP-DRM) - content protection systems of the future, such as Adobe DRM, Verimatrix-M, Google Widevine, PlayReady, and Zenith/LG IP Pro:Idiom technologies. In order to accomplish those goals, NXG was designed to be an anything-in to anything-out solution. Based on key customer guidance and the company's research and development effort, NXG is a 100% fully modular, passive-back-plane-based product that enables the service providers to easily and seamlessly accomplish the migration described in the forgoing; and cost effectively and seamlessly address what may become any future, unforeseen, prospective transmission, and content protection migrations. Unlike many competing products, in NXG, all active electronic components reside in their respective modules. In addition, the company's plan is for the functionality of all of the standalone key signal processing products described in both the foregoing and following paragraphs are to be, over time, migrated and subsumed as modular optional features supported by the NXG product line. In 2021 the company released and began producing the NXG Edge version of the NXG product line to target lower-functionality and lower-cost advanced encryption edge QAM types of use cases. The company's NXG Products accounted for approximately 15% of the company's revenue in 2022.

Coax Distribution Products are used to transport signals from the headend to their ultimate destination in a home, apartment unit, hotel room, office or other end-point location along a coax distribution network. Among the products offered by the company in this category are broadband amplifiers, directional taps, splitters and wall outlets. In cable television systems, the coax distribution products are either mounted on exterior utility poles or encased in pedestals, vaults or other security devices. In SMB systems the distribution system is typically enclosed within the walls of the building (if a single structure) or added to an existing structure using various techniques to hide the coax cable and devices. The non-passive devices within this category are designed to ensure that the signal distributed from the headend is of sufficient strength when it arrives at its final destination to provide high quality audio/video images. The company's Coax Distribution Products accounted for approximately 8% of the company's revenues in 2022.

CPE Products are consisted mainly of Android-based IPTV set top boxes sold to the Tier 2 and Tier 3 cable and telecommunications service providers for use in mainstream residential services to consumer households. The Company's CPE Product initiative achieved sales to over 75 different telco, municipal fiber and cable operators and accounted for approximately 0% of the company's revenue in 2022.

Digital Modulation Products are used by a system operator for acquisition, processing, compression, and management of digital video. The headend is the center of a digital television system. It is the central location where multiple programs are received and, through additional processing, allocated to specific channels for digital distribution. Blonder Tongue continues to expand its Digital Modulation Product offerings to meet the evolving needs of its customers, which is expected to continue for years to come. IP interfaces have been added to a wide range of products to help in the migration to IPTV. One such example is the AQT8-B, a multichannel 8VSB/QAM-IP transmodulator that receives up to 64 programs of off-air broadcast signals over 8 different frequencies and transmodulates them for output on both coax and IP distribution networks. Other lines of digital products provided by Blonder Tongue and Drake include the company's Edge QAM devices, Satellite Quadrature Phase Shift Key (QPSK) and Eight Phase Shift Key (8PSK) to QAM transmodulators.

The company's Aircastertm ATSC, QAM, and IP trans-modulator series of products (AQT8) allow the user to create a customized line up from off-air and/or cable feeds for coax IP distribution. The customizable IP output contains multiple programs with a combination of single and multiple transport streams, from multiple RF input sources. The unique MPEG-2 transport systems information tables associated with each of the selected input programs are transferred to the IP outputs. This means the virtual channel numbers and program names on the IP outputs can be the same as their RF program input sources. The company's AQT8 products enable the user to modify the metadata, including PSIP parameters, such as the Program ID, Program #, Short Name, Major Ch., and Minor Ch. Information, to provide a customized IP program delivery solution. The Aircaster AQT8 features Emergency Alert System (EAS) program switching through either an ASI or IP format EAS input and terminal block contacts for triggering.

Stand-alone Edge QAM devices accept Ethernet input and capture MPEG over IP transport streams, decrypt service provider conditional access or content protection, and insert proprietary conditional access, such as Pro:Idiom, into the stream. These streams are then combined and modulated on to QAM RF carriers, in most cases providing multiple streams on to one 6 MHz digital channel. Inputs to Edge QAM devices can come from satellite receivers, set-top boxes, network devices or video servers. The use of these devices adds flexibility for the service provider, in part, because all of this routing happens in one device. Scaling is accomplished via software and modules embedded inside the hardware. Since it is a true network device, the Edge QAM can be managed over a traditional Ethernet network or over the Internet.

Digital Modulation Product use continues in all of the company's primary markets, bringing more advanced technology to consumers and operators. The Company's Digital Video Headend Products accounted for approximately 6% of the company's revenue in 2022.

DOCSIS Data Products give service providers, integrators, and premise owners a means to deliver data, video, and voice-over-coaxial in locations, such as hotels and hospitality, MDU's, and college campuses using IP technology. Among the products offered by the company are CMTS and cable modems (CM). The company's DOCSIS Data Products accounted for approximately 13% of the company's revenue in 2022.

SLA and Services includes Service Level Agreements (SLA), installation and support services, contracts on equipment advanced replacement, hands-on customer and end-user training, system design engineering, on-site field support, remote support, troubleshooting and complete system verification testing. These SLA and Services also include after hour and 24x7x365 support contracts. The company began programs in 2020 and expanded in 2021 to promote and emphasize the value of services and agreements for services offering a range of service levels tailored to various customer's business needs. The company's SLA and Services products accounted for approximately 2% of the company's revenue in 2022.

Other Products: There are a variety of other products that the company sells to a lesser degree, either to fill a customer need or where sales have reduced due to changes in Company direction, technology, or market influences. Sales of products in these categories contributed less significantly to the company's revenue in 2022 and is expected to remain this way for 2023. These products include:

Analog Modulation Products are used by a system operator for signal acquisition, processing and manipulation to create an analog channel lineup for further transmission. Among the products offered by the company in this category are prefabricated headends to accommodate legacy analog TV systems, modulators, demodulators, and processors.

Fiber Products are used to transport signals from the headend to their ultimate destination in a home, apartment unit, hotel room, office or other terminal location along a fiber optic distribution network. Among the products offered by the company in this category are fiber optic transmitters, receivers (nodes), and couplers.

Test and Measurement instruments, for measuring both digital and analog CATV and Broadcast TV signals, as well as capture, analyze and/or generate MPEG ASI transport streams.

Contract Manufacturing Services, providing manufacturing, research and development and product support services for other companies' products.

Miscellaneous products and services, filling customers' needs for receiving off-air broadcast television and satellite transmissions prior to headend processing, satellite distribution, repair, and parts.

The company will modify its products to meet specific customer requirements. Typically, these modifications are minor and do not materially alter either the product functionality or the ability to sell such altered products to other customers.

Marketing and Sales

Blonder Tongue markets and sells its products for use in a wide range of IPTV and other Telecom and SMB markets, including with municipal fiber optic operators, traditional cable television, telco, MDU, lodging/hospitality, and institutional settings (schools, hospitals and prisons). The company also sells into a multitude of niche SMB markets such as sports arenas and the cruise ship industry. Sales are made directly to customers by the company's internal sales force, as well as through Blonder Tongue Premier Distributors. The company instituted its Premier Distributor Program in 2007, through which a limited group of larger distributors who stock a significant amount of the company's products in their inventory are given access to a special purchase incentive program allowing them to achieve volume price concessions measured on a year-to-year basis. Sales to the company's Premier Distributors accounted for approximately 25% of the company's revenue in 2022. These Premier Distributors serve multiple markets. Direct sales to telco operators, municipal fiber operators, cable operators and system integrators accounted for approximately 31% of the company's revenue in 2022.

The company's sales and marketing function is performed by its internal sales and marketing associates working in partnership and conjunction its Premier Distributors, as well as its smaller company integrator and distributor network. Should it be deemed necessary, the company may retain independent sales representatives in particular geographic areas or targeted to specific customer prospects or target market opportunities. Sales and marketing made up 19% of the company's overall workforce as of December 31, 2022, divided into central and regional coverage in Old Bridge, New Jersey, in Ohio and Florida, as well as Pennsylvania, the Chicago and Atlanta areas.

The company has several marketing programs to support the sale and distribution of its products. Blonder Tongue participates in industry trade shows and conferences and also maintains a robust website and direct on-line sales portal. The company publishes technical articles in trade and technical journals, distributes sales and product literature and has an active public relations plan to ensure complete coverage of Blonder Tongue's products and technology by editors of trade journals. The company provides system design engineering services for its customers, maintains extensive ongoing communications with many original equipment manufacturer customers and provides one-on-one demonstrations and technical seminars to potential new customers. Blonder Tongue supplies sales and applications support, product literature and training to its sales representatives and distributors. Before the COVID pandemic began in March of 2020, the management and sales staff of the company traveled extensively, identifying customer needs and meeting existing and potential customers. The company anticipates resuming these activities at pre-pandemic levels as U.S. CDC guidelines allow.

Customers

Blonder Tongue has a diverse customer base, which in 2022 consisted of approximately 70 active accounts. Approximately 38% of the company's revenue in 2022, was derived from sales of products to the company's three largest customers. North American Cable, Stellar Private Cable and World Cinema accounted for approximately 14%, 13% and 11%, respectively, of the company's revenues in 2022.

Since 2010, the company has held multi-year contracts with key distributors in its Premier Distributor Program. Many of the company's smaller business customers, with whom the company had formerly dealt on a direct basis, now purchase the company's products from its Premier Distributors.

In the company's direct sales to system integrators, the complement of its significant customers tends to vary over time as the most efficient and better financed integrators grow more rapidly than others.

The company's revenues are derived primarily from customers in the continental United States; however, the company also derives some revenues from customers in other geographical markets, primarily Canada and to a much more limited extent, in developing countries. Sales to customers outside of the United States represented approximately 1% of the company's revenue in 2022. All of the company's transactions with customers located outside of the United States have historically been denominated in U.S. dollars.

Intellectual Property

The company holds several United States and foreign patents, including certain technologies within the NXG platform and certain technologies within its DOCSIS data products. The company owns a United States trademark registration for the word mark Blonder Tongue and Aircaster and also on a BT logo. Drake owns a United States trademark registration for the word mark DRAKE.

Since 2008, the company has obtained and renewed licenses for a variety of technologies in concert with its digital encoder line of products. The licenses are from a number of companies, including from Zenith, a subsidiary of LG Electronics (expires December 2023). These standard licenses are all non-exclusive and many require payment of royalties based upon the unit sales of the licensed products. With regard to the licenses expiring in 2023, the company expects to renew these standard licenses on similar terms to those presently in force.

Research and Development

For the year ended December 31, 2022, the company's research and development expenses were $1,778,000.

Regulation

The company has authorization to discharge wastewater under the New Jersey Pollution Discharge Elimination System/Discharge to Surface Waters General Industrial Stormwater Permit, Permit No. NJ0088315. This permit will expire June 30, 2023 and is automatically renewed upon payment of the annual fee. The company intends to renew this permit.

History

Blonder Tongue Laboratories, Inc. was founded in 1950. The company was incorporated under the laws of Delaware in 1988.