FiEE Inc (FIEE) 2017 Q2 法說會逐字稿

Good afternoon. My name is Stephanie and I will be your conference operator today. At this time, I would like to welcome everyone to the Zoom Telephonics call for the second quarter 2017. (Operator Instructions)

Thank you. I would now like to turn the call over to Frank Manning. Please go ahead, sir.

Okay, thank you, Stephanie. Welcome to the Zoom Telephonics conference call for Q2 2017. My comments refer to the slides available on our website at www.zoomtel.com/s2.

Let's start with slide 3. I will be comparing Q2 2017 to Q2 2016 unless I say otherwise. We had strong revenue growth in Q2 2017. Revenue increased 71% over Q2 2016, and this was the fifth straight quarter of strong year-over-year revenue growth.

We had substantial growth in sales of Motorola cable modems at all our major retailers. Sales through Amazon were very strong and we have gained substantial cable modem share at Amazon at the expense of Arris and Netgear.

Gross margin increased to 32.1%, up from 30.2% in Q2 2016 due primarily to sales growth. Overall operating expenses increased $255,000 to $2.4 million during the quarter, primarily due to the $250,000 per quarter increase in our minimum Motorola royalty payment in 2017. However, operating expenses decreased as a percentage of net sales to 35.5%, significantly lower than the 54.5% in Q2 2016.

Our advertising expense decreased by $173,000 compared to Q2 2016 and by $261,000 compared to Q1 2017. We are getting better results with less advertising spend as we have worked hard to maximize return on ad expenses. We also achieved a $74,000 decrease in G&A and a 52,000 decrease in R&D during the quarter.

We continued to expand our product line during the quarter. We began shipping our first DOCSIS 3.1 cable modem as well as our first Motorola brand router and first range extender. We are continuing to develop cable modem, Wi-Fi, cell, and sensor products and will provide details about our product plans later in this call.

Now let's go to slide 4. With slide 4, you can see our revenue growth on both a six-month and a quarterly basis. Our trailing 12-month revenues exceed $23 million and our first 6 months revenue for 2017 is up 79% compared to the first 6 months of 2016.

Let's go to slide 5. We continue to gain shelf space, which helps to increase future sales. As you can see, our shelf space increased by 23% in Q2 2017 versus Q1 2017. We are selective about our retailer partners, concentrating on the best retailers of cable modem products.

Let's go to slide 6. On slide 6, you will see our Q2 2017 income statement. Here are a few highlights. Gross profit in Q2 2017 increased to 32.1% compared to 30.2% at Q2 2016. Additionally, gross profit for the 6 months ended June 30, 2017, increased to 32.8% compared to 30.4% for the period ended June 30, 2016.

This increase was primarily due to increased sales of our Motorola brand cable modems to major US retailers. As our sales increase, our fixed manufacturing costs become a lower percentage of sales.

We have previously shared with you that driving efficiency in our operating expenses is a key focus of ours. We saw progress on this front in the second quarter. Total operating expenses were down significantly as a percentage of sales. And as you can see from the table, all components of operating expenses were down substantially as a percentage of sales.

Net loss for Q2 2017 decreased to $269,000 due primarily to higher sales causing higher gross profits, with good control of expenses. We are working to get to profitability and we estimate that this occurs at quarterly sales somewhere between $7.5 million and $8 million, assuming that gross margin and the operating expenses stay within forecasted ranges.

Now let's go to slide 7. Slide 7 shows some balance sheet items. At June 30, 2017, we had approximately $1.95 million drawn on our $3 million line of credit and $495,000 in cash. Working capital stood at $2.3 million with a healthy current ratio of 1.4. We believe the balance sheet and available liquidity provide a good foundation for the continued growth of the business.

Let's go to slide 8. Slide 8 summarizes our expanded Motorola license agreement signed during the third quarter of 2016. Our trademark rights now include worldwide rights and they cover cable modems and gateways plus Wi-Fi routers, range extenders, powerline network products, access points, and more. This expanded license is a significant and exciting opportunity for the growth of our Company.

Now to go to slide 9. Slide 9 demonstrates our success in the Amazon cable modem market as a result of our excellent product ratings and other things. Six of our seven main cable modem products are rated 4.5 stars, and 5 of them are labeled as Amazon's Choice. A clear indicator that our products are popular among customers and also category leaders at Amazon.

Since early 2016, we have grown our Amazon share of cable modem sales from a little under 3% to the low- to middle-20% range depending on the week. Both of our main competitors, Arris and Netgear, have lost significant share on Amazon during the same time period, as you can see.

How have we grown our share so dramatically? Major factors include the Motorola brand, superb products, strong customer reviews, hard-earned skill in selling through Amazon, and lots of hard work from many talented people here at Zoom.

On slide 10, we detail what we've accomplished with our Motorola cable modem product plan to date and some of our plans. We introduced six new cable modems in 2016 and these have been a big success. We launched the Motorola model MB8600 DOCSIS 3.1 cable modem in May 2017 and witnessed significant sales and sales momentum during the quarter.

As of June 30, 2017, we had Motorola brand cable modems in over 6,000 stores. And we remain focused on our product placement in the leading retail stores, including Best Buy, Micro Center, Target, and Walmart. We continue to stay focused on expanding our product line, increasing our retail store placements, and increasing sellthrough in stores and online.

We are targeting introduction of three 24x8 cable modem products in Q4 2017, including one with telephony, a major category. In 2018, a major focus will be the new DOCSIS 3.1 gateway products. In other words, we have a cable modem -- DOCSIS 3.1 cable modem bridge now and we plan to have gateway products, which also include advanced routers.

Slide 11 next. The expanded Motorola agreement gives us access to very desirable local-area network or quote LAN products. Last quarter we officially launched the first of a line of Motorola brand LAN products.

This quarter, we begin shipping the Motorola model MX1200 range extender and MR1900 router, our first standalone Motorola Wi-Fi router. Sales are low so far since we just watched the products, but these products are just starting to get some positive reviews on Amazon and that should help.

We have new routers and range extenders planned for the US and international sales later this year, including an AC2600 router and a low-cost high-performance wireless end product. Currently we have three Motorola routers shipping in China, with four more products planned for shipping by the end of 2017 for China.

I want to mention mesh networks. These are a big high-growth part of Wi-Fi networking, with sales on Amazon of about $1 million a week. We realize the importance of introducing mesh network products in 2018. They are covered by our license and we view them as very important, but they also have a lot of technology. So there's still a lot of work to do in this area.

Later this year, we plan to introduce multimedia over coax, or Moca adapters as well as a VDSL/ADSL gateway. We believe that Moca adapters and VDSL/ADSL gateways are good products for retail, with each of those categories selling a little under $50,000 per week on Amazon.

As you may know, Moca adapters let you make a reliable high-speed connection using already installed coax cable to send signals between your router and an HDTV, game station, or other device anywhere in your house.

For example, picture a home that has cable TV, an HDTV, and a router in one corner of the home and another HDTV in a faraway corner of the home. Both TVs have a coax cable going through a set-top box to the TV. You can install one Moca adapter near the router and one near the faraway HDTV and that lets you use your home's existing coax cable to send Netflix and other Internet TV through your router to the remote TV.

This is an easy, reliable way to get an Internet connection from a router to any place in the home that has coax cable installed. And because it's using high-performance cable, namely coax cable, you tend to get very high data rates, typically much better than Wi-Fi.

Now let's go to slide 12. Slide 12 summarizes some of our key international goals in 2017 and beyond. We are excited about bringing to market multiple Wi-Fi and powerline products to address the international market.

One way we will do that is through Amazon. We know how to sell through Amazon and we plan to leverage that knowledge and expertise when selling through Amazon UK and other Amazon Europe vehicles. The European market represents a solid growth opportunity and we plan to increase our retail and distribution presence as we roll out our Motorola brand local-area network products.

We are also currently working on new products for China, a market that represents a significant opportunity for expansion. Finally, we intend to expand our presence in Latin America and the Middle East using existing master distributors.

Now let's get to slide 13. In terms of our cell modem plan for 2017, we remain focused on introducing our line of industrial-strength USB cell modems for the Internet of Things and machine-to-machine markets. We are sampling our USB cell modems, with volume shipments planned for the quarter we are, Q3 2017. And we are pleased with the lead referrals we are getting from AT&T.

We plan to launch at least one high-speed consumer cell modem and to bring a Motorola high-speed cellular gateway to market later this year. Our products typically include a Gemalto module and Gemalto is recognized as one of the leading producers of cellular data modules. We will continue to cultivate our Gemalto relationship with the goal of winning new business with their help and others.

Finally, we will continue to focus on strengthening our relationships with the major carriers, such as AT&T and Verizon. We are part of the AT&T Partners program, a potential source of new business with volume AT&T customers. And we think we are close to Verizon certification for one of our USB cell modems, which would help us reach out to volume Verizon customers.

Now let's go to slide 14. Slide 14 provides details around our 2017 sensor plan. As some of you know, we have been developing sensors for several years. We focus on sensors that communicate through the cell network to smartphones and browser-enabled devices.

Cellular sensors are easier to set up than Wi-Fi sensors since they don't need to reach the Internet through a router and a fixed broadband modem. The service plan cost for a sensor can be very low because a sensor doesn't send much data. Cellular sensors are ideal for second homes, apartments, condominiums, and even for vacationers who want to monitor their home while they are away.

We plan to introduce a line of sensor products, from a simple temperature sensor to sensors that detect various combinations of temperature, humidity, acceleration/earthquake, flood, light, motion, sound, and voltage. We hope to ship our first product in Q4 2017. This is a very big effort, but we have made a huge amount of progress. So we can't guarantee Q4 2017, but I think we are on track.

Now go to slide 15. In closing, we have made a lot of progress and we are excited about the opportunities ahead of us. The strong Motorola brand should continue to help us grow our cable modem and Wi-Fi product sales.

The new DOCSIS 3.1 cable modem standard offers much higher cable modem speeds: over 1 gigabit per second. And over the next few years, this should drive a new wave of customer upgrades. And we believe there's significant opportunity for DOCSIS 3.0 products, including a 24x8 high-performance AC1900 gateway with telephony. There is a significant international growth opportunity represented by the expanded Motorola agreement for consumer home network products.

I know I am just listing bullets. The next bullet is we are excited by expected introduction of Moca adapters and VDSL/ADSL products later this year. Finally, we have made considerable progress developing cellular modem and cellular sensor products and we look forward to bringing them to market.

Those are my prepared comments. Now let's turn to questions, Stephanie.

(Operator Instructions) [Bryce Thomas], [North Grove] Asset Management.

You mentioned that you will be getting into the VDSL area. Could you provide some insight into what those are and what the prospects are for this?

Sure. Both VDSL and ADSL use the telephone line that comes to many people's homes to carry high-speed broadband. And Zoom in the past has had ADSL products, which are popular. Not nearly as popular as cable modems, but popular.

VDSL gets you to a significantly higher speed, although the phone line needs to be -- VDSL needs a phone line that is shorter between the central office and the home. So it's faster, but it requires a shorter timeline.

We are getting in -- sort of renewing our interest in this area because we have a technology provider that is the largest producer of DSL products in the world. They have strong products. We know that there are significant sales, not huge, but significant sales through Amazon for that type of product. As I mentioned, about $50,000 a week.

And there's significant opportunity, especially internationally with some of the service providers. We have sold to them in the past and we hope to do that in the future. So we don't see this as a giant revenue source, but we do think there's good opportunity.

One thing that helps the retail product is that CenturyLink provides a discount if you bring your DSL, your modem, whether it be ADSL or VDSL, if you bring that in instead of using theirs. So there's some parallel to cable modems. The product is slower than cable, but still fairly popular in the United States with a good retail story and also a service provider story.

Okay, thank you.

Spencer Raymond, private investor.

Great report, Frank, and you've just accomplished so much in the last couple years and so many exciting events just looking forward. So there's so many things here ready to be announced.

And I see you have an IR firm now. Are you satisfied that they are getting the story out to all the right people: money managers and stockbrokers and small funds?

I think they do a great job. We actually met our initial investor significant investor, Manchester Management, through them. And they were instrumental in our meeting the UK-based company that helped us with the next round of investment.

So I think they have been very helpful on the investment side, and they've also been helpful in introducing us to very significant investors. They are very good at knowing where the action is and not wasting time on pursuits that aren't going to really lead to much. And they find very good qualified investors for us. So yes, I think we are doing well.

The one thing we haven't done is taken advantage of the many calls we get for a very promotional push, and it's just not our style. We don't really want a hyped-up approach to our stock. I think we are looking to have very qualified significant investors that understand our story and invest because of that. And I think our IR firm does a really good job at getting those people to us.

Yes, I agree with that. It's just that you don't see too much volume. There are days when there's no volume. I was just curious whether -- and of course, that's sort of the nature of the beast too with small companies now. But I just wanted to make sure that you were getting your story out because it's very exciting and at some point it's going to connect.

But whatever you can do as far as having them release announcements between quarters because sometimes a long time goes by. And if you can do something, if you can announce something that doesn't have any adverse competitive reasons not to, if you can get exciting announcements out, that helps.

Thank you, Spencer. You have always given good advice to us and you've been a very good long-term shareholder. So I appreciate the advice. Thank you.

All right, thank you. Good luck.

Jim Kennedy, Marathon Capital.

Congratulations on your progress. I wanted to drill down a little bit on the whole area of sensors. And I wanted to understand a little bit about what's out there today competitively, what you are seeing, what makes your products or products to be released different? Is it a cost feature, a technology future? Is there IP around them? Can you talk just a little bit more about it?

Sure, I'd be happy to. You don't find a lot of sensors if you look to the market, but there are some and they are starting to do some fairly reasonable volume. The most famous product that at least has a sensor involved is Nest. And there are other competitors on the thermostat side, but also other sensors for things like temperature and humidity.

But typically most of those products are connecting through Wi-Fi, which is fine. And it especially makes sense if you want a home full of sensors, like a lot of window sensors for instance. Wi-Fi is a very good way to solve that problem.

We have a different tack on the problem. We are focused on cellular sensors, which use the cell network. And what we like so much about that is that they are so easy to install because they are not -- you don't need a broadband connection, you don't -- besides a cell connection, and you don't need a router. You don't need to worry about this foreign equipment that -- and whether it works with your product.

We like the cellular approach very well for a number of the areas we are targeting; I mentioned some of those. And we also like the fact that if you picture something like a second home, you might not want to pay a lot for broadband every month because you are not there that often. But on the other hand, if the place is flooding, you'd like to know about it or if the temperature has gone down to freezing and it's about to break your pipes or whatever.

So a cellular sensor is perfect for that application because it's easy to install. And the data plans can be in the very low-single-digit per month range, like $2 or $3 a month. And so we like that a lot.

You don't see much in the way of cellular sensors. I'm not saying there aren't any, but you see some in industrial. But I think that we have really a lot of the sensing working already. We already have our product getting that data up to the Amazon cloud. And now we just have to finish the last firmware and the connection between the Amazon cloud and your smartphone or your browser.

So I think the main thing that's different is we cover a lot of sensors. We will be priced competitively in terms of the retail market, and most importantly, we use a cellular approach.

In terms of IP, these are all developed totally in-house. So we own the design, the firmware, hardware design. We contract it out for the link between the smartphone and the cell phone but -- I mean, in the cloud, but we will own that.

We haven't applied for any patents, but we do have a lot of intellectual property. So we are very excited about this area. We think it has huge potential, and I'm just -- for me, the biggest issue is we just have to get it done. It's a big project; we have to get done.

So in terms of something like a water detector or a flood sensor, is that something that would only, say, turn on when it's exposed to water or a temperature, etc., and therefore uplink to my, say, phone? Does that require an application of some sort on my phone?

We would provide that. And I mentioned that we had contracted to an outside house. They are doing that. But yes, you would have an application, but that would come with the product.

And you would need some kind of cell plan. We'd love it if we could get a good arrangement with AT&T, for instance, but the fall back that we will definitely include will be a cell plan that will probably be under our brand. And we will let somebody know that he or she has a cell plan for that device that's very inexpensive.

So if I am -- for instance, I am a Verizon wireless customer now. Wouldn't I be able to, say, load an app, allow that sensor to upload on my plan, and just pay my data charge or whatever the charge happens to be? Or I would need a separate [plan]?

Not necessarily, because if you look at any of the significant providers like Verizon or AT&T, they typically have some charge per device. And so I certainly hope to negotiate that kind of situation you are talking about.

But I don't want to promise that we can deliver that in the short term, especially at a very competitive price. But I think we can deliver something that is easy for you. You might opt to be billed monthly or maybe get an annual fee that's very modest and then it just happens automatically.

And frankly, a lot of those plans make use of AT&T or Verizon. So we would make sure to have a very good quality cellular carrier in back of the plan, but you might have a separate bill but it's a simple credit card bill.

So when you have -- let's get off the sled for a moment and just say that there are other things you are sensing out there. Is this one common platform that you are building upon to provide these other sensing services, shall we say?

Good question. The short answer is yes. The first piece of hardware that we've already designed and are bringing in to production already senses a lot of the things I just mentioned.

So it senses temperature, humidity, flood, acceleration, which we also think of as earthquake, light, and voltage just to be monitoring whether you still have power in your house. It has a battery backup concept, too. But yes, that one platform will do all those things.

Now, we've had sensors in the past that were designed for non-cellular applications. And it turned out -- we had a service provider in that case for the cloud part that [she gave up] on 900 megahertz. But the point there is that not only do we have a lot of sensing built into this product, but we have a lot of designs that can be configured toward cellular. And we have a jumpstart on quite a broad cellular sensor product line.

Great. Okay, well, I look forward to hearing more about it as the year progresses. Thank you.

Okay, thanks a lot, Jim.

Kevin Dede, Rodman.

Thanks for taking my questions. Appreciate it. I have got a few, but since we are on sensors, I appreciate the extra detail there. But from the 20,000-foot perspective, it seemed that strategically it's a distraction from the core modem business that you are selling on a pure retail basis, given that your sensor business has to be tied pretty strongly to a wireless carrier.

Well, let me comment on that. You are right that it has to be tied to a wireless carrier, but it's absolutely okay for retail. Because when you buy the product, we will give you at least a month of free wireless plan for that product and just a simple credit card option opting for to be billed monthly or annually at very low cost for your cellular service.

So really, the cellular carrier just comes with the product, so to speak. So it's really not -- we think it's very well suited to retail.

Okay. I guess -- just looking at it from a compatibility perspective, you would have to be sort of agnostic to a carrier in order to address the full retail environment, though. And I guess in my mind, that's --

Not really, because we don't care if you -- I'm sorry I cut you off, I apologize. But we don't care if you have Verizon or AT&T or Sprint or whatever, any of those is fine because the plan that we include is separate from those. They don't require you -- we don't care which one you have. We are off to the side, so to speak. And so that question of complicated compatibility issues, there is no question like that. It's very straightforward.

Okay. Then what would be your marketing plan? And when would we expect or should expect to see that in the market?

Well, our hope is to be shipping in Q4 and I think we have a very good chance of that. But I do want to emphasize that it's a difficult product. It's got a lot of moving parts, so to speak, that we have to finish. And a lot of it is already finished, but there's still work to do. So the plan is to ship in Q4 and I think we have a good chance, but it's no guarantee.

In terms of marketing, we absolutely hope to bring those to retail and we are really excited about retail. But we also know that, for instance, a very good area for this type of product is the installer. There are trade groups that reach this -- I think it is called CEDIA -- that reaches installers who installs things like audio equipment, security equipment, just different equipment for your home. They are a good target for a way to sell this type of product.

Another target, which I admit we don't have experience in selling and I'm not going to promise we are going to succeed in selling them. But in my view, a great target is the insurance companies.

Because, for instance, I was surprised to hear that there's more money spent by insurance companies dealing with water damage than there is, for instance, on fires in a home. In other words, it's a very significant, very significant cost center for these insurance companies.

What I'd love to believe is that we could sell them this type of product to dramatically reduce the amount of claims they are servicing. But that's hope and a definite goal, but again, I'm not going to promise that we are going to deliver that. We are certainly going to try.

Great, okay. Interesting perspective. Thanks for that. Regarding the cable modem side, especially with the 3.1 DOCSIS upgrade looming, is there a shot at expanding distribution beyond just retail and partnering with service providers, given that you are going to start to have to do that on the sensing and cell modem side?

Well, I think --

I guess I would -- apologies for interrupting. But I guess what I mean is selling through directly I guess Cox, Comcast, Charter, etc.

Okay, so let me address that. We definitely want to reach service providers, but frankly, we don't expect to sell Comcast as an example. I have huge respect for that company, but they are so big. And frankly, Arris as an example has a good advantage there because they also make the CMTS or headend side of the connection. So that gives them a nice advantage in a place like Comcast.

But there are many companies smaller than -- I will highlight really Comcast and Cox -- I'm sorry, Comcast and Charter. And we would like to succeed in selling them. We are in very early days there. We know that they have certain specific needs in terms of firmware that are a little different from a retail customer. And we've actually managed to finish most, if not all, of those needs for a select number of our cable modems.

So yes, we are absolutely trying to go after that customer. It's a new effort for us. It's not something I'd say we are good at, but I think that we've learned a lot in the last six months or so about selling to them. And we do have some prospects and I think there is a good opportunity there.

Okay. Last one from me, just with regard to slide 5, the cable modem shelf space growth, where you are showing two SKUs at 1,000 stores count as 2,000 units. I was just wondering how you characterize Amazon on that? And how you would recommend that we look at it with that in mind?

We don't count them at all in this slide. So here, we are just focused completely on retail stores that you can walk into. So we addressed the Amazon question somewhat in terms of things like share and -- but the retail shelf space is a different place and that's what this slide is addressing. It doesn't have Amazon in it.

Okay, okay. All right, well, thanks, again, Frank, for taking my questions. Appreciate it.

Okay. Thanks for your good questions. I appreciate it.

David Schwartz, PWL.

Did the Company have any international sales in the quarter?

We did, but they were around a little over 1%, very little. We are just starting to sell on Amazon UK, and we do have a distributor in the UK that is buying some product. They've actually been our distributor for a number of years. But it was pretty quiet when we focused on cable modems because that's not a significant category at retail in the UK.

But the sales are still very low. And I think that the new LAN products will help. But we also know that some of the markets we want to reach are oriented toward -- and this is not so much the UK, but some of the other markets are oriented towards very low cost. And so we are working on a router that focuses in that direction.

We also think that there's an opportunity even with the cell modems. In some cases, we have distributors that are fairly strong with the cellular carrier.

So it's very early days. There was a time when Zoom in the dial-up modem days when international was a fairly significant part of our revenue. Now it isn't, and we are really having to grow from close to 0. I think we can do it; I think we can grow our sales significantly. But it's very early days for that.

Okay. Now that the range extender and the new router products have shipped, do you see a market for those? In the last call, I asked you about how the Company might be able to break into a market which is apparently pretty full already. How do you feel now about the potential for those?

I think that there is potential, but I'd be the first to admit that it's been very slow going. And part of it is that Motorola isn't known as well for this type of product. And another thing is that retail distribution is so well covered by guys like Netgear.

So to the extent you've got a significant focus in the United States on Amazon, which we do, reviews are very important. In the early days, it's hard to get them because you don't have them. So it's a snowball effect. But I think we are going to get there, but I'd be the first to admit that it's pretty slow going now for that type of product.

Do you work with people at Motorola or is it strictly a licensing agreement at this point? Do they give you any suggestions or help with marketing or anything like that?

They do some of that, but the main thrust is definitely our effort. But they actually have been helpful in introducing some potential distributors and suggesting some product directions. And they have even talked in terms of some potential help with the cellular carriers.

At this point that's a hope, not a -- nothing's happening yet, but I think that they've already delivered significant value. They are starting to deliver some help with Amazon in terms of not so much the marketing, which we already do very well, but we certainly have a hope that Amazon will make fewer mistakes.

And when they make them, they will fix them faster because we are not alone in saying that they need to shape up on that side. It's a great company, they do a lot of great things, but they need to make fewer mistakes. And Motorola is I think helping us with that.

So yes, it's a very positive thing. They don't develop products for us, but they also give us very good input in terms of what they want to see in terms of a look tying to the Motorola brand in terms of look and also quality control and features. If you are going to list their priorities, money isn't one. It's probably number two. Number one is protect the brand and make it powerful. And they do a good job of that.

Okay. Now the bank line, $3 million. Have there been any discussions on possibly extending that? I know that you're not too far away from cash flow breakeven, it appears. But still, it might be worthwhile to see if you can extend that.

I think that the key thing there is going to be -- I think we can do that, but they definitely are looking to assets like receivables. So it's a combination of increasing the line and also making sure we have the receivables coverage that they are looking for.

Yes, okay. Now the 3.1 modem, which seems to be doing well so far, what is the market availability of DOCSIS 3.1? And how quickly will people be upgrading to 3.1? And how do you see that market developing over the next two or three years?

Okay, here's my take on that. Comcast was definitely the leader and is the leader and they've been aggressively rolling out 3.1. And I think they planned by the end of the year to pretty much have it available in the vast majority of their locations.

Okay.

So that's important. And they've been retail-friendly, which is very good and helpful. So that's a definite focus. Cox also is probably number two as far as I know in terms of aggressively getting into 3.1. And we have our product newly certified for Cox also and they are a significant player.

So definitely all the service providers are talking about it and talking about plans. So I think there is good opportunity, but it's going to take time. And I can't give you the exact curve, but I think it's a very exciting development.

Okay. And my last question -- I think I ask this pretty much every quarter. How is the Charter expansion affecting your sales and affecting the cable modem business at retail?

That's a great question. Well, it's not just hurting ours, it's hurting everybody's. And it's interesting because -- I'm trying to have some data for you here.

If you look at Amazon sales, and Amazon, if anything, has gained cable modem share over the last 12 months. If you look at cable modems for Amazon, they actually -- their unit sales declined 12% in the past year and the revenues declined 16.5%. And that's looking at a week ending July 22.

And the good news is that the rate of decline has slowed. So the revenues had dropped year over year 15% around the week ending April 1. So in almost 4 months, the decline went from 15% to 16.5% in terms of year over year.

So the basic answer is they definitely hurt. We think that that shrinkage is pretty much 100% due to their impact. We don't just say that because we believe it without looking at it. We've actually looked at the territories where Time Warner Cable is. And we absolutely see that that's not where the action is in terms of selling cable modems for retail.

So it has been a negative effect, and it's a disappointing fact. But at least it's not a killer. It's just a negative.

Are you able to get your new modems, like the DOCSIS 3.1, certified by Charter?

I don't think they're -- I could be wrong, but the last time I checked, which is recently, they weren't certifying 3.1. I'm not really sure where they are with their rollout plans.

Charter generally has been resistant to retail and they're kind of kicking and screaming. But they do certify other products. But the problem with them is that they don't -- especially in the old Charter territories, they don't give a discount if you bring your own cable modem.

We think for Time Warner Cable, they've -- if you were getting a discount, you still get it. But for new customers, they're trying to push them toward basically having to take the Charter product. So they are definitely not our favorite cable company, but we can live with the situation.

All right. Well, thanks for taking my questions.

Okay, thank you.

(Operator Instructions) There are no additional questions at this time.

Okay, well, thank you, Stephanie. And thanks to everybody. I appreciate all the good questions and it's always good to speak with you. Thanks for your support. Bye now.

Thank you. This concludes today's conference. You may now disconnect.