Cobra Electronics Corporation (COBR) Management Discusses Q2 2013 Results - Earnings Call Transcript

Jul.26.13 | About: Cobra Electronics (COBR)

Cobra Electronics Corporation (NASDAQ:COBR)

Q2 2013 Earnings Call

July 26, 2013 11:00 am ET

Executives

James R. Bazet - Chairman and Chief Executive Officer

Robert J. Ben - Chief Financial Officer and Senior Vice President

Sally A. Washlow - President

Analysts

Bruce C. Baughman - Franklin Advisory Services, LLC

David Rode

Operator

Ladies and gentlemen, thank you for standing by. Welcome to the Cobra Electronics Corporation's Second Quarter 2013 Conference Call on Friday, 26 of July, 2013. [Operator Instructions]

I will now turn hand the conference over to Mr. Jim Bazet, Chairman and Chief Executive Officer. Please go ahead, sir.

James R. Bazet

Thank you, and good morning. Welcome to the Cobra Electronics' second quarter results conference call. With me today, I have Bob Ben, our Senior Vice President and Chief Financial Officer; and Sally Washlow, President of the company. Each of them will have an opportunity to address our results shortly, and I will be available to respond to your questions at the conclusion of our call.

I will now ask Bob to give some opening remarks regarding our call today.

Robert J. Ben

Before we begin, please keep in mind that our call today will include certain forward-looking statements and that actual results could differ materially from the results projected in the forward-looking statements. We refer you to our Forms 10-K and 10-Q, especially the risk factors, for information that could cause actual results to differ materially from the results projected in the forward-looking statements. Please also keep in mind that this conference call is being simultaneously broadcast over the Internet, and a replay will be available on the Cobra website for 30 days.

Now, I'd like to turn the call back to Jim Bazet to share his thoughts on the second quarter results.

James R. Bazet

Thank you, Bob. Before I begin today, I want to suggest a direction for today's call. In accordance with our traditional calls, we will present substance with the numbers released today, and answer to the best of our ability questions that you might have. However, today, we would also like to focus on what management is doing, and has done, to correct the 2 difficult quarters that have just passed and return the company to profitability and growth in the 2 quarters ahead. We don't have to tell you about the slow economic recovery and the impact on today's businesses. You read about it every day in the newspapers and you watch it every evening on the news. We don't have to illustrate to you the significant burden the protracted patent litigation can place upon our company, particularly small ones. So our focus today will be to present and discuss initiatives that you should expect any management team to put in place at a time when these previously mentioned events burden a company's resources, rob it scale and profitability in growth. As always, I will summarize the results and Bob will give you a deeper look at what they mean, and to the extent possible, the substance behind these results. And Sally will set the stage with the presentation of several new and exciting products that will not only drive our business in the back half, but in the year ahead. These will be our core revenue drivers. I will then come back and discuss some initiatives, such as our patent litigation settlement, significant expense reductions and exciting new products that will all add up to a profitable third and fourth quarter. The perfect storm has run its course and the worst is behind us. We do not make excuses for the economy, the litigation or other matters. Instead, we are focused on implementing initiatives that will return the company to profitability and growth and better prepare the company to weather the economic headwinds and whatever else might come our way, now and in the future. So let's proceed.

I like to begin our call today with an overview of the second quarter 2013 results. Additionally, I would like provide some context on our second financial results, both relative to last year's second quarter and compared to our industry peers. This morning, we reported to our shareholders a net loss of $1.9 million, or $0.29 per share, for the second quarter of 2013, compared to net income of $902,000, or $0.14 per share in the second quarter of 2012. In addition, there was an operating loss of $1.9 million for the current quarter compared to an operating income of $1.4 million in the same quarter last year. Quite a variance. I'd like to spend some time on reviewing the second quarter net sales and gross margin results.

First, consolidated net sales for the second quarter of 2013 were $25.6 million or $3.5 million lower than in the second quarter of 2012, due in part to decreases in both of our operating segments. The Cobra segment net sales were $3 million lower than in the prior year second quarter. The sales drop for the Cobra segment resulted from lower domestic sales of Truck Navigation products and Citizens Band radios. However, this was partially offset by a significant increase in detection products and PMR two-way radio sales in Eastern Europe. Truck Navigation domestic sales to travel centers were significantly below the second quarter of 2012 due to strong initial load-in of sales of the 2 models in the prior year's second quarter. These were not repeated in 2013, as well as an increased competition. In addition to the decline in Citizens Band Radio, domestic sales reflected higher customer inventories due to lower sell-through at major travel centers. While we're disappointed with the results, we know that others in the Consumer Electronics industry have been severely impacted by these negative business conditions. Also, when the consumer shows up in the stores, our product sell through very good. It's important to point out at this time right now that we don't have a brand problem and we don't have a product problem. What we have is economic headwinds exacerbated by certain areas that some of our customers aren't doing so well. When our products are on the shelf, we're still important to the consumers, measured by our continuing market share. We haven't lost market share. The brand is still well-ridden and the brand is still well-sold.

Moving to the PPL segment, net sales were $415,000 lower than in the prior year's second quarter. This sales decrease was attributed to a continued difficult economic environment in Europe and increased competition in the Truckmate Navigation products. As you may know, also, there has been an expanded recession in the U.K. and in Western Europe, and it creates a lumpiness to their business. Turning to some brighter news, the all-new and sleek Cobra SPX series of detectors and a redesigned line of new marine radios started selling at the end of the second quarter, and Sally will talk more about some of our new products shortly.

Consolidated gross margins for the second quarter of 2013 was 26.1% compared to 30.5% for the second quarter of 2012, as a result of less favorable sales mix and competitive pricing, pressures mainly in the Cobra segment. For this segment, the gross margin was 24.9%, compared to 29.5% in the second quarter of last year due to decrease of percentage of sales of higher margin truck Navigation products that I mentioned earlier. It also created a decline due to competitive pricing pressures of some of our more aggressive competitors. Also contributing to lower gross margin in the Cobra segment were competitive pricing pressures on sales of detection products to Eastern Europe. PPL's gross margin decreased to 33.1% from 36.3% in the second quarter last year, reflecting mainly an unfavorable product mix and a foreign exchange loss compared to a gain in the same quarter last year.

Now, I'd like to address a significant matter that has affected Cobra in the current quarter. The company entered into an agreement to sell all outstanding claims relating to the Fleming patent litigation. The settlement agreement provides the company with a license to certain patents held by Mr. Fleming in exchange for certain payments to be made by the company. Although this occurred -- this settlement occurred subsequent to the completion of the second quarter, the expense for an upfront payment was recorded in the current quarter's financial results in accordance with U.S. GAAP. We are pleased to have resolved this matter and believe that this settlement is in the long-term best interest of the company and its shareholders because it will allow us to avoid lengthy and legal -- costly legal process that would otherwise be necessary to bring this case to a conclusion.

Let's talk a bit about the outlook. Outlook for the third quarter of 2013 and for the entire year, as noted in our press release this morning, we are implementing several actions to make this outlook better and those actions will be improving significantly our financial performance. Some of these actions include substantially reducing operating expenses, adding meaningful sales to several exciting new products not previously planned for this year, and taking steps to improve distributor sales. We believe that these steps, along with the recently settled patent litigation, will enable the company to return to profitability and achieve a higher operating income in the third quarter of 2013 than in the third quarter of 2012. However, the company anticipates a lower level of operating income in 2013, compared to 2012, for the year as a result of those losses experienced by the company in the first half.

In conclusion, the U.S. economy is reflecting a deterioration in discretionary spending on consumer electronics items other than tablets and smartphones. However, some economic data suggest a pickup in the second half of 2013. Nonetheless, Cobra is still well positioned for future quarters for the following reasons. We have a strong brand name and a growing brand equity. Also, our company has been in business for more than 50 years and has shown great resilience during these periods. We have found that during these slower periods, the reducing cost and operating expenses, while not sacrificing investments that will positively impact the near-term performance of our company, is absolutely essential. We have expanded our marketing and distribution networks worldwide, which provides more storefronts to find and purchase our products. Cobra products are sold in 75 countries and 55,000 storefronts today. Additionally, we will continue to use this network to be more promotionally-oriented to increase the sell-through of our products and plan to make future improvements in order to increase sales in the back half and beyond 2013. We continue to introduce, develop exciting, award-winning new products that take advantage of our marketing and distribution channels and also to target a younger consumer. In addition, there will be many of these exciting new products introduced in the back half of 2013 than originally planned. Once again, Sally will provide you with a more in-depth update of the new products in her comments.

I'll be back to discuss some other initiatives in a moment but at this point, let me turn the call over to Bob. Sally will then update you on our marketing and product initiatives and we will open the call for questions. Bob?

Robert J. Ben

Thanks, Jim, and good morning, everyone. As Jim noted earlier, Cobra reported a net loss for the second quarter of $1.9 million, or $0.29 per share. This compared to net income in the prior year second quarter of $902,000, or $0.14 per share. Obviously, this is a disappointment for both me, as your fellow shareholder, as well as your CFO. But however, as Jim noted, we are implementing aggressive actions in order to improve the profitability of our company in the second half of 2013. This change to a net loss in the current quarter from a net income in the second quarter of 2012 resulted from lower sales, a decrease in gross margin and higher SG&A expenses. The company reported net sales of $25.6 million in the current quarter as compared to $29.1 million in the second quarter of 2012. Consolidated gross margin was down by more than 4 points, to 26.1%, primarily due to a less favorable product mix and increased competition in certain areas of our business.

Turning to selling, general and administrative expenses. These increased to $8.5 million from $7.4 million in the prior year second quarter. Variable selling expenses declined, however, consistent with net sales. Fixed expenses, though were higher, primarily in the Cobra segment, reflecting mainly significant expenses resulting from the Fleming patent litigation that Jim discussed earlier. Interest expense for the second quarter of 2013 was $150,000 compared to $235,000 in the same quarter of 2012. This reflected a lower interest rate that we received in our bank extension and amendment that was completed in December of 2012. Other income was $86,000 compared to other expense of $144,000 in the prior year's quarter, primarily due to a gain on the cash surrender value of life insurance that the company owns for the purpose of funding deferred compensation programs for certain current and former officers of the company. This compared to a loss in the same quarter of last year on those comps.

Moving to the tax provision. This was a $14,000 expense in the current quarter as compared to $164,000 tax expense in the second quarter of 2012, mainly due to lower pretax income, for both Cobra Electronics Europe Limited and Performance Products limited.

Looking at the first 6 months of 2013, comparing it to the same period of 2012. Net sales were $47.2 million for the 6-month period of 2013 as compared to $55.5 million for the first 6 months of 2012. Gross margin for the first 6 months was 27.4%, a decrease of more than 2 points from last year's gross margin during the same period. SG&A expenses increased to $16.5 million from $14.8 million in the first 6 months of 2012, mainly due to significant expenses for the Fleming patent litigation that was recently settled. As a result, the company reported net loss for the year-to-date of $3.5 million or $0.53 a share compared to a net income of $1.2 million or $0.19 per share in the prior-year period. However, as Jim stated, the company anticipates an operating income for fiscal year 2013, although at a lower level, than fiscal year 2012 due to the first half loss.

Turning to our review of the June 30 balance sheet. Accounts receivable at the end of the quarter were $12.3 million compared to $16.4 million 1 year earlier. In addition, days sales outstanding was 47 days compared to 48 days in the prior year's quarter. Inventories at the end of the second quarter increased to $34.6 million from $32.6 million at the end of June 30, 2012, as a result of the lower-than-expected sales. As a result, Cobra had interest-bearing debt of $15.2 million as compared to $14.2 million at June 30, 2012, and cash of $2 million compared to cash of $2.9 million at June 30, 2012.

Now, I'd like to turn the call over to Sally to provide us with an update on our markets and products.

Sally A. Washlow

Thanks, Bob and good morning. As Jim and Bob mentioned, we have taken several initiatives to improve our results for the back half. I will be discussing several new products that will be introduced throughout the third and fourth quarter. Many of these products have not been publicly released. As part of our new product and launch strategy, these products will be announced to the public in detail closer to the actual launch date, so that we can take advantage of the momentum of the press release with immediate product availability and sales. Therefore, many of these products will be discussed in general. Please look to our press releases throughout the quarter for the actual product detail. Overall, in the back half, we will be introducing over 40 new SKUs, consisting of a mix of product line extensions and new categories. I would like to begin with our new products in the Radar Detection category. The SPX 5300, 5400 and 5500 were announced for general availability in June of this year. This newest line of powerful, yet affordable, detectors delivers unprecedented performance range and protection from all radar and laser guns. We have secured key product placements with many retailers for shipment this quarter and promotions for the key holiday selling season. The SPX radar line is priced from $99 to $149. We are constantly pushing the envelope to deliver products to enhance driver situational awareness and ultimately, driver safety. In the latter part of the quarter, we will be introducing additional models of the SPX line with an entirely new industry-leading design. These 3 new models are well-positioned for late Q3 and Q4 sales. You will hear more details about these products in the coming months as general availability will be announced.

The nationwide general availability of the Cobra iRadar ATOM was announced in May. Based on the award-winning Cobra iRadar system, the Cobra iRadar ATOM is the most compact detector on the market while delivering unrivaled performance, typically only available from units costing hundreds of dollars more. Cobra iRadar ATOM has a 35% smaller form factor than previous iRadar models. We'll also be adding another SKU to the award-winning iRadar line that will be introduced this fall. It is truly Cobra's first self-radar detector. The entire iRadar product line leverages Cobra's first-to-market and rapidly evolving iRadar App family, available in App Store and the Android marketplace. We recently have upgraded our app to allow music controls while in the app on both platforms. Furthermore, the iOS version provides the ability to purchase data upgrades, view distance to alert countdowns and background alert notification. Lastly, we have been working on the expansion of detectors in other international markets beyond our current strengths in Eastern Europe. Throughout the quarter, we will be readying products for these new markets.

Turning to products for the professional driver and the core Cobra customer, we have several exciting initiatives. We will kick off many of these new products for the professional driver at the Great American Trucking Show in Dallas, Texas, at the end of August. These products will include a highly-featured Citizens Band Radio, Citizens Band Radio accessories, an entirely new category from Cobra to enhance driver safety. The Cobra professional navigation units continue to provide drivers with safe and efficient routing along with free live and predictive traffic to help drivers avoid costly delays. We introduced Cobra HomeBase that allows drivers to download the latest map and software updates at ease, as well as lets them back up their personal data, including address books and state mileage logs. We continue to work with our key partners to provide creative bundle packs for holiday promotion at travel centers. We feel that not only do these bundle packs provide a great value to the driver, they're also great holiday gift items. You'll see many more of these in the future months.

Moving on to Two-Way radios. At the end of June, we announced the general availability of the latest design that includes redesign of the 100 series and completely new designs of the 300 and 500 series. The 100 series is the most economical two-way radio solution on the market with a built-in weather radio feature, featuring weather alert in a 16-mile range. The 300 series are designed for outdoor use and feature a 23-mile range along with NOAA, weather and emergency radio, a dedicated weather button and voice-activated transmission for hands-free use. The 500 series features a 28-mile range with access to weather alert, NOAA weather radio and emergency radio, VibrAlert, which is great for noisy or all-quiet environments, VOX hands-free transmission, as well as an LED flashlight and rubberized grip make it perfect for rugged outdoor use. We are pleased to announce that the new line has been selling well and that we are building further momentum. We have secured for the back half many Black Friday and other themed promotions. We are excited to be able to deliver these creative solutions to our customers.

In the marine category, the new line of handheld floating VHF radios has been well received by the boating community. The Cobra HH350, and sister radio, the HH500, are great additions to Cobra's marine lineup. The HH350 is at a key price point for boaters and provides increased power, up to 6 watts, and full access to all NOAA weather channels. The patented HH500 Floating VHF Marine Radio is not only a handheld waterproof VHF marine radio, but it also includes Bluetooth Wireless Technology. This wireless capability allows users to pair their smartphones to the new radio, so they can answer phonecalls while keeping their cellphones safe and dry. We also continue to pursue expanded distribution channels throughout the summer and fall, which includes new products and territories. You will hear more throughout the quarter as we launch these products. This concludes my overview of our key sales and marketing initiatives. We are focused on delivering these new products and we look forward to sharing the results with you in the future quarters.

Operator, we are now ready to take questions.

Question-and-Answer Session

Operator

[Operator Instructions] The first question comes from Bruce Bowman from Franklin Simpleton.

Bruce C. Baughman - Franklin Advisory Services, LLC

What was the amount of the Fleming-related expenses?

James R. Bazet

Bruce, we can't disclose that. We have a nondisclosure agreement that we have. I can only tell you they were substantial.

Bruce C. Baughman - Franklin Advisory Services, LLC

So you cannot disclose what you paid for the licenses?

James R. Bazet

No.

Bruce C. Baughman - Franklin Advisory Services, LLC

Okay. How -- can you describe, out of the total amount that the company will be paying, how much of it will be booked as an intangible license and how much will just be expensed?

James R. Bazet

Really, none of it's booked as an intangible license. It's really just a royalty going forward.

Bruce C. Baughman - Franklin Advisory Services, LLC

Okay. And the royalty -- will the royalty be based on sales of the products?

James R. Bazet

Yes.

Robert J. Ben

Yes.

Bruce C. Baughman - Franklin Advisory Services, LLC

Okay. And then you mentioned the cash payment, an initial cash payment. Is that initial cash payment that did not come before the end of the quarter? Does that represent a payment for past sales of product?

Robert J. Ben

That's correct.

Bruce C. Baughman - Franklin Advisory Services, LLC

Okay. And then after that, will there be any other payments for sales of the product that occurred before June 30, 2013?

Robert J. Ben

No. There will not be.

Bruce C. Baughman - Franklin Advisory Services, LLC

Okay. And then in the presentation, you spoke about reducing operating expenses. Can you elaborate on that, somewhat? Where are the opportunities for reducing operating expenses?

James R. Bazet

Sure. Bruce, this is Jim. What we did was we sat down and went way beyond low-lying fruit, I can't give you the exact number. It also is substantial. It was across the board. We reduced things such as travel, entertainment, some headcount. We reduced some product cost. We restructured some operations so that they wouldn't be as costly and it's just about almost every line item in SG&A. What we did not reduce. We did not cut to the bone because we are keeping our product development process, as Sally talked about. A lot of new products that are coming out and everything. We did the same thing last time. We had some significant expense reductions and we did not cut any of our long-term growth initiatives that we're working on right now. Some of those will be announced towards the end of this year as well.

Bruce C. Baughman - Franklin Advisory Services, LLC

Okay. And can you elaborate a little more -- you mentioned how some of the products that are going to be introduced in the third and the fourth quarter were not initially scheduled for that period release. Why is that?

Sally A. Washlow

We've been able to look at some of the shifts that are going on in the market and quickly focused our team on bringing up some of this product development. Some new opportunities have come our way that we feel fits the brand and we're able to deliver these products to the market in a pretty short timeframe.

James R. Bazet

Bruce, this is Jim. Also, it's important to note that we have been having discussions with different partners and so forth, and not knowing whether these discussions were going to materialize in product. Some of these products are well on their way of development and we're putting our brand to them. And so, as these things have been jelling together, we put them into our portfolio. And we didn't put those in previously, because we were in such preliminary discussions then, it just wouldn't make any sense.

Bruce C. Baughman - Franklin Advisory Services, LLC

Okay. You spent a lot of time talking a lot about new products and the offer -- the operating results you're expecting them to help with in the second half. But are you willing to quantify it in any way? How important is it?

James R. Bazet

We -- again, since we don't disclose by product categories and everything is difficult for us to quantify, but maybe I can help you with this. What you're going to see in the back half, and I guess the question is like, why are you going to do so better in the back half than you did in the first half? It's a combination. Number one, the Fleming matter is going to be behind us. So we'll have minimal expenses to deal with in the back half. Number two, we significantly reduced operating expenses, and I wish I could tell you because I'll be proud to do so. And that is going to help us. If you look at the contribution margin in the company, you're getting about $5 worth of revenue for every dollar of expenses you've got. It's an easy formula to understand. And third of all, these exciting new products are going to come out and we have Black Friday sales, we have placement, we have things for them that we know we're going to materialize in some healthy sales. So it's a combination. It's not any one thing. We're not betting the farm on just the new products because some are going to be base hits, some are going to -- hopefully there's a home run in there. Some will be triples, so on, so forth. But I think, if you look at it, it's a combination of the cost reductions, the stress that's been put on us in the first half in terms of economics and management from a patent litigation matter and the new product introduction. So the combination of those 2 make it a more comfortable type of guidance to give.

Bruce C. Baughman - Franklin Advisory Services, LLC

Okay. You said that you expect the third quarter to be better than last year's third quarter on the operating line but last year's third quarter was not a great quarter, it's $300,000, I think, in operating income.

James R. Bazet

That's correct.

Bruce C. Baughman - Franklin Advisory Services, LLC

Just -- so if you come in at $350,000, it's better than this quarter, but it's not a good quarter. What really -- are you -- I'm not really sure what you're telling us. It sounds like you're really not expecting much. Although, did you say that you expect to be profitable for the full year on the operating line?

James R. Bazet

That's correct.

Operator

[Operator Instructions] We have a follow-up question from Bruce Baughman from Franklin Simpleton.

Bruce C. Baughman - Franklin Advisory Services, LLC

Yes, just on the -- around the Fleming litigation and the related expenses. Again, I think I saw a comment that you're talking to the banks about eliminating that from certain ratios or calculations. Can you elaborate on that a bit and how it's going to matter, one way or the other?

Robert J. Ben

Bruce, this is Bob Ben. Yes, we are speaking with our banks regarding that because we view that as a one-time event that was not as a result of the operating performance of the company. And so, yes, we're asking them to exclude that from certain calculations and we're in discussions with them right now on that.

Bruce C. Baughman - Franklin Advisory Services, LLC

Are you breaching covenants if those are not excluded?

James R. Bazet

Bruce, I think that what we're saying is, is because of the amount of the upfront settlement, there is a possibility that we can put some stress on the covenants that wasn't unexpected. But I will tell you, it's all I could say at this point in time because it's a timing issue, we're working through it. The bank has accepted right now to us making some changes and we'll leave it at that.

Operator

The next question comes from David Rode from Stifel.

David Rode

It's kind of a follow-up question to what Bruce had relating to the Fleming expenses. Can you elaborate what other quarters, prior to this one there may have been Fleming expenses in?

Robert J. Ben

Dave, it's Bob. I just want to -- I'll make sure I understand your question, you want to know what other quarters the Fleming expenses were incurred?

David Rode

Right. I mean, how far back does the Fleming expensing go?

Robert J. Ben

Yes, that started in September of 2012, but it started really impacting us in the fourth quarter of 2012, and that it continued, of course, in the first quarter and into the second quarter.

David Rode

Okay. And from a book value point of view, based on $0.29, are we at $5.48 now after the second quarter? Is that correct?

Robert J. Ben

I show is as $5.51 at the end of the second quarter. So qualitative [ph] .

David Rode

And the tax credit valuation, et cetera, et cetera, thing is hanging out at how many million right now?

Robert J. Ben

Right now, it's a little bit under $9 million as of the end of the second quarter.

David Rode

Which is what? $1.30, $1.31, something as...

Robert J. Ben

Yes, about $1.30 a share, thereabouts.

David Rode

Okay. Also, I know Bruce had talked about the new product stuff, too. My question is, I know we hired somebody early in the year, whose efforts were going to be solely towards new product -- well, not solely, but new product introductions and in an effort to manage the initial splash of these more efficiently and to create a larger footprint, initially. Can you comment on how that's going right now? And does it have anything to do with the confidence factor that you have in the release of some of these other new products that seem to be getting a little more expedited on the back end here?

Sally A. Washlow

Yes, Dave. Certainly, we have been hard at work and not only getting the new products ready but implementing certain key technology initiatives that will help us strengthen and expand the channels to get this to launch. So we're working on deploying that throughout this quarter, before the end of the quarter, you'll see some releases from us on it, but certainly -- and that's where I had to be a little more vague than I have been in the past on new products, because we want to keep the details of them closer to launch, so that we can drive and build the momentum from that. So certainly, you and I have had discussions on some of the technology out there. We're implementing a lot of it throughout this quarter, so that, not only can it help us in the back half of this year, but next year and beyond. And we'll just continue to build on that.

David Rode

Sally, also, you'd mentioned there's 40 new SKUs, some of them extensions, some of them new. Can you just break it down, maybe on a percentage basis, how many of those SKUs are new and how many of those SKUs are extension related?

Sally A. Washlow

Oh, probably, 70% are extensions and 30% are new. So we've got great partners and so when I say some of the them are extensions, it's some great merchandising solutions that we've come up with. For example, 1 product that was selling well in a major retailer, we came up with some other themed promotions for them. So there's a lot involved in -- and a lot of dynamic things driving this business. So it isn't really just 1 thing that we're pointing to. It's various SKUs that will help drive the business as well as a couple of new categories.

David Rode

Okay. And the Fleming deal didn't have anything to do with the ongoing database, but you've been growing as far as the Android and the Apple platforms?

Sally A. Washlow

No, it did not.

David Rode

And can you -- is it possible to quantify how many numbers you've got associated with that? About how many people have downloaded those platforms?

Sally A. Washlow

Yes, it's still in a high 700,000, 750,000. The good news is, what I also mentioned, and it just was an released on the iOS Store this week is that we have the ability for people as well now to purchase data upgrades. So that allows us to develop more features for in-app purchases for the users as well. So we're pretty excited about the roadmap of features that we have coming in and that as well to start driving some revenue, not only from the hardware sales but also the app sales.

David Rode

And on that area, again, I know, again, we heard the term, big data. Are you guys moving the needle forward on how to utilize those downloads and turn those into revenues and trying to quantify what type of value that brings to you?

Sally A. Washlow

We certainly are and a lot of that is melding together. A lot of these separate databases that we've had stored in various places throughout the company. So that's part of some of the technology that we're putting in place this quarter. So we've already started to utilize that data but to really capture the essence of it, we need all of these to be in one place and then really start just driving and building into that data, not only to drive sales but to look for other -- what that data says for the products to develop.

David Rode

Okay. And can you elaborate a little bit on what may or may not be new with your presence with Apple right now?

Sally A. Washlow

New products will be launching in their stores as we speak. So I -- they're not out there yet, so I can't necessarily say what they are.

David Rode

Okay. Let's see here. I guess, this is old news from my end. But again, I view this as not so much me, or in same cases, not so much somebody like Bruce, but some potential new investors out there and whatnot. I look at the last 17 months, we've actually had insider activity to the negative 6,500 shares. Not so much a question but just a point. There has been a lack of insider activity/sponsorship and I would hope that there'd be consideration, either on the Board, depending upon each individual person, or even management, that this would be something that would be considered going forward. And then forward from that, I know that when you guys -- when your stock got down in 2007, 2008, below $1, and then as high as $1.75, there was none, if any, stock buybacks or anything at that time and I realize you're banking scenario right now, though not compromised, awfully tight. The stockings and at these type of prices, again, I would advocate considering a stock buyback. Again, just a comment. Yes, again, it's -- I'm pleased to hear that you're taking steps to potentially set up a good second half here, but there's obviously some type of movement in the stock going on right now, and anything and everything, whether it's insider activity or whatnot, could be helpful. My last comment would be this. I am -- and I know I brought this up before, but again, it's outside people that aren't involved with this, not so much me and Bruce, but I am not an advocate of the poison pill. And again, I'd like to ask the Board to take a look at that whole scenario because it's -- again, my opinion of poison pill in place in the year 2013, these are things that were more implemented back in the 1980s and I'm not a big fan of them.

Robert J. Ben

Okay, Dave. We understand what you're saying and we'll take that into consideration.

Operator

[Operator Instructions] There are appear to be no further questions at this time.

James R. Bazet

Thank you, operator. As with our industry and other industries, we know that there's going to be some challenges ahead of us. We're not going into this naive or blind, particularly with slower economy for consumer electronics products. However, at the same time, we feel we are well-positioned overall. I think we've shared with our listeners here today the initiatives that we've put in place and we've got some good input back from you. We also regret having to incur the expenses associated with Fleming patent litigation and we're working on longer-term ways to mitigate this or try to, at least, avoid it in the future. However, our plans to significantly reduce operating expenses, well beyond low-lying fruit and to introduce new and exciting products that Sally mentioned here today, by including many not planned for introduction in 2013. Again, adding more distributors, taking some lumpiness out of our business over time with less customer concentration. All of this with then sales will return Cobra to profitability in the third and fourth quarters of 2013. And in all of this, it's also important to note that we're not losing track of growth. In particular, we're still focused on growing our top line and brand equity through some accelerated new initiatives. Some of those, Dave, you had asked Sally questions about and some of those, they'll be coming out as we get closer to the initiative becoming online. As you heard from Sally, new product development in accordance with our Develop or Die philosophy continues, and we look forward to announcing more innovative new products in the near future.

In addition, as I said earlier, we will not cut back on product development and our growth initiatives as it represents our future lifeblood. As we noted in our press release this morning, we expect to achieve higher operating income in the third quarter of 2013 than in the third quarter 2012. Bruce, you pointed that it could be really little or it could be really big, and all we can do is point to our year-to-date anticipation of having a profitable operating income for 2013, but not as high as we had last year as a result of the first half issues. We can assure you that management is very focused. We feel that the outlook is bright. We feel that the initiatives that we've put in place are a good balance of initiatives to give us our best chance to successes, even in some sort of an economic headwind. And at this time, we can only say thanks for your continued support and for your participation in the call today.

Operator, this concludes our Q2 earnings call.

Operator

Thank you. This concludes the Cobra Electronics Corporation's Second Quarter 2013 Conference Call. Thank you for participating. You may now disconnect.

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