LeapFrog rebounds in Q3
By Staff -- Playthings, 11/4/2008 8:16:00 AM
EMERYVILLE, Calif.—LeapFrog Enterprises reported a 35 percent jump in net sales and a $24 million profit in the third quarter ended on September 30.
For the quarter, the toy and electronic learning products maker reported net sales of $194.6 million, up from $144 million in the corresponding period of 2007. The company’s net income of $24.0 million, worth $0.38 per share, was a turn-around from 2007’s Q3 when LeapFrog lost $10.3 million, or 16 cents per share.
Net sales from the company’s U.S. Consumer segment increased 40 percent to $153.6 million for the third quarter 2008 compared with $109.5 million for the third quarter 2007. Net sales from its International segment increased 26 percent to $38.2 million. Net sales from its School segment fell 35 percent to $2.8 million.
Gross profit improved to $85.3 million for the third quarter 2008 compared to $60.7 million for the third quarter 2007. Gross margin fur the quarter increased by 1.6 percentage points to 43.8 percent. Operating expenses fell by $25.3 million to $56 million, impacted by a 35 percent decrease in selling, general and administrative expenses, which included staff reductions and the absence of comparable patent defense and settlement costs. Research and development costs fell by 18 percent to $11.7 million, reflecting decreased spending for platform development and a shift to third-party content development. Advertising expenses grew 14 year-over-year to $14.6 million for the third quarter to support new product introductions.
"We entered 2008 planning for our largest and most important launch year ever, and our third quarter results were on track with our expectations,” said LeapFrog President and Chief Executive Officer Jeffrey G. Katz. “Third quarter sales were driven by the continued roll-out of our new products, notably our Leapster2 and Didj educational gaming systems, and the Tag reading system in our international markets. These launches went well and our products have already won numerous awards and strong holiday toy accolades in the media, which we think bodes well for when holiday consumers finally come out of their bunkers. And we think they will come out. But, we doubt we can completely compensate for the recent softness in retail trends and so we are going to moderate our expectation for full year sales growth."
The company’s revised expectations for full year 2008 now include a 10 to 15 increase in revenue, a higher gross margin than the 39.2 percent it achieved in 2007 and a 15 percent reduction in overall SG&A and R&D spending compared to the prior year.
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