LeapFrog Reports First Quarter 2012 Net Sales Increased 81%

EMERYVILLE, Calif., May 3, 2012 /PRNewswire/ -- LeapFrog Enterprises, Inc. (NYSE: LF) today announced financial results for the first quarter ended March 31, 2012.

(Logo: http://photos.prnewswire.com/prnh/20090219/LFLOGO)

Highlights of first quarter 2012 results compared to first quarter 2011 results:

• Consolidated net sales were $72 million, up 81%.
• Gross margin was 41.3%, up 11.7 percentage points.
• Net loss per share was $0.14, an improvement of $0.20.
• Cash and cash equivalents were $135 million as of March 31, 2012, an increase of $57 million compared to the balance as of March 31, 2011.

"We delivered a terrific performance in the first quarter with strong sales growth, margin expansion, and a significant improvement to the bottom line," said John Barbour, Chief Executive Officer.  "Our exceptional growth was a result of strong business execution, far lower retail inventory levels at the start of the year, and Easter occurring two weeks earlier than last year which drove sales in the first quarter compared to the second quarter last year.  In addition, sales of LeapPad, its content, and accessories significantly exceeded our expectations." 

Financial Overview for the First Quarter 2012 Compared to the First Quarter 2011

First quarter 2012 net sales were $72 million, up 81% compared to $40 million last year, and included a 1% negative impact from changes in currency exchange rates.  Net sales growth was primarily driven by lower retail inventory at the start of the year compared to last year, an earlier Easter, strong content sales, and continued high consumer demand for LeapPad.  First quarter 2012 net sales increased 98% in the U.S. segment and increased 49% in the international segment, with international segment net sales including unfavorable changes in currency exchange rates of two percentage points.  Gross profit was $30 million for the quarter, up 153% from a year ago.  Gross margin was 41.3% for the first quarter 2012, up 11.7 percentage points compared to a year ago.  Loss from operations was $9 million for the first quarter 2012, an improvement of $13 million, or 61%, compared to a year ago.

"While it's early in the year, we're out of the gate strong and executing against our stated goal of growing our earnings and delivering strong cash flow through disciplined growth and diligent cost control," said Mark Etnyre, Chief Financial Officer.  "As a result, we improved our bottom line by $0.20 per share and generated $63 million of net cash flow in the first quarter.  With our leading educational entertainment portfolio, strong team, and commitment to innovation in technology, education, and content, we are well positioned to deliver earnings and cash flow growth in 2012 and beyond." 

Guidance

"Given the strength of our first quarter results, we are raising our full year 2012 guidance," continued Mr. Etnyre.

For the full year 2012, we now expect:

• Net sales to increase by 10% to 13% compared to 2011.
• Net income per diluted share to be in the range of $0.52 to $0.57, compared to $0.30 in 2011. 

For the second quarter of 2012, we expect:

• Net sales to increase by 17% to 22% compared to the second quarter of 2011.
• Net loss per share to be in the range of $0.18 to $0.20, compared to a net loss per share of $0.21 in the second quarter of 2011.

Conference Call and Webcast

LeapFrog will hold a conference call to discuss first quarter 2012 financial results on May 3, 2012, at 2:00 p.m. Pacific Daylight Time (5:00 p.m. Eastern Daylight Time).  The conference call will be webcast and can be accessed at LeapFrog's investor web site at www.leapfroginvestor.com.  To participate in the call, please dial (706) 634-0183 and request conference ID 70750296.  A replay of the call will be available for one month.  To access the replay, please dial (404) 537-3406 and use conference ID 70750296.

About LeapFrog

LeapFrog Enterprises, Inc. is the leader in educational entertainment for children. LeapFrog's award-winning product portfolio helps millions of children achieve their potential by delivering best-in-class curriculum through engaging content, fun multimedia learning platforms, and toys.  The Learning Path, LeapFrog's proprietary online destination for parents and extended family, provides personalized feedback on a child's learning progress and offers product recommendations to enhance each child's learning experience. Through the power of play, LeapFrog's products and curriculum help children of all ages prepare for school and life success.  LeapFrog's products are available in more than 45 countries and have been used by teachers in more than 100,000 U.S. classrooms.  LeapFrog is based in Emeryville, California and was founded in 1995 by a father who revolutionized technology-based learning solutions to help his child learn how to read.  Come see the learning at www.leapfrog.com.  

NOTE: LEAPFROG, the LeapFrog logo, and LEAPPAD, are trademarks or registered trademarks of LeapFrog Enterprises, Inc.

Forward-Looking Statements

This news release contains forward-looking statements that involve risks and uncertainties, including statements regarding anticipated financial results. Our actual results may differ materially from those expressed or implied by such forward-looking statements. The risks that could cause our results to differ include, without limitation, deterioration of global economic conditions, our ability to correctly predict highly changeable consumer preferences and product trends, our ability to continue to develop new products and services,  our reliance on a small group of retailers for the majority of our gross sales, our dependence on our suppliers for our components and raw materials, the seasonality of our business, our growing focus on online products and services, system failures in our online services or web store, our reliance on a limited number of manufacturers, our ability to maintain sufficient inventory levels, our ability to compete effectively with competitors, our ability to maintain or acquire licenses, third parties who claim we are infringing on their intellectual property rights, errors or defects in our products, privacy concerns about our Internet-connected products, the sufficiency of our liquidity, the risk associated with international operations, continued compliance and associated costs with and/or changes in laws and regulations, negative political developments, natural disasters, armed hostilities, terrorism, labor strikes or public health issues, the loss of members of our executive management team, continued ownership by a few stockholders of a majority of voting power in us, and the volatility of our stock price.  These risks and others are discussed under "Risk Factors" in our filings with the U.S. Securities and Exchange Commission, including our 2011 annual report on Form 10-K filed on February 29, 2012.  All information provided in this release is as of the date hereof, and we undertake no obligation to update this information.

SOURCE LeapFrog Enterprises, Inc.