LeapFrog Reports Second Quarter 2012 Net Sales Increased 31%

EMERYVILLE, Calif., Aug. 1, 2012 /PRNewswire/ -- LeapFrog Enterprises, Inc. (NYSE:LF) today announced financial results for the second quarter ended June 30, 2012.

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

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

• Consolidated net sales were $71 million, up 31%.
• Gross margin was 39.9%, up 500 basis points.
• Net loss per share was $0.12, an improvement of $0.09.
• Cash and cash equivalents were $127 million as of June 30, 2012, an increase of $69 million compared to the balance as of June 30, 2011. 

Highlights of six month 2012 results compared to six month 2011 results:

• Consolidated net sales were $143 million, up 52%.
• Gross margin was 40.6%, up 790 basis points.
• Net loss per share was $0.26, an improvement of $0.29.

"We delivered terrific second quarter results, driven by the strong demand for LeapPad1 and its content," said John Barbour, Chief Executive Officer.  "LeapPad1 continues to be the best-selling children's learning tablet in the USA, UK and Canada.

"This summer, we launched a new significantly enhanced LeapPad, the LeapPad2, plus the next generation of educational video gaming systems, the LeapsterGS. We are excited about the initial response to these two exciting new platforms – both will start shipping in early August. 

"In addition, we have an extensive content library of hundreds of fun educational games, videos, apps, music and books all curated by our team of learning experts and available in cartridge or by digital download."

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

Second quarter 2012 net sales were $71 million, up 31% compared to $54 million last year, and included a 1% negative impact from changes in currency exchange rates.  Net sales growth was primarily driven by continued high consumer demand for LeapPad and strong content sales.  Second quarter 2012 net sales increased 26% in the U.S. segment and increased 46% in the international segment, with international segment net sales including a 5% negative impact from changes in currency exchange rates.  Gross profit was $29 million for the quarter, up 50% from a year ago.  Gross margin was 39.9% for the second quarter 2012, up 500 basis points compared to a year ago.  Loss from operations was $7 million for the second quarter 2012, an improvement of $6 million, or 43%, compared to a year ago.

"We are executing against our stated goal of growing our earnings and delivering strong cash flow through disciplined growth and diligent cost control," said Mark Etnyre, departing Chief Financial Officer.  "As a result, we have grown our sales by 52%, improved our bottom line by $0.29 per share and increased our operating cash flow by $13 million during the first six months of this year compared to a year ago.  With our award-winning 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 second quarter results and improved visibility to the second half of the year, we are raising our full year 2012 guidance," continued Mr. Etnyre.  "Our guidance is based on our best view as of today, but keep in mind that our full year 2012 results will be highly dependent on the economy and consumer sales during the all-important holiday season."

For the full year 2012, we now expect:

• Net sales to increase by 13% to 15% compared to 2011.
• Net income per diluted share to be in the range of $0.61 to $0.66 compared to $0.30 in 2011. 

For the third quarter of 2012, we expect:

• Net sales to increase by 10% to 15% compared to the third quarter of 2011.
• Net income per share to be in the range of $0.36 to $0.41 compared to $0.35 in the third quarter of 2011.

Conference Call and Webcast

LeapFrog will hold a conference call to discuss second quarter 2012 financial results on August 1, 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 13404560.  A replay of the call will be available for one month.  To access the replay, please dial (404) 537-3406 and use conference ID 13404560.

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 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 leapfrog.com.  

TM & © 2012 LeapFrog Enterprises, Inc. All rights reserved.

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.