LeapFrog Enterprises (LF), the educational gaming company, announced their Q1 2008 results yesterday. Their revenues of $58.3 million were 4.3% lower than previous year Q1 revenues but were substantially higher than the market’s expectations of $51.7 million. For the quarter, their loss per share of $0.43 was lesser than the market’s projected losses of $0.48.
US consumer segment generated revenues of $40.6 million recording a 6.5% reduction compared to the previous year. International segment revenues were marginally higher at $12.7 million compared to $12.5 million the previous year. Net sales from the school segment remained flat at $5.0 million.
Hardware brought in 35% of their revenues for the quarter compared to 23% the year before. Software sales’ contribution remained constant at 35% for the quarter and sales from standalone products reduced from 42% earlier to 30% this quarter.
They reaffirmed their outlook for the year of annual revenue growth rate in the mid to high teens at a nominal loss. They expect the first half of the year to be weaker than the second half, but that is pretty much the nature of the toy business.
In my interview with Jeff Katz, he had mentioned how Leapfrog’s Mission number one was to come back with a set of fabulous reading products. Their recently launched Tag scheduled to be on shelf by June, might just be that product. The market is certainly waiting for that encore to LeapPad.
He had also talked about the need for the company to catch up with the Internet. Their LeapFrog Learning Path software will give progress report on the child’s performance, and also recommend the next range of products as the child grows, thus becoming an active sales vehicle for the company. Their launches of Leapster 2 and Didj are also on track and they too shall be web connected to their Learning Path software.
They added title lineups of Star Wars and Indiana Jones to their list and they are planning to move to external or third party vendors for the creation of additional titles.
The market reacted positively to their results and the stock closed 6% higher at $8.98. This may be a good time to buy the stock in preparation of a turnaround in 2009 under Jeff Katz’s able leadership, especially given that LF today is down 72 cents, or 8%, to $8.26.