Leapfrog narrows loss in Q1

Firm reports a net loss of £23.5 million for the first quarter ended March 31st 2010.
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The net loss for the period lessened year-on-year, compared to £27,171 in the same quarter of 2009.

Net sales for the quarter were $42.4 million, up 42 per cent year-on-year compared to $29.9 million in Q1 2009, and included a three point favorable impact from changes in currency exchange rates.

Net sales were strong across the entire portfolio and benefited from lower retail inventory levels leading into the first quarter of 2010 as compared to 2009.

Bill Chiasson, CEO and president commented: "LeapFrog's Learning Path and product portfolio strategy continued to drive good performance.

"Strong net sales growth, gross margin expansion, and disciplined spending contributed to an improved bottom line. Importantly, too, POS increased 12% in the US and was also strong internationally.

"Since our business is seasonal, the first quarter typically represents the lowest sales period of the year and the gross margin is generally lower than the full year gross margin. That said, we are pleased with the strong sales performance across our entire portfolio and our increasing software tie ratio trends."

Net sales from the US for the quarter were $32.7 million, up 47 per cent compared to $22.2 million a year ago.

Net sales from the international segment were $9.8 million, up 28 per cent compared to $7.6 million a year ago, and included a 13 percentage point favorable impact from changes in currency exchange rates.

Going forward, Leapfrog expects net sales to increase between ten and 20 per cent for the full year 2010. The firm also hopes to see positive operating income and net income for the year.

For the second quarter of 2010, Leapfrog expects net sales to increase between 20 and 25 per cent year-on-year. The second quarter is also expected to increase modestly, but the firm notes that in Q2 2009, the firm benefitted from a one-off tax benefit of $6 million.

Chiasson continued: "Looking forward, we are encouraged by the exciting new products launching this year, increased retail distribution, and the impact of direct marketing."

Mark Etnyre, chief financial officer added: "We had a solid first quarter. Net sales increased 42 per cent, gross margin expanded by two points, operating expenses remained flat, and we generated $35 million of operating cash flow.

"We believe we are well-positioned for future growth and profitability given our leading brand, strong product portfolio, Learning Path-connected strategy, and lower cost structure."


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