Leapfrog?s Q3 rise

Leapfrog has announced financial results for the third quarter ended September 30, 2008.
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The company reported net sales of $194.6 million and net income of $24 million, or 38 cents per share for the period. This compares to net sales of $144 million and a net loss of $10.3 million, or 16 cents per share, for the third quarter 2007.

Gross profit improved to $85.3 million for the quarter compared to $60.7 million for the same period in 2007.

Operating expenses fell to $56 million for the period compared to $71.3 million year-on-year. Selling, general and administrative expense also decreased by 35 per cent, reflecting the impact of headcount reductions and the absence of patent defense and settlement costs.

Research and development costs also fell by 18 per cent to $11.7 million, reflecting decreased spending for platform development and the shift to third-party content development.

Sales from the US consumer segment increased 40 per cent to $153.6 million compared with $109.5 million year-on-year. Net sales from the International segment increased 26 per cent to $38.2 million for Q3 compared with $30.2 million in 2007.

Leapfrog president and chief executive officer Jeffrey G. Katz said:

"We entered 2008 planning for our largest and most important launch year ever, and our third quarter results were on track with our expectations. 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.

“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."

Bill Chiasson, chief financial officer, said: "We are pleased with this quarter's results. We have a strong portfolio of products, clean inventories, a healthy balance sheet and plenty of liquidity to weather the economic storm."

LeapFrog's revised expectations for the full year 2008 results include a 10-15 per cent revenue increase compared to 2007; a higher gross margin compared with 39.2 per cent in the previous year and a 15 per cent reduction in overall SG&A and R&D spending year-on-year.


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