Mixed Q3 for Leapfrog

Leapfrog's third quarter results show sales down but inventory levels improving.
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Leapfrog's third quarter results show sales down but inventory levels improving.

Net sales for the quarter ended 30th September were $111.9 million, down 42.5 per cent compared to $194.6 million in the same quarter a year ago. They were impacted by high retail inventory levels remaining from 2008 which have now reached levels substantially lower than a year ago. Net income for the quarter was $7.2m compared to $24.1m a year ago.

Despite the decline in net sales, cash and cash equivalents were $29.5 million at September 30th, 2009, an improvement of $5.9 million compared to $23.6 million a year ago. Gross margin for the quarter was 42.7 per cent, compared to a gross margin of 43.8 per cent a year ago. Operating expenses for the quarter were $38.7 million, down 30.8 per cent compared to $55.9 million a year ago.

Nine month figures showed sales declining from $321.1m in the same nine months in 2008 to $191.1m. Net income showed a loss of $32.1m for the nine month period in 2009 compared to $23.95m last year.

"Over the past nine months, our net sales declined substantially as we worked with our retail partners to bring down unusually high inventory levels from last year. We are pleased that current retail inventory levels are now over 30 per cent lower than a year ago," said Jeffrey Katz, Chairman and CEO.

"But in this tough environment, we have also grown retail point-of-sales dollars year over year, we have increased our market share, we have our lowest operating expenses since we went public in 2002, and we expect to see sales growth in the fourth quarter."

"We are also pleased to be starting to see early benefits from our Learning Path strategy which builds direct 'one-to-one' relationships with consumers. For example, POS and tie ratios of software for Tag, our first connected product, are well beyond what we experienced with the highly successful LeapPad at the same point in its lifecycle. We have over one million connected consumers today, and we have the capability to market to them directly in a personalized manner based on consumer information we have through the Learning Path. At the end of the holiday season, we expect to have substantially more connected consumers and to see earnings benefits grow further as a result," continued Katz.