LeapFrog Enterprises (LF), the educational gaming company, announced its Q1 2008 results on Monday. Its 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, its loss per share of $0.43 was lesser than the market’s projected losses of $0.48.
Its U.S. Consumer segment generated revenues of $40.6 million recording a 6.5% reduction compared to the previous year. Its International segment revenues were marginally higher at $12.7 million compared to $12.5 million the previous year, and net sales from its School segment remained flat at $5.0 million.
Hardware brought in 35% of its 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.
The company reaffirmed its outlook for the year of annual revenue growth rate in the mid-to high-teens at a nominal loss. The company expects 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. Its 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. Its 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. Its launches of Leapster 2 and Didj are also on track, and these products will also be web-connected to its Learning Path software.
The company added title lineups of Star Wars and Indiana Jones to its list, and it is planning to move to external or third-party vendors for the creation of additional titles.
The market reacted positively to its 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 on Monday, LF was down $0.72, or 8%, to $8.26.