LeapFrog Enterprises, Inc. Bank of America Consumer Conference March 15, B of A 3/15/06 1

Transcription

1 LeapFrog Enterprises, Inc. Bank of America Consumer Conference March 15,

2 Kathryn Olson Chief Marketing Officer 2

3 Forward-Looking Statements Certain statements in this presentation contain forward-looking statements. The forward-looking statements involve a number of risks and uncertainties. A number of factors could cause our actual results, performance, achievements or industry results to be materially different from any future results, performance or achievements expressed or implied by these forward-looking statements. Additional information concerning factors that could cause actual results to materially differ from those in the forwardlooking statements is contained in the Company s filings with the Securities and Exchange Commission. 3

4 Who are we? LeapFrog is first and foremost an educational products company We are driven by our passion to be the most effective brand for quality, technology-based products Our products solve education problems Content of all products align with state and national educational standards 4

5 The LeapFrog Vision Become the Leading Brand for Quality, Technology-Based Educational Products for School, Work and Home Use for All Ages Around the World 5

6 Our Business Segments US Consumer Revenue: $478 International Revenue: $131 Education and Training Revenue: $40 6

7 US Consumer Segment Education International US Consumer Ranked third of all brands in the industry Strong portfolio of educational products Four large product categories Stand-Alone Book-based Screen-based FLY pentop computer Benefit: All products are based on real education curriculum 7

8 Our Product Portfolio is Broader (US Consumer Segment Only) Little Touch 4% Stand-Alone 25% My First LeapPad 13% Total LeapPad Family 61% Total LeapPad Family 27% Stand-Alone 28% Little Touch7% My First LeapPad 6% LeapPad 44% LeapPad 13% Other 6% Leapster / Leapster L-MAX 7% Other 2% FLY 11% Leapster / Leapster L-MAX 32%

9 2005 Infant, Baby, and Toddler 9

10 2005 LeapPad Family 10

11 Little Touch TV Commercial 11

12 2005 Leapster and Leapster L-MAX 12

13 Leapster TV Commercial 13

14 2005 FLY Pentop Computer Big winner at this year s 2005 Toy Fair Most Innovative Toy of the Year Best 2005 Educational Toy Overall best Toy of the Year 14

15 FLY TV Commercial 15

16 International Segment US Consumer Education International Includes sales in 6 languages in more than 25 countries Leapster L-MAX named Toy of the Year by the Canadian Toy Testing Council in 2005 Growing France, Spain and Mexico businesses 16

17 International TV Commercial 17

18 Our Products Have Received Numerous Awards in 2005: FLY Pentop Computer, Oppenheim Toy Portfolio, Platinum Award Leapster Learning Game System, Dr. Toy, Best Smart Play/Smart Toy Product 2005 Leapster L-MAX Learning Game System, Oppenheim Toy Portfolio, Platinum Award Leapster L-MAX Learning Game System, The National Parenting Center Seal of Approval Learn-Around Playground, Oppenheim Toy Portfolio, Platinum Award Learning Connections Train, - The National Parenting Center Seal of Approval Learning Connections Train, Parents' Choice Approved Award winner Learning Connections Train, Oppenheim Toy Portfolio, Gold Award My First LeapPad learning system, Oppenheim Toy Portfolio, Gold Award My First LeapPad learning system, The National Parenting Center Seal of Approval Talking Words Factory 2: Code Word Caper, Parents Choice Silver Award 18

19 LeapFrog International Awards 2005 Leapster L-MAX learning game system, Canadian Toy Testing Council Energizer Battery-Operated Toy of the Year Award Leapster L-MAX learning game system, Canadian Toy Association 2005 Hot Toy Leapster L-MAX learning game system, Today s Parent Top Toys Leapster L-MAX Letters on the Loose Software, Canadian Toy Testing Council three-out-of three-star rating Learn-Around Playground, Canadian Toy Association 2005 Hot Toy - Pre-School Category Learning Band Walker, Canadian Toy Testing Council, three-out-of-three-star rating Learning Connections Train, Canadian Toy Testing Council Children s Choice Award Learning Connections Train, Today s Parent, Top Toys LittleTouch LeapPad Learning System, Canadian Toy Association 2005 Hot Toy - Pre-School Category French LittleTouch LeapPad Learning System, Canadian Toy Testing Council, three-out-of three-star rating LittleTouch LeapPad Learning System, Protégez-Vous, five-out-of-six point rating for French version 19

20 Coverage Across Top Tier Media Has Been Extensive 20

21 T.O.T.Y (Toy of the Year) 2006 Toy of the Year: FLY Pentop Computer Educational Toy of the Year: FLY Pentop Computer Most Innovative Toy of the Year : FLY Pentop Computer 21

22 The 2006 HOT winners (by category) are: Apparel & Accessories: Perfect Panty, by Hanes Automotives: Ice & Frost Shield, by Prestone CE & Entertainment: SoundDock, by Bose Hardware: ONELink, by First Alert Health & Beauty: Venus Vibrance, by Gillette Home Goods & Housewares: Tide To Go, by Procter & Gamble Office Supplies & Stationery: Scotch brand Stretchy Tape, by 3M Sporting Goods: StreetPilot, by Garmin Toys: FLY Pentop computer, by LeapFrog 22

23 Property Santa Claus LeapFrog Toy Story Shrek (Movie Character) Toy Story 2 Cinderella The Easter Bunny Winnie the Pooh Shrek (Movie) Robot Chicken Nemo Dora the Explorer Positive Q Score

24 LeapFrog - Fortune BREAKAWAY BRAND 24

25 Education and Training Segment US Consumer International Education Products used in over 100,000 Classrooms LFSH editorial staff Educational Advisory Board Maps to state standards Adjustable learning paths personalized to the child s abilities Multimedia abundance, especially audio language support Grows with the child for added value 25

26 LeapTrack: K to 5 System for Formative Assessment and Differentiated Instruction Individualized instructional Learning Paths Comprehensive suite of reports Aligned to State Standards Reading Language Arts Math 26

27 Our Portfolio is Supported by Strong Licensed Products 27

28 Bill Chiasson Chief Financial Officer 28

29 To Strengthen the Company We Implemented a Three Step Process Fix Business Processes Grow the Business Restore Profitability 29

30 We Did What We Said We Would Do Successful launch of new products Strong and more diversified portfolio of product line Sales improved by 11% in US Consumer segment Gross margin improved 2.5% Operating expenses down $14 million Net income of $17.5 vs. loss of $6.5 in

31 2005 Financial Performance Summary Strong US Consumer business offset sales declines in our International and Education and Training segments Gross margins increased for all segments Better product mix and improved processes Lower charges for inventory reserves and sales allowances Operating expenses are down Strong cash position, debt free 31

32 2005 Full Year Results ($ millions, except EPS) Net Sales Gross Profit Operating Expense Income / (Loss) from Operations Net Income / (Loss) Diluted EPS 2005 Amt. $649.8 $279.6 $258.7 $21.0 $17.5 $0.28 Vs % 8.0% (5.3%) + $ $ $0.39 % to Net Sales Gross Profit Operating Expense Income / Loss from Operations Net Income / (Loss) 43.0% 39.9% 3.1% 2.5% ppts ppts ppts ppts 32

33 Consolidated Net Sales Stable (US$ in Millions) $650 Up 1% Sales growth in US Consumer segment $600 $550 $500 Offset by decline in sales in International and Education and Training segment $450 $

34 Consolidated Gross Margin (%) Improved 44% 42% 40% 38% 36% 34% 32% 30% Up 2.5 ppts 43.0% 40.5% Favorable product mix Accretive FLY pentop computer margin Improvements in cost of sales Improved freight costs Gross margin up in each segment US Consumer: up 3.8 ppts International: up 2.5 ppts Education and Training: up 1.8 ppts 34

35 Consolidated Operating Expense down $14 million (US$ in Millions) $275 $265 $255 $245 $235 $225 $215 $205 $195 $185 $175 Down $ Consumer business cost reduction actions R&D expense decreased FLY Pentop Computer Global Leverage Lower displays and catalog related costs Some increases due to: restructuring process improvements 35

36 Consolidated Operating Income Improves (US$ in Millions) $30 $20 Up $35 $10 $0 -$10 Sales Stable + Margins up 2.5 ppts + Expenses Down $14 Million = Operating Income up $35 million -$20 -$

37 Kathryn Olson Chief Marketing Officer 37

38 Continuing the Innovation Global launch of Little Leaps Grow-with-Me learning system 38

39 Continuing the Innovation Global launch of Leapster TV learning system 39

40 Continuing the Innovation Software for FLY Pentop Computer platform Algebra, Creative writing, In-classroom testing 40

41 Continuing the Innovation in the Classroom The Literacy Center Now with alignment to DIBELS FLY Pentop Computer Leapster Portable Technology Center 41

42 Long-Term Goals Continue to build global consumer educational brand Become leading provider of PreK-12 supplemental curriculum Create strategic advantage in the extended learning market Achieve superior levels of profitability and shareholder value 42

43 Why We Will Succeed Original vision correct Company strengths: Brand strength Product innovation Diversified portfolio Education foundation Operational metrics are improving Liquidity strong 43