LeapFrog Announces Q1 Results
LeapFrog Enterprises, Inc., announced financial results for the first quarter ended March 31, 2013. Highlights of first quarter 2013 results compared to first quarter 2012 results are as follows:
• Consolidated net sales were up 15 percent
• U.S. segment net sales were up 11 percent, and international segment net sales were up 26 percent
• Loss from operations improved 47 percent
• Net loss per basic and diluted share was $0.04, an improvement of $0.10
• Normalized net loss per basic and diluted share, which includes an effective 37.5 percent tax rate, was $0.05, an improvement of $0.04
• Operating cash flow was up 17 percent, and free cash flow was up 12 percent
• Adjusted EBITDA was positive for the first time in the first quarter since 2003
“We delivered solid sales and cash flow growth in the quarter while making strategic, long-term investments in the business,” said John Barbour, CEO. “Content sales for our installed base of millions of multimedia learning platforms were the biggest driver of our sales performance. Sales were strong across content, platforms, accessories and toys, with each exhibiting double-digit sales growth rates, and also benefited from an earlier Easter than in 2012. Free cash flow increased 12 percent. Our sales growth speaks to the exceptional quality and rich educational experiences of our learning solutions, while our cash flow growth speaks to the quality of our business execution.”
Barbour added. “We are making good progress towards achieving our 2013 objectives. Importantly, we are also making significant long-term investments in content, new business categories, international expansion, online communities, and systems. We believe these investments will enable us to greatly extend our leadership in children’s educational entertainment and further strengthen our foundation for continued growth.”
Financial Overview for the First Quarter 2013 Compared to the First Quarter 2012
First quarter 2013 net sales were $82.9 million, up 15 percent compared to $72 million last year, and were not materially impacted by changes in currency exchange rates. Net sales growth was driven by strong sales of content, platforms, accessories, and toys, which all exhibited double-digit sales growth rates. In the U.S. segment, net sales were $58.1 million, up 11 percent compared to $52.2 million last year. In the International segment, net sales were $24.8 million, up 26 percent compared to $19.8 million last year, and were not materially impacted by changes in currency exchange rates.
Loss from operations for the first quarter was $4.6 million; this is an improvement of 47 percent compared to $8.5 million a year ago. Loss from operations as a percentage of net sales was 5.5 percent, an improvement of 640 basis points compared to 11.9 percent a year ago.
Net loss for the first quarter was $3 million; this is an improvement of 68 percent compared to $9.5 million a year ago. Net loss per basic and diluted share was $0.04, an improvement of 71 percent compared to $0.14 a year ago.
Normalized net loss for the first quarter, which reflects an effective 37.5 percent tax rate, was $3.1 million, an improvement of 45 percent compared to $5.7 million a year ago. Normalized net loss per basic and diluted share was $0.05, an improvement of 44 percent compared to $0.09 a year ago. The company provides normalized net income (loss) measures, which are non-GAAP measures, to help investors review performance excluding discrete tax items, which have historically been significant.
Adjusted EBITDA for the first quarter was $2.4 million, up $3.5 million compared to a year ago.
Guidance
For the full year 2013, Leap Frog is reiterating guidance for net sales, operating margin, and capital expenditures and initiating guidance for net income per diluted share and normalized net income per diluted share. Leap Frog says its expects:
• Net sales to increase at a high single-digit percentage growth rate compared to 2012
• Operating margin to be relatively flat to 2012, as the company makes long-term investments in content, new business categories, international expansion, online communities, and systems
• Net income per diluted share (GAAP) and normalized net income per diluted share (non-GAAP) to both be in the range of $0.57 to $0.60. This assumes an effective 37.5 percent tax rate, which does not include one-time discrete tax items. Leap Frog may incur some discrete tax items in 2013, but is not able to estimate or anticipate those discrete tax items at this time, which primarily relate to any adjustment of remaining valuation allowance against deferred tax assets. For the full year 2012, net income per diluted share (GAAP) was $1.24 and normalized net income per diluted share (non-GAAP) was $0.56.
• Capital expenditures to be in the range of $30 million to $35 million, compared to $25 million in 2012, as it makes long-term investments in the business. Capital expenditures include purchases of property and equipment and capitalization of product costs.
For the second quarter of 2013, Leap Frog expects:
• Net sales to increase at a mid-to-high single-digit percentage growth rate compared to the second quarter of 2012
• Net loss per basic and diluted share (GAAP) and normalized net loss per basic and diluted share (non-GAAP) to both be in the range of $0.08 to $0.10. This assumes an effective 37.5 percent tax rate, which does not include one-time discrete tax items. We may incur some discrete tax items in the second quarter of 2013, but we are not able to estimate or anticipate those discrete tax items at this time, which primarily relate to any adjustment of our remaining valuation allowance against our deferred tax assets. For the second quarter of 2012, net loss per basic and diluted share (GAAP) was $0.12 and normalized net loss per basic and diluted share (non-GAAP) was $0.07.
MEGA Brands Reports Q1
MEGA Brands, Inc., announced its financial results for the first quarter ended March 31, 2013. Consolidated net sales in the first quarter increased 11 percent to $64.5 million compared to $58.2 million in the corresponding 2012 period.
• Toys sales increased 14 percent compared to the first quarter of 2012, driven by growth in both of MEGA’s construction toy categories.
• Sales of Stationery & Activities products were up 3 percent, the eighth consecutive quarter of year-over-year growth in this segment.
• On a geographical basis, sales were 12 percent higher in North America and 9 percent in international markets compared to the first quarter of 2012.
The Corporation recorded negative EBITDA of $1 million, an improvement of $1.2 million compared to negative EBITDA of $2.2 million in the first quarter of 2012. EBITDA is a supplementary financial measure.
Net loss improved to $7.2 million or $0.43 basic and diluted per share compared to a net loss of $8.5 million or $0.52 per basic and diluted share in the first quarter of 2012. The Corporation’s business is seasonal and historically the first quarter is the period with the lowest sales of the year and negative profitability.
“We are pleased with the sustained improvement in our sales and profitability,” said Marc Bertrand, president and CEO. “We continue to build momentum in the marketplace and our new product lines are being well received by retailers around the world.”
DreamWorks Announces Q1 Results
DreamWorks Animation SKG, Inc., announced financial results for its first quarter ended March 31, 2013. For the quarter, the Company reported total revenue of $134.6 million and net income of $5.6 million, or $0.07 per share on a fully diluted basis.
“This year is off to an outstanding start for DreamWorks Animation. The Croods has reached a blockbuster level of nearly $480 million at the worldwide box office and is well on its way to becoming the No. 1 movie released during the first four months of 2013,” said Jeffrey Katzenberg, CEO of DreamWorks Animation. “I’d like to congratulate and thank our new distribution partners at Twentieth Century Fox for helping to propel The Croods to global success and we now look forward to launching our summer tentpole, Turbo, in theaters on July 17.”
Ann Daly, COO of DreamWorks Animation, added. “The strength of our worldwide box office results from The Croods and over-performance in home video from both of our 2012 titles demonstrate success in DreamWorks Animation’s core business so far this year. As importantly, we made great strides to advance a number of key growth initiatives in the areas of franchise-building, consumer products, television, and location-based entertainment,” she said.
The Croods, released theatrically on March 22, 2013, has reached $163.5 million at the domestic box office and $315.5 million at the international box office for a worldwide gross of $479 million to date. The Croods contributed $4 million of revenue to the quarter.
Rise of the Guardians contributed $9.6 million of revenue to the quarter, primarily from home entertainment. The film reached an estimated 3.2 million home entertainment units sold worldwide through the end of the first quarter, net of actual and estimated future returns.
Madagascar 3: Europe’s Most Wanted contributed $22.8 million of revenue to the quarter, primarily from home entertainment. The film reached an estimated 7.2 million home entertainment units sold worldwide through the end of the first quarter, net of actual and estimated future returns.
Puss In Boots contributed $7.5 million of revenue to the quarter, primarily from home entertainment. The film reached an estimated 6.8 million home entertainment units sold worldwide through the end of the first quarter, net of actual and estimated future returns.
Library contributed $41.4 million of revenue to the quarter. Other items, including television series and live theatrical properties, contributed $20.9 million of revenue to the quarter. Classic Media contributed $27.9 million of revenue to the quarter.
Costs of revenue for the quarter equaled $85.5 million. Selling, general, and administrative expenses totaled $42.8 million, including $3.9 million of stock-based compensation expense.
The Company’s combined effective tax rate—its actual tax rate coupled with the effect of its tax sharing agreement with a former stockholder—was approximately 15 percent for the first quarter. The Company currently expects that its full-year 2013 combined effective tax rate will be in the mid-to-high 20 percent range.
The Company also provided an update to its share repurchase program. Year to date, the Company has repurchased 1.3 million shares for $25 million. The Company has $100 million remaining under its current authorization.
The Company’s second quarter results are expected to be driven by the performance of The Croods at the worldwide box office. Television revenue from Madagascar 3: Europe’s Most Wanted is also expected to contribute revenue to the Company’s second quarter results.