Book/Software Sales Jump at LeapFrog

Sales of interactive books and software rose 126%, to $139.6 million, in 2002 at LeapFrog, the company reported in its year-end filing with the Securities and Exchange Commission. LeapFrog attributed the increase in content sales to higher sales of LeapPad books, the introduction of Quantum Pad books and the growth in My First LeapPad books and iQuest cartridges. The interactive books and software are used with LeapFrog's electronic platforms, and platform sales rose 38% last year, to $207.1 million. There are now more than 14 million platforms in the market. Sales of stand-alone educational products increased 44%, to $111.3 million.

The content, platform and educational products are all part of LeapFrog's U.S. consumer segment, which had total sales of $458 million last year, an increase of 58% over 2001. Operating profit rose 233%, to $72.7 million. At the end of 2002, LeapFrog had introduced six core electronic platforms that offer age-appropriate devices working with a variety of content units. The platforms include the Imagination Desk learning system for ages three to five; the My First LeapPad learning system for ages three to five; and the LeapPad learning system for ages four to eight. Under its Quantum Leap brand, the company offers the Turbo Twist handhelds for grades one to six; the Quantum Pad learning system for grades three to five; and the iQuest interactive handhelds for middle school through high school. LeapFrog also now publishes more than 75 interactive books as well as nine cartridges and seven cartridges for the iQuest platform. The company also offers 35 stand-alone products.

LeapFrog's sales are concentrated through three major retailers: Wal-Mart (including Sam's Club), Toys R Us and Target. The three chains accounted for 69% ($367 million) of LeapFrog's total revenue of $531.8 million in 2002. During the year, LeapFrog looked to broaden its customer base by offering its products in bookstores, electronic stores and office supply stores. It will continue the diversification effort in 2003.

LeapFrog attributed part of its success at retail to the rollout of LeapFrog Learning Center displays, which include both the company's hardware and content products. In 2003, LeapFrog will be devoting more space in the displays to its content library and expects to add more titles to its present lineup. There is also the possibility that the company may enter the traditional book publishing market.

In addition to the U.S. consumer market, LeapFrog's education and training segment contributed sales of $20.1 million last year, a 129% increase over 2001. Sales in the international segment jumped 228%, to $53.6 million.