Transcript Leapfrog Enterprises

Leapfrog
Enterprises
Breadon, William
Hollis, Diana
James, Mark
Johnston, Charles
Executive Summary
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About
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Leading designer, developer and marketer of
innovative, technology-based educational
products and related content. LeapFrog is 100%
focused on developing products that will
provide the most engaging, effective learning
experience - for all ages, in school or home,
around the world.
Founded in 1995 by Michael Wood and Robert
Lally.
Employs over 550 full and part-time employees.
Mission
“Helping kids to learn how to read.”
Products
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LeapPad Ultra (4-9 yrs.)
LeapPad2 Power (3-9 yrs.)
LeapPad2 (3-9 yrs.)
LeapsterGS (4-9 yrs.)
Leapster Explorer (4-9 yrs.)
LeapReader (4-8 yrs.)
Tag (4-8 yrs.)
App Toys (3-6 yrs.)
Learning Toys (0-4 yrs.)
iPhone®/iPad® Apps (2-5
yrs.)
SWOT Analysis
Strengths
Weaknesses
• Brand recognition and
reputation
• Popular licensed
content (i.e. Disney)
• In-house design
• Proprietary curriculum
developed by expert
educators
•Perceived high retail
prices
•Heavy reliance on main
customers (Wal-Mart,
Target, Toys R Us)
•Most suppliers and
manufacturers
concentrated in China
•Few numbers of
proprietary characters
Opportunities
Threats
• International
expansion
• Lower priced products
• More mobile
applications
• Expansion to an older
demographic of
children.
•Seasonal fluctuations
•No long term agreement
with retailers
•Mobile market
(smartphones and
tablets)
•Competition
manufacturing lowered
priced products
Marketing Impact
 LeapPad is following the basic
marketing plan as the Apple
IPad. They intend on
developing a pad that is aimed
at children ages 4 to12.
 Strategy:
 Sell the cheapest tablet on market,
for $100.
 Focus on children ages 4 to 7.
 Develop and sell accessories for the
LeapPad unit.
 Sell hundreds of apps for units.
Marketing Impact
Third-party apps
allowed in 2011.
Available apps
doubled on their store.
LeapFrog’s marketing
focuses on the
concept of
“connecting with more
carefully selected
customers.”
Marketing Impact
Stiff competition, specially from
Mattel Power Touch Pad.
Closed environment, very
proprietary.
More diversification to hinder
competition.
Marketing Impact
 In June 29, 2011, LeapFrog
introduced the LeapPad
Explorer, a personalized
learning tablet for
children aged 4 to 9.
 The LeapPad Explorer presale units sold out in the first
two weeks. LeapPad hit
shelves on August 15, 2011
 2013 LeapFrog app to be
available for the IPad and
IPhone.
Stakeholders
 15%
of shares held by all insider and 5%
owners
 75 % of shares held by institutional &
mutual fund owners
 89 % of float held by institutional & mutual
fund owners
Shareholders
Direct
•Mollusk Holdings LLC (2,130,116),
•Milken Michael R (1,301,789)
•Rissman Owen Randall (443,321)
•Barbour John (206,175)
•Kalinske Thomas J (170,513)
Institutional
•Wellington Management Company, LLP (6,026,546)
•Wells Fargo & Company (4,599,629)
•Franklin Resources, Inc. (4,294,730)
•Vanguard Group, Inc. (The) (3,762,958)
•Oppenheimer Funds, Inc. (2,500,000)
Current Marketing Strategy
 Global
initiative
 ‘We Give Books’
 Facebook campaign
"Read 20 Minutes A
Day"
 Expand the impact
from 150k to 2M
Financial Reports
LeapFrog (5 year) revenue model:
Financial Reports
LeapFrog (10 Year) Stock price:
Financial Performance
$ in millions (except per
share data)
Net Sales
2009
$380
2010
2011
2012
$433
$455
$581
2009-2012
15% CAGR
U.S. Segment Net Sales
$307
$344
$342
$425
11% CAGR
International Net Sales
$73
$88
$113
$156
29% CAGR
Operating Income (Loss)
($8)
$8
$24
$64
$72
Operating Margin
(2%)
2%
5%
11%
13 Points
Net Income (Loss)
EPS (Loss)
($3)
($0.04)
$5
$0.08
$20
$0.03
$86
$1.24
$89
$1.28
Normalized EPS (Loss)*
($0.10)
$0.06
$0.18
$0.56
$0.66
Adjusted EBITDA*
$23
$34
$49
$93
60% CAGR
Cash & Equivalents
Debt
$62
$0
$19
$0
$72
$0
$120
$0
25% CAGR
N/A
*Normalized EPS (Loss) and Adjusted EBITDA are non‐GAAP financial measures. Please see the following pages
for a discussion of these measures and their reconciliation to the most appropriate GAAP measure.
**CAGR - Compound Annual Growth Rate
Strategic Recommendation
Today’s Situation
 Slow
market growth.
 Increased apps and accessories for
LeapPad.
 Reaching out to children 4- 7 years old
 Competition with other tablet and
smartphones.
 Launching app for iPad and iPhone in
2013.
Strategic Recommendation
How we got here
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Losses from 2005 to 2011.
Competition with Mattel.
Introduction of LeapPad
Explorer in 2011.
Development of 3rd party
apps in 2011.
Expanded content and
games in 2012.
Agreements with children
educational content
companies including
Sesame Workshop.
Strategy Recommendation
 Addition
of card readers and WIFI.
 Cloud storage for LeapPad products.
 More parental controls
 Compatibility with multiple platforms.
 Continue development of technology to
keep up.
Strategy Recommendation
 Establish
more brand recognition.
 Engage costumers directly.
 Addition of other language and cultures
for international market.
 Build relationships with teachers, families
and caregivers.
Questions?
Thank you!