LeapFrog Reports Q2 2016
LeapFrog Enterprises, Inc., announced financial results for the second quarter fiscal year 2016. LeapFrog’s fiscal year covers the 12-month period ending March 31, 2016. Summary of financial results for the quarter ended September 30, 2015, compared to the quarter ended September 30, 2014:
- Consolidated net sales were $67.2 million, down 41 percent. U.S. segment net sales were down 41 percent, and international segment net sales were down 39 percent.
- Net loss per basic and diluted share was $0.48 compared to prior-year net loss per basic and diluted share of $0.03.
- Cash and cash equivalents were $52.6 million as of September 30, 2015, compared to $111.3 million a year ago.
- Total impact of foreign currency exchange rates on net sales was $2.3 million, or negative 2 percent.
“Our second quarter financial results fell significantly short of our expectations. Our sales were impacted by a far tougher retail landscape around the world than last year, with many of our key retail partners managing their inventories very tightly, resulting in more conservative and later placement of their up-front holiday orders” said John Barbour, CEO in a statement. “These challenges were compounded by reduced retail space support for our line and tough prior-year comparisons from large shipments of clearance tablets and LeapBand last year. Our revenues were also reduced by significant markdown allowances to support our promotion plans for LeapTV over the holidays and our strategic move to tiered pricing on cartridge content. Our International sales continue to be impacted by the closure of Target in Canada, inventory issues with one of our key overseas distributors, and the strength of the dollar versus last year. Operating losses were higher due to the reduction in sales, the above markdown allowances, lower of cost or market charges on LeapTV on-hand inventory, plus higher expenses associated with our recent ERP implementation and on-going litigation. While there’s still a lot of work ahead of us, we continue to make progress against our strategic initiatives. In October, we initiated additional cost cutting measures, including a second round of headcount reductions of 150 positions, or 26 percent of our work force.”
Barbour continued. “We remain committed to turning the company around as quickly as we can to position LeapFrog for long-term growth and leadership in educational entertainment. We recently launched our Leap Ahead integrated marketing campaign, which we expect to build consumer demand for our products over the all-important holiday season and are focusing our efforts on a number of key opportunities to turnaround our financial performance. We continue to be a leader in the children’s tablet market with the introduction of our two new feature-filled tablets—the LeapFrog Epic Android-based Kid’s Tablet available in Consumer Electronic sections and the LeapFrog Platinum Tablet available in the Early Learning Aisles. Sales of these premium tablets should also build demand for our extensive portfolio of fun, educational content, which includes new games, books, and videos. In addition, new strategic price drops on our LeapTV console and content will be featured in major retailer holiday catalogs and should help drive consumer demand for this award-winning platform,” said Barbour.
Financial Overview for the Second Quarter Fiscal Year 2016 Ended September 30, 2015, Compared to the Quarter Ended September 30, 2014:
Second fiscal quarter net sales were $67.2 million, down 41 percent compared to $113.6 million last year, and included a 2 percent negative impact from changes in currency exchange rates. In the U.S. segment, net sales were $45.4 million, down 41 percent compared to $77.6 million last year. In the International segment, net sales were $21.8 million, down 39 percent compared to $36.1 million last year, and included a 7 percent negative impact from changes in currency exchange rates.
Operating expenses for the second fiscal quarter were $40.3 million, relatively flat compared to $40.2 million last year due to higher legal, audit, and consulting fees. Results of the headcount reductions implemented in the fourth quarter fiscal year 2015 yielded $2.5 million in savings this quarter, or 14 percent year-over-year. However, those savings were partially offset by current year retention bonus accruals of $1.1 million and a $1.3 million reversal of prior-period incentive compensation accruals. Loss from operations was $34 million, compared to prior-year’s loss of $3.1 million due to sales and gross margin declines.
Net loss for the second fiscal quarter was $34.1 million, or $0.48 per basic and diluted share compared to prior-year net loss of $2 million, or $0.03 per basic and diluted share.
Non-GAAP adjusted EBITDA for the quarter was negative $26.4 million compared to EBITDA of $6.3 million a year ago.
Iconix Brand Group Reports Financial Results For Q3 2015
Iconix Brand Group, Inc., reported its financial results for the third quarter and nine months ended September 30, 2015.
Results for the Third Quarter Ended September 30, 2015:
- Licensing revenue for the third quarter of 2015 was approximately $88.9 million, a 3 percent decrease as compared to approximately $91.6 million in the third quarter of 2014. Licensing revenue was negatively affected by approximately $2.7 million due to foreign currency exchange rates. Excluding the effect of foreign currency exchange rates, licensing revenue was flat in the quarter. There was no Other Revenue in the third quarter of 2015, as compared to approximately $18.7 million of Other Revenue related to a joint venture for the Lee Cooper and Umbro brands in China recorded in the third quarter of 2014.
Iconix’s results for the third quarter of 2015 include the following items:
- Approximately $12.2 million, or $0.16 per diluted share, of accounts receivable reserves and write-offs related to a comprehensive review of the company’s licensing agreements and relationships with its licensees;
- Approximately $3.8 million, or $0.08 per diluted share, related to adjustments from the preparation of the company’s 2014 federal tax return; and
- Approximately $7.1 million, or $0.10 per diluted share, of charges for professional fees associated with the continuing correspondence with the Staff of the U.S. Securities and Exchange Commission, the Special Committee’s review and severance costs related to the transition of Iconix management.
Due in large part to these items and there being no Other Revenue in the quarter, all metrics decreased. Adjusted EBITDA attributable to Iconix for the third quarter of 2015 was approximately $30.5 million, a 53 percent decrease as compared to approximately $65.4 million in the prior-year quarter. On a non-GAAP basis, net income attributable to Iconix was approximately $4.4 million, an 89 percent decrease as compared to the prior-year quarter of approximately $38 million. Non-GAAP diluted EPS for the third quarter of 2015 was $0.09, an approximate decrease of 88 percent as compared to $0.72 in the prior-year quarter. Excluding the increase in accounts receivable reserve and write-offs and the tax adjustment in the third quarter of 2015, non-GAAP diluted EPS was $0.33. GAAP net income attributable to Iconix for the third quarter of 2015 reflects a loss of approximately $6.3 million, as compared to income of $33.7 million in the prior-year quarter, and GAAP diluted EPS for the third quarter of 2015 reflects a loss of $0.13 as compared to earnings of $0.58 in the prior-year quarter.
Free cash flow attributable to Iconix for the third quarter of 2015 was approximately $39 million, an 11 percent decrease as compared to the prior-year quarter of approximately $43.9 million.
Results for the Nine Months Ended September 30, 2015:
Licensing revenue for the nine months ended September 30, 2015, was approximately $279 million, a 7 percent decrease as compared to approximately $299.3 million for the prior-year period. Total licensing revenue was negatively affected by approximately $7.9 million due to foreign currency exchange rates. In addition, licensing revenue in the comparable 2014 period included $17.1 million of revenue related to the five-year renewal of the Peanuts specials with ABC. Excluding the effect of foreign currency exchange rates and the ABC renewal, licensing revenue increased 2 percent.
There was no Other Revenue in the nine-month period, as compared to approximately $38.7 million of Other Revenue related to the formation of joint ventures and sale of Sharper Image e-commerce and website recorded in the prior-year period.
Adjusted EBITDA attributable to Iconix for the nine-month period was approximately $135.7 million, a 34 percent decrease as compared to approximately $206.8 million in the prior-year period. On a non-GAAP basis, net income attributable to Iconix for the nine-month period was approximately $54.5 million, a 50 percent decrease as compared to approximately $108.4 million in the prior-year period, and non-GAAP diluted earnings per share was approximately $1.10, an approximate decrease of 46 percent versus $2.05 for the prior-year period. GAAP net income attributable to Iconix for the nine-month period was approximately $72.1 million, a 42 percent decrease as compared to $124.6 million in the prior-year period, and GAAP diluted EPS for the nine-month period was $1.43, a 33 percent decrease as compared to $2.14 in the prior-year period.
Free cash flow attributable to Iconix for the nine-month period was approximately $144.5 million, a 13 percent increase over the prior-year period of approximately $128 million.
“I would like to reiterate that the underlying fundamentals of our business are strong,” said Peter Cuneo, chairman and interim CEO of Iconix. “We have gone through a difficult transition period, but Iconix continues to have significant business strengths including its diversified portfolio of consumer brands, profitable business model, and strong free cash flow generation. All of us at the company are focused on capitalizing on these strengths and addressing the issues that have impacted more recent performance to improve our results and enhance value for shareholders.”
Chicago Toy & Game Group Announced Toy & Game Inventor of the Year Honorary Award Recipients
The honorees for the eighth annual Toy & Game Inventor of the Year (TAGIE) Awards are in. The honorees for these categories have been selected by a closed jury of industry-based judges and will be honored at the TAGIE Awards Gala on November 20, 2015, in the Grand Ballroom at Navy Pier.
- The Hassenfeld Family Humanitarian Award will go to Big Brothers Big Sisters of Metropolitan Chicago. Big Brothers Big Sisters of Metropolitan Chicago opened in 1967 to empower at-risk youth by providing high impact one-on-one mentoring that enables lifelong success.
- The In Memoriam Award will honor Richard Knerr and Arthur “Spud” Melin, the co-founders of Wham-O. Wham-O is best known for introducing iconic products like the Hula Hoop and the Frisbee. Other well-known products include the Superball, Slip ‘N’ Slide, and Silly String.
- The Lifetime Achievement Award will go to Richard Maddocks. Maddocks started his career at Matchbox in 1971 and then became an independent inventor. From there, he went to Tiger Electronics and Hasbro where he helped bring Furby and FurReal Friends to the market. Maddocks is best known for propelling robotics in toys while maintaining depth of character and emotion in his creations.
The TAGIE Awards Gala will commence with a cocktail hour at 6pm, followed by a seated dinner, and the official award ceremony announcing the winners from each category including Toy Design, Game Design, Rising Star, Excellence in Game Design, Young Inventor, and Digital Toy/Game.
This year’s evening is sponsored by Hasbro (Presenting Sponsor), Hassenfeld Family Initiatives, Global Toy News, Michael Kohner Corporation, Oxford Games, The Playmakers, Peggy Brown Creative, Quinn & Sherry, Moose, Mayfair Games, Toy Industry Association, Reyn, Fat Brain Toy Co., and Chicago Toy and Game Group.
For more information about Chicago Toy & Game Week events including ChiTAG 2015, the playCHIC Fashion Show, the Young Inventor Challenge, and the TAGIE Awards Gala visit ChiTAG.com.