LeapFrog 2002 Annual Report Download - page 2

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Fellow stockholders,
We produced our first learning product in 1995, and in
2002, sales of our learning products made us the third
largest company in the United States toy industry.*
LeapFrog is one of the fastest-growing education companies,
and one of the largest publishers of children’s books in the
United States — and we are just getting started.
2002 was a banner year for LeapFrog. Annual net sales
exceeded $531 million, which represented more than 69%
growth over our 2001 revenues. Net income for 2002
increased 349% to $43.4 million compared with $9.7 million in 2001. In July 2002, our
initial public offering raised a net $115 million for the company. Our capital resources
and strong financial performance have us well positioned to fund our growth going forward.
Having met and exceeded all of our financial goals for 2002, we are looking forward to
building our product offering and developing new market opportunities in 2003.
LeapFrog products are recognized for innovation, engagement and learning efficacy in
every category in which we compete:
• Our core strength in preschool electronic learning aids (ELA) continues to grow.
According to The NPD Group, our market share in 2002 reached 79%, and eight of
the 10 top-selling products in this category were from LeapFrog. We believe we can
continue to drive the growth of this category by introducing two new platform products,
22 new software titles and four standalone products in this market in 2003.
• We have made a definitive statement about our ability to compete in and address the
non-preschool ELA, or “’tween and teen” market. Our market share in this category
grew to 71% in 2002, and 16 of the 20 top-selling products were from LeapFrog.
We believe we can lead the expansion of this category by launching four new products
and seven new software titles for this market in 2003.
• We are a growth force in the infant and toddler category, our newest market segment.
Three of the 10 top-selling products in this category in 2002 were from LeapFrog. We
plan to introduce a platform product along with six standalone products for the infant
and toddler market this year.
Distribution in more than 12 countries contributed to 228% net sales growth in our
international segment in 2002, bringing net sales to $53.6 million. In 2003 we plan to
reach out to international children with more than 40 new products. Net sales for our
SchoolHouse division grew 129% to $20.1 million in 2002. We believe our SchoolHouse
division products are now in use in more than 13,000 classrooms in the U.S. We believe
our new LeapTrack™Assessment and Instruction System is a powerful, effective tool for
teachers that will help us reach still more educators and classrooms this year.
LeapFrog’s focus going forward is clear. We are engaged in an ongoing mission
to make learning more engaging and effective for children, parents
and teachers. We look forward to launching additional innovative
products in 2003, and hope you will continue to monitor our
progress and results.
Since it was unwrapped
on Christmas day … Arianna
has spent countless hours with
her LeapPad on her lap.Within a
month she could read the stories
in the original book quite well.
At first we thought that it was
more memorization than
knowledge.We were wrong …
she constantly scans the house
for new words to read. She also
spends quite a bit of time read-
ing her storybooks to her dolls
and stuffed animals....Thank
you for creating a wonderfully
fun way for my granddaughter
to learn. Now she can’t wait until
after her fifth birthday so she
can get her own library card.
—Juliann A.
Grandparent
We integrated in the LeapFrog
curriculum to bring us up to
standards for literacy.We’re
having a lot of success with it.
Some of the test results we’re
getting with this system
are just amazing.
—Margaret T.
Teacher
Oakland, California
“
”
*Based on retail sales, according to The NPD Group / NPD Funworld /TRSTS.
The NPD Toy Retail Sales Tracking Service market study is based on retail sell-
through data that encompasses approximately 40% of the toy retailing industry.
Mike Wood
President and CEO