Leapfrog Enterprises filed a prospectus with the Securities and Exchange Commission late last month in preparation for a public offering through which it hopes to raise $150 million. Based in Emeryville, Calif., Leapfrog develops interactive educational materials and related content for the preschool through eighth grade market. The company said it will use the proceeds from the IPO to pay down debt and for general corporate purposes.
Leapfrog was founded in 1995 and merged into Michael Milken's Knowledge Universe in 1997. Total revenues in 2001 were $313.7 million, a 95% increase over 2000; net income was $10.1 million in the year, compared to a loss of $2.3 million in 2000. Its core products to date have been electronic platforms that work interactively with a variety of books, cartridges or other content products. Through March 31, Leapfrog had sold more than seven million hardware devices. The company also sells 35 interactive books that can be played on the platforms, 75 activity sheets that can be downloaded from its Web site and five spelling cartridges.
By the end of this year, Leapfrog plans to up the number of books available through retail outlets to more than 85, to increase the number of activity sheets to more than 350, and to add four new spelling cartridges. The company also expects to expand its product line to the high school market in the year. The company's platforms sell for $29.99 to $59.99, and the price for its interactive books and cartridges range from $9.99 to $14.99.
Leapfrog's biggest retail customer is Wal-mart, which accounted for 30% of its sales in 2001, followed by Toys R Us, which represented 28% of sales. Kmart, which has filed for bankruptcy, and Target each generated about 10% of sales. The company said it was owed $11 million by Kmart at the end of 2001 and had already written off $6.4 million of its accounts receivable. Although Leapfrog anticipates that its four largest accounts will continue to generate the bulk of its sales in 2002, it plans to increase its distribution through bookstores in the year.
The company also hopes to increase its penetration of the school market. Sales in the education and training segment rose 93% last year, to $8.5 million, and the company has formed a new school sales force. The international market, which had sales of $16.3 million in 2001, is another area targeted for growth. To help support its expansion, Leapfrog has been on a hiring binge. It had 85 employees at the end of 1999; 438 employees at the end of 2001; 503 as of March 31; and the company said it expected to hire a "significant number" of new employees this year.
