I listened to the entire presentation by the CFO and was disappointed on several counts:
1. The CFO had the enthusiasm of a Ben Stein in promoting the Leapfrog products. He certainly lacked the enthusiasm of John Barbour, and although he talked positively about Leapfrog, he droned on and on without really showing any excitement about what Leapfrog has done in the past and what it is poised to do in the future.
2. Although he said at the start that he would make foward projections, he never really stated any guidance at all.
3. He downplayed a possible buyback of stock, saying that the company was more interested in growth. If only he had said that buying back stock was a REAL POSSIBILITY, he would have cut the shorts off at the knees and the price of the shares of Leapfrog stock would have soared dramatically IMO.
4. He never said what I think a lot of us shareholders really wanted to hear: that the shorts were wrong in 2012, and they are DEFINITELY WRONG in 2013 about Leapfrog's demise. He should have said that Leapfrog is not just a one toy wonder, which was proved by the results of Christmas 2012. He could have suggested that Leapfrog's new products were outstanding and that LF would be entering many more international markets during the next 2 years - and give some guidance about what specific nations they were thinking about moving into.
5. In short, the CFO sounded like he really didn't want to be there at the conference and just went through the motions of reading his prepared speech. If I were John Barbour, I would never let this guy speak in public again, unless he had other executives alongside who could offset his continuous monotone voice and lack of enthusiasm. I do not understand why John Barbour did not speak himself and why he entrusted to the CFO a very important opportunity to get the word out on the Leapfrog game plan and say things to attack the shorts in no uncertain terms to . Very Discouraging.
His exact words were "there will come a day when its time to buy back shares or issue a dividend"...
Heres what you need to consider:
LF is in a stage where they are still susceptible to competition from massive companies (Apple, Google, Amazon, etc). Although I believe the LF brand will continue to prevail in this sector, I admit that one of these companies could come in and give LF a run for their money. Management, although confident, knows that there will be new entrants in this space and the best way to protect is to continue building the brand, and establishing distribution in as many places as possible. In other words, LF needs to expand more than ever right now.
This next part is the most important for people to understand:
Share buybacks and dividends do ABSOLUTELY NOTHING to support any type of competitive advantage. They are completely internal and although those things might increase the share price, making us longs very happy on the day they are announced, they will do nothing in the long run. Anyone that thinks LF's money would best be spent on stock repurchases or dividends has clearly never started a company or run a business. All LF cash right now should be spent on: R&D(new products), strengthening supply chain(possibly through acquisitions), strengthening distribution networks, and strenghtening the brand.
LF's future looks very bright, but as everyone knows new entrants to an industry can rain on any growing company's parade. Management already admited being surprised at the lack of competition in 2012, but that doesnt mean competition isn't on the horizon.
LF is a castle, and management is building a moat. When others companies try to invade the castle, the moat is what will save us...not a #$%$ng share repurchase!...thanks.
Mthesis - WOW you make some excellent comments. Run the business, strengthen the supply chain, promote innovation, make the necessary managerial decisions and the stock price will take care of itself. Far too often we read comments on this board about boosting the share price as if that's all that matters - short term, myopic, selfish and often naive thoughts - your post is indeed a breath of fresh air. Thank you.
Patient and Long,
I did not have a chance to listen to it yet but I have been annoyed with the CFO's style in the past. He seems to take pride in the fact that he comes across unenthusiastic, as though he thinks it is a measure of his "professionalism".
Honestly most analysts at the conference probably couldn't care less. They sit through presentation after presentation and were probably at the bar all day the night before. He said what he had to say and anyone interested listened if they need to.
I'm still curious to see what they plan on doing with all that cash. Its a lot more than they need for R&D and product development. They keep mentioning acquisitions, but the CFO didn't seem to have a clue what that would be. Honestly neither do I. What other small educational toy companies are out there to buy? If they wanted to spend the cash they should have developed other language Leappads for this year, not 2014.