Q4 2007 Highlights
-- Leadis acquired Acutechnology Semiconductor, Inc., a privately-held analog semiconductor company specializing in power management technologies for consumer and industrial markets, in late December 2007. The acquisition added approximately 20 products, 5 patents and a small team of experienced analog engineers. -- Leadis was awarded 4 new display driver program design wins, reaching its target of 15 design wins in 2007. Leadis was also awarded one new LED driver design win. -- Leadis announced sample availability of a family of charge-pump based LED drivers that use the company's proprietary PowerLite current regulator to deliver up to 95% power efficiency for longer battery life. -- Leadis completed tape-out of its first Touch product, with engineering samples expected to be available for evaluation in the first half of 2008.
Fourth quarter revenue was $6.2 million, meeting the company's guidance. Fourth quarter gross margin was (4%), with charges for excess and obsolete inventory of $0.8 million reducing the gross margin by approximately 13%. Under generally accepted accounting principles (GAAP), fourth quarter net loss was $10.9 million or $0.38 per basic share, as compared with the $8.4 million, or $0.29 per basic share, net loss reported in the previous quarter and the $3.1 million, or $0.11 per basic share, net loss reported in the fourth quarter of 2006. The loss in the current quarter includes a $0.6 million estimated charge for in-process research and development acquired during the quarter in connection with the Acutechnology acquisition, and an acceleration of $0.8 million in the Mondowave retention bonus. The company anticipates finalizing measurement of the charge for in-process research and development related to the Acutechnology transaction in the next several weeks and will report the final charge in its Annual Report on Form 10-K to be filed in March 2008.
In addition to reporting GAAP results, the company reports non-GAAP results, which exclude share-based compensation expense per FAS 123(R) and acquisition-related expenses. Non-GAAP net loss for the fourth quarter of 2007 was $7.1 million, or $0.25 per basic share, as compared to a net loss of $5.9 million, or $0.20 per basic share, in the third quarter of 2007 and a net loss of $1.5 million, or $0.05 per basic share, in the fourth quarter of 2006. The increase in net loss from the prior quarter is primarily due to the inventory charged discussed previously. A reconciliation of GAAP measures to non-GAAP measures is included in the financial statements portion of this press release.
The company reported cash, restricted cash and short-term investments of $70.7 million as of December 31, 2007, which was $10.3 million lower than its balance as of September 30, 2007, due primarily to the fourth quarter net loss and the $5.0 million acquisition of Acutechnology.
The company remains focused on execution of its strategy of diversification beyond display drivers. The acquisition of Acutechnology enhances Leadis' analog product portfolio and provides the company greater potential for integration through the addition of power management functions to both its LED driver and audio product portfolios, as well as the potential to penetrate portions of the broad power management market. Other highlights for the quarter included:
-- Leadis announced sampling of the LDS8866, LDS8865 and LDS8864, a new family of high-efficiency charge-pump based LED drivers that use the company's proprietary PowerLite current regulator to deliver up to 95% power efficiency, extending battery life by up to 20%. These products are targeted at mobile backlighting applications and support up to six LEDs with a maximum current of 32mA per channel. -- Leadis achieved an important milestone with the completion of three reference designs and two design-ins for its audio products. Reference designs are turnkey solutions enabling customers to get to market quickly and have the potential to proliferate into multiple OEMs.
Q1 2008 Outlook
"We expect revenue to be flat plus or minus 10% in the first quarter of 2008 as compared with the 2007 fourth quarter," said Mr. Paul Novell, Executive Vice President of Sales and Marketing. "We will realize initial revenue from our 2007 display driver design wins that will help offset declines in legacy product revenue. Our revenue outlook should improve in the succeeding quarters as our newer display driver designs ramp."
Based on information currently available to the company, expectations for the first quarter of 2008 are as follows:
-- Revenues are expected to be flat plus or minus 10% in the first quarter of 2008 as compared with Q4 2007. -- Gross margin on product sales, which varies with product mix, selling price and unit costs, is expected to be approximately 8% in the first quarter. -- Operating expenses are expected to be approximately $9.0 million, reflecting increases as a result of the Acutechnology acquisition as well as engineering staffing and mask cost increases.
"Fourth quarter financial results met our revenue expectations, while gross margins were lower due to inventory reserve charges," said Mr. Tony Alvarez, President and CEO. "Operating expenses were below our guidance as a result of new wafer mask activity costs that will fall into the first quarter of 2008. Reflecting on 2007, we successfully diversified beyond our traditional display driver business and added intellectual property in each of our businesses. We believe this positions Leadis for higher margin revenue growth. We remain optimistic about our growth prospects based on customer interest in our newer products, however we have not yet generated appreciable revenue beyond our display driver business. That is our primary goal in 2008."
Conference Call Today
Leadis will broadcast its conference call today, Tuesday, January 29, 2008 at 2 p.m. Pacific Time (5 p.m. Eastern Time) to discuss its fourth quarter 2007 earnings and provide additional guidance.
To listen to the call, dial 1-877-548-7907 approximately ten minutes before the start of the call. A taped replay will be made available approximately two hours after the conclusion of the call and will remain available for one week. To access the replay, dial 1-888-203-1112. The confirmation code for the replay is 3426052.
A live webcast of the call will be available on the investor relations section of the company's web site, http://ir.leadis.com. An archived webcast of the call will remain available until the company's next earnings call.
About Leadis Technology, Inc.
Leadis Technology, Inc., headquartered in Sunnyvale, California, designs, develops and markets analog and mixed-signal semiconductors that enable and enhance the features and capabilities of mobile and consumer electronics devices. Leadis' product offerings include color display drivers, which are critical components of displays used in mobile consumer electronic devices; LED drivers, which provide controlled levels of current required to drive light emitting diodes in diverse applications including mobile backlight units; and audio CODEC and FM transmitter ICs, which are integral components in mobile media players and their associated aftermarket accessories. Leadis currently supplies display drivers supporting the major small panel display technologies, including a-Si and LTPS TFT LCDs, color STN LCDs, and color OLED displays, and LED drivers supporting mobile backlighting applications.
Non-GAAP Financial Measures
Leadis reports financial information in accordance with generally accepted accounting principles (GAAP), but believes that non-GAAP financial measures are helpful in evaluating its ongoing operating results and comparing its performance to comparable companies. Leadis management uses financial statements that exclude share-based compensation expense and the impact of purchase accounting expenses, including in-process research and development expenses, amortization of purchased intangible assets, and retention expenses connected with acquisitions, to plan and evaluate its financial performance. Consequently, Leadis has excluded these expenses in deriving calculations of net income (loss), net income (loss) per share, gross profit or margin and certain operating expenses (including cost of sales, research and development, selling, general and administrative, and provision for income taxes). Leadis believes the inclusion of these non-GAAP measures enhances the comparability of current results against the results of prior periods. These non-GAAP measures will enable investors to evaluate the company's operating results and business outlook in a manner similar to how the company internally analyzes its operating results and makes strategic decisions. Investors should note, however, that the non-GAAP financial measures used by the company may not be the same non-GAAP financial measures, and may not be calculated in the same manner, as that of other companies. The company does not itself, nor does it suggest that investors should, consider such non-GAAP financial measures alone or as a substitute for financial information prepared in accordance with GAAP. A reconciliation of GAAP financial measures to non-GAAP financial measures is included in the financial statements portion of this press release. Investors are encouraged to review the related GAAP financial measures and the reconciliation of the non-GAAP financial measures to their most directly comparable GAAP financial measure. For additional information on the non-GAAP financial measures, please see the Form 8-K regarding this press release furnished today with the Securities and Exchange Commission.