Q2 2008 Highlights
-- Leadis achieved ten new product design wins in the quarter, including two Tier 1 LED driver wins and its second design win utilizing the Epic technology for AM-OLED displays. In total, Leadis was awarded four new display driver program design wins, two new Audio design wins and four new LED/Power design wins. -- Leadis announced sample availability of the first four products in its family of PureTouch products, including the world's first capacitive touch controllers with an integrated haptics driver for use with mobile phone touch-input controls. -- Leadis announced production availability and commencement of volume shipments of two display drivers, the LDS343, a QVGA LTPS LCD display controller, and the LDS342, a QVGA LTPS LCD display driver. Shipments now exceed one million units on each of these devices.
Second quarter revenue was $5.9 million, falling short of the company's guidance of $7.0 million plus or minus 10%. Second quarter gross margin was 0%, with 2% gross margin on direct product sales offset by negative gross margin on NRE activity during the quarter. While the NRE activity generated a negative gross margin, these projects generate cash that offsets overall costs. Under generally accepted accounting principles (GAAP), second quarter net loss was $19.5 million, or $0.67 per basic share, as compared with the $10.1 million, or $0.35 per basic share, net loss reported in the previous quarter and the $6.1 million, or $0.21 per basic share, net loss reported in the second quarter of 2007. The loss in the second quarter of 2008 included a $9.4 million non-cash impairment charge for goodwill and other intangible assets originally recorded in connection with previous business acquisitions. The loss in the first quarter of 2008 included a $0.5 million charge for excess and obsolete inventory.
In addition to reporting GAAP results, the company reports non-GAAP results, which exclude share-based compensation expense per FAS 123(R), acquisition-related expenses, and goodwill and intangible impairment charges. Non-GAAP net loss for the second quarter of 2008 was $8.2 million, or $0.28 per basic share, as compared to a net loss of $8.3 million, or $0.28 per basic share, in the first quarter of 2008 and a net loss of $4.1 million, or $0.14 per basic share, in the second quarter of 2007. 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 investments of $54 million as of June 30, 2008, which was $5.6 million lower than its balance as of March 31, 2008, due primarily to the second quarter net loss. Cash flow was favorably impacted by a tax refund of $2.5 million received during the second quarter.
"Second quarter revenue fell short of our guidance, also impacting gross margins," said Mr. Tony Alvarez, President and CEO. "The shortfalls were primarily due to a slower than expected ramp rate in our display driver business."
The company continues to focus on achieving design wins across its business areas, as well as expanding its line of analog and mixed-signal products. Design win progress and product introductions for the quarter included:
-- Leadis gained four new display driver design wins, including a second design utilizing its Epic technology designed to dramatically improve AM-OLED manufacturing yields and picture quality. The other design wins included one AM-OLED design, one TFT design and a timing controller product that will be utilized with Epic products. -- The four LED/Power design wins included two designs with a Tier 1 mobile phone manufacturer utilizing the LDS8866, a high-efficiency multi- mode fractional charge pump with ultra low dropout voltage. These designs are expected to ramp into production in the third and fourth quarters. The other two design wins utilize Power management products added through the Acutechnology Semiconductor acquisition in December 2007. -- Leadis added two Audio design wins, both for its industry-leading low power CODEC device, which are expected to begin shipping in the third quarter. -- Leadis announced sampling of the LDS8620 and the LDS8621, a new family of inductorless 200mA, dual-output LED flash/lamp drivers. These products address portable LED lighting applications including LED flashlights, flash/lamp LEDs in video and camera cellphones, PDAs, smartphones and digital cameras. -- Leadis announced sampling of a new Low Drop Out linear regulator (LDO) controller, the first new power management product announced resulting from the acquisition of Acutechnology. The LDS128P is part of a new family of LDO controllers designed to drive NMOS or NPN pass transistors. -- Leadis signed two additional NRE contracts during the second quarter and has several additional NRE contracts committed and under contract negotiation. NRE contracts signed to date will generate over $1 million of cash during development of the projects.
Q3 2008 Outlook
"Our revenue outlook for the third quarter is mixed," said Mr. Paul Novell, Executive Vice President of Marketing. "We expect revenue to remain approximately flat in the third quarter of 2008 as compared with the second quarter. Our newer display driver programs are not ramping as quickly as expected, resulting in a lower revenue outlook for the remainder of this year. We currently believe the slower ramps are the result of a softening consumer market, in particular for higher-end phones. On the positive side, we are gaining traction in our analog businesses with the Tier 1 LED driver design wins leading to expected shipment of hundreds of thousands of analog units in the third quarter. This is an important milestone even though these parts still only provide modest revenue."
Based on information currently available to the company, expectations for the third quarter of 2008 are as follows:
-- Revenue is expected to be approximately flat at $5.9 million dollars in the third quarter of 2008. -- Gross margin on product sales, which varies with product mix, selling price and unit costs, is expected to be approximately 8% in the third quarter. -- Non-GAAP operating expenses are expected to be approximately flat with the second quarter at $8.9 million.
"Our revenue outlook for the second half of the year has dropped to reflect slower growth in display driver programs," said Mr. Alvarez. "It follows that we will hold operating expenses roughly flat for the remainder of the year. We are pleased to win our first Tier 1 analog customer and will see stronger growth in analog sales as a result. Year to date we have earned a total of 20 design wins and have introduced over ten new products. While our near term revenue outlook is weak and we fully understand the challenges that we face, we remain confident that the acceleration of design wins and new product introductions will lead to a successful turnaround of the company's financial results."
Conference Call Today
Leadis will broadcast its conference call today, Thursday, July 24, 2008 at 2 p.m. Pacific Time (5 p.m. Eastern Time) to discuss its second quarter 2008 earnings and provide additional guidance.
To listen to the call, dial 1-877-545-1488 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 3453123.
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 portable and consumer electronics devices. Leadis' product offerings include color display drivers, which are critical components of displays used in portable consumer electronic devices; LED drivers, which provide controlled levels of current required to drive light emitting diodes in diverse applications including backlight units; power management ICs including LDOs, LDO controllers, shunt references, thermal switches, current regulators, and battery charger controllers; audio CODEC and FM transmitter ICs, which are integral components in portable media players and their associated aftermarket accessories; and touch controller ICs, which enable highly reliable touch-based input controls and attractive industrial design options for both mobile and non-mobile applications.