Financial Results
Revenue of $24.1 million for the first quarter of 2006 exceeded the high end of the company's guidance and reflected a 12% sequential increase and 107% growth year over year. Under generally accepted accounting principles (GAAP), first quarter net loss narrowed to $2.8 million as compared to $3.6 million net loss in the fourth quarter of 2005, resulting in net loss per basic share of $0.10 as compared to net loss per basic share of $0.13 in the fourth quarter of 2005.
During the quarter ended March 31, 2006, the company adopted FAS 123(R) regarding accounting for stock-based compensation. In addition to reporting GAAP results, which reflect stock-based compensation, the company is reporting non-GAAP results, which exclude such expense. Non-GAAP net loss for the first quarter of 2006 was $2.2 million or $0.08 per basic share, as compared to net loss of $3.3 million or $0.12 per basic share in the fourth quarter of 2005, and net loss of $1.8 million or $0.06 per basic share in the first quarter of 2005. A reconciliation of GAAP measures to non-GAAP measures is included in the financial statements portion of this press release.
The company reported cash and short-term investments of $102 million as of March 31, 2006, as compared to $114 million reported as of March 31, 2005 and $107 million reported as of December 31, 2005. Cash and short-term investments decreased as a result of cumulative net losses incurred the past four quarters.
Business Summary
* First quarter revenue was $24.1 million, representing the fourth
consecutive quarter of double-digit percentage increases. The
increase was primarily fueled by an increase in TFT sales as a
result of a successful ramp of our amorphous TFT product introduced
in late 2005. TFT sales increased as a percentage of revenue to
approximately 35% from 15% in the immediately prior quarter.
* ASP increased slightly on a blended basis compared to the prior
quarter. A more favorable product mix weighted toward TFT drivers
offset individual product ASP declines for TFT, OLED and STN drivers.
* Total driver unit shipments in the first quarter grew 8%
sequentially to a record 20.5 million units, as compared to 19.0
million units in the fourth quarter of 2005 and increased 230% from
6.2 million units in the same period last year. This substantial
year-to-year unit shipment growth compares favorably with overall
mobile handset unit growth of approximately 20% for the same period,
indicating the company's recapturing of market share over the past
year.
* Non-GAAP first quarter gross margin was 16%, slightly higher than
15% in the prior quarter and below expectation. The improved
product mix toward TFT was unable to offset greater individual
product ASP erosion.
* The LDS518, a low-power single chip area color OLED driver with
several user programmable features targeting multiple applications,
including mobile handset sub-displays, MP3 players, printers and fax
machines, moved into volume production status in the first quarter.
* Two new executives joined Leadis during the first quarter of 2006:
a) Dr. Jose Arreola, Executive Vice President of Engineering,
joined Leadis in January 2006 and leads our engineering
organization in Korea. For the past four years, Dr. Arreola
was CEO at Kovio, Inc. Prior to that, Dr. Arreola had a long
tenure at Cypress Semiconductor, where he was most recently
Vice President of Process Technology R&D.
b) Dr. Robert Fang, Vice President of Operations, joined Leadis in
March 2006. Dr. Fang most recently was Vice President of
Operations at XGI Technology, Inc., in Taiwan. An experienced
industry veteran, Dr. Fang will grow the company's operations
team in Taiwan in close proximity to key vendors, allowing for
improved response to customers and market dynamics.
"I am pleased with our first quarter's strong revenue growth. The successful launch of our initial amorphous TFT product in late 2005 reversed what is normally a seasonally down first quarter," said Antonio Alvarez, President and CEO. "Additionally, the successful recruitment of Dr. Jose Arreola and Dr. Robert Fang as vice presidents of engineering and operations, respectively, provides us with experienced executives in our largest international business locations. This will better enable us to focus on continued improvements of our new product introduction and operational processes which will produce improved response to our customers' needs."
Business Outlook
"We continue to see healthy growth in the handset industry, which in turn continues to drive demand for display drivers," said Mr. Alvarez. "From a technology standpoint, the growth for TFT technology based drivers is growing faster than the overall market, which we expect to fuel our revenue growth in the second quarter. The significant ramp of TFT sales that is driving our projected first half 2006 revenue growth is expected to be slower in the second half of the year. We currently expect third quarter revenue to be flat to slightly lower relative to the second quarter and a resumption of growth in the fourth quarter. We are targeting TFT sales to grow to 40-50% of our revenue by the end of year."
Based on information currently available to the company, expectations for the second quarter of 2006 are as follows:
* Revenue, which varies with product mix and selling prices, is
expected to increase approximately 15-30% to the range of $28 to $32
million in the second quarter.
* TFT sales are expected to be 35-40% of revenue in the second
quarter.
* ASP on a blended basis, which varies with product mix, is expected
to be flat or slightly lower.
* Gross margin, which varies with product mix, average selling price
and unit costs, is expected to be slightly higher as a percent of
sales.
