Under generally accepted accounting principles (GAAP), fourth quarter net loss was $3.1 million or $0.11 per basic share, inclusive of a $0.6 million charge to establish a valuation allowance on deferred tax assets, most of which is the result of stock-based compensation expense. As a result of the tax charge, fourth quarter net loss slightly increased as compared to $2.8 million or $0.10 per basic share reported in the previous quarter, but decreased as compared to the $3.6 million net loss or $0.13 per basic share reported in the fourth quarter of 2005. Fiscal year 2006 net loss increased to $11.9 million from $11.4 million in 2005, primarily due to increases in stock-based compensation charges associated with the company's adoption of FAS123(R) in 2006. Excluding stock-based compensation charges and its tax effects, fiscal year 2006 net loss narrowed to $7.4 million from $9.2 million reported for 2005.
In addition to reporting GAAP results, the company reports non-GAAP results, which exclude stock-based compensation expense per FAS 123(R). Non-GAAP net loss for the fourth quarter of 2006 narrowed to $1.5 million or $0.05 per basic share as compared to a net loss of $1.7 million or $0.06 per basic share in the third quarter of 2006 and a net loss of $3.3 million or $0.12 per basic share in the fourth 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 $107 million as of December 31, 2006, flat as compared to the balance as of the end of 2005.
The company's Board of Directors has authorized a program to repurchase up to 2.5 million shares of its common stock through December 31, 2007. Purchases may be made at the company's discretion from time to time in open market transactions at prevailing prices or through privately negotiated transactions as conditions permit.
"Our Board's decision to adopt the stock repurchase program demonstrates our commitment to enhancing stockholder value and reflects the Board's confidence in management's operating plan," said Mr. Tony Alvarez, President and CEO. "In light of the company's strong balance sheet, the Board believes that the repurchase program is a good investment of available funds and will help offset potential dilution from option grants made to employees."
Business Summary -- Fourth quarter revenue was $23.9 million, a 7% quarterly sequential increase. Fourth quarter sales to Japanese customers represented approximately 20% of revenue. -- TFT sales increased to approximately 25% of revenue, as forecast. STN and OLED sales were approximately 70% and 5% of total revenue, respectively. For the fiscal year 2006, TFT sales grew more than 300% over the prior year and represented approximately 30% of total sales in 2006. -- Total driver unit shipments for the fourth quarter increased 12% sequentially to 28 million units. For the fiscal year 2006, Leadis shipped a record 102 million units. -- ASP decreased sequentially approximately 4% on a blended basis, representing a slower decline relative to the prior quarters in 2006. -- Fourth quarter gross margin was 13% on both GAAP and non-GAAP basis, flat with the prior quarter. -- Operating expenses were controlled tightly during the quarter, as the company achieved its fourth successive quarter of decreased expenses. Operating expenses excluding stock-based compensation expense decreased slightly to $5.9 million. For the fiscal year 2006, operating expenses excluding stock-based compensation expenses decreased approximately $1 million to $24.3 million. -- Since the beginning of the fourth quarter, the company has announced volume production status on three new qQVGA display drivers for mobile phone displays, bringing to seven the total number of new volume production products for 2006: a) The LDS331, a 262K color LTPS TFT driver addressing multimedia phones using advanced TFT technology. b) The LDS522, a 65K color OLED driver suitable for MP3 players and mobile phone sub display applications. c) The LDS191, a 262K color STN driver capable of supporting video- enabled phones. -- Leadis further announced its entry into the LED driver business and sampling of its first LED driver, the LDS8841, a four channel fractional 1x/1.5x charge pump capable of driving up to four LEDs in mobile backlight units. This new product is designed to efficiently drive backlight units of mobile display modules for applications such as mobile handsets and portable media players. Combined with the company's upcoming line of PowerLite(TM) display drivers incorporating dynamic backlight control, the new line of LED drivers are an integral part of Leadis' comprehensive system solution capable of reducing module power by up to 50%.
"I am pleased that the fourth quarter met expectations with a sequential increase in revenue and narrower net loss. We made significant strides in 2006, growing annual revenue over fifty percent to more than $100 million, regaining market share with over 100 million units shipped, and maintaining a strong year-end cash position," said Mr. Alvarez. "Equally important, we achieved critical operations and engineering improvements to our new product development engine as well as commenced our diversification into the LED driver business. We are pleased with these efforts and believe we will reap benefits in 2007 and beyond."
Q1 2007 Outlook
"The decline in revenue contribution from legacy products is anticipated to continue in the first quarter as we decrease our participation in the lower margin STN market," said Mr. Paul Novell, Vice President of Sales and Marketing. "Coupled with the seasonally lower demand for the January to March period, revenues are forecast to be sequentially down."
Based on information currently available to the company, expectations for the first quarter of 2007 are as follows:
-- Revenue, which varies with product mix and selling prices, is expected to decline to the range of $13- $15 million. -- ASP on a blended basis, which varies with product mix, is expected to be relatively flat compared to the fourth quarter. -- Gross margin, which varies with product mix, ASP and unit costs, is expected to be flat as a percentage of sales relative to the prior quarter. 2007 Strategy