EXAR CORPORATION FREMONT, Calif., Nov. 5, 2015 /PRNewswire/ -- Exar Corporation (NYSE: EXAR) a leading supplier of analog mixed-signal semiconductor components and system solutions serving the industrial, high-end consumer and infrastructure markets, today announced financial results for the Company's second fiscal quarter of 2016, which ended on September 27, 2015.
Richard Leza, Exar's chairman and interim president and CEO, commented, "As expected, while the September quarter was challenging with weakness persisting in China, we delivered solid non-GAAP results within our revenue and EPS expectation ranges. Non-GAAP gross margin was adversely affected by softness within our Industrial customers; however, we were able to implement cost controls to ensure we delivered improved profitability from a year ago." Mr. Leza continued, "We are engaged in multiple initiatives to restore focus, revenue growth and higher levels of profitability to Exar. This includes implementing a strategy built on Exar's core strengths, a restructuring of our sales and marketing efforts, and continuing to implement steps to target a reduction in our cost of goods."
Second Quarter Fiscal Year 2016 Highlights
The following highlights the Company's financial performance on both a GAAP and supplemental non-GAAP basis. The Company provides supplemental information regarding its operating performance on a non-GAAP basis that excludes certain gains, losses, and charges which occur relatively infrequently and which management considers to be outside our core operating results. Non-GAAP results are not in accordance with GAAP and may not be comparable to non-GAAP information provided by other companies. Non-GAAP information should be considered a supplement to, not a substitute for, financial statements prepared in accordance with GAAP. A complete reconciliation of GAAP to non-GAAP results from continuing operations is attached to this press release.
Second Quarter Fiscal Year 2016 Highlights on a Non-GAAP Basis:
-- Quarterly revenues of $37.2 million decreased $6.1 million or 14% from
$43.3 million reported a year ago and decreased $3.2 million or 8% from
the previous quarter's revenue of $40.4 million.
-- Gross margin of 45.6% decreased from the 46.8% reported a year ago and
the 49.5% from the previous quarter.
-- Operating expenses of $14.1 million decreased $3.7 million from the same
quarter a year ago and $0.6 million from the previous quarter's expenses
of $14.7 million.
-- Net income of $2.8 million increased $0.3 million or 11% from the second
quarter of fiscal year 2015 and decreased $2.3 million or 45% from the
previous quarter's net income of $5.1 million.
-- Diluted earnings per share of $0.06 per share increased $0.01 per share
from a year ago and decreased $0.04 per share from the previous quarter.
Second Quarter Fiscal Year 2016 Highlights on a GAAP Basis:
-- Quarterly revenues for the second quarter of fiscal year 2016 were $34.7
million.
-- Gross margin of 36.4% increased from the 9.6% reported in the second
quarter of fiscal year 2015 and decreased from the 43.1% reported a
quarter ago.
-- Operating expenses of $17.9 million decreased $9.1 million from the same
quarter a year ago and $1.9 million from the previous quarter's expenses
of $19.8 million.
-- Net loss of $4.2 million compared to the previous quarter's $2.5 million
net loss.
-- Loss per share of $0.09 compared with $0.05 a quarter ago.
-- GAAP results were impacted by charges of (i) $3.4 million related to
amortization, (ii) $2.5 million for a dispute resolution related to our
Data Compression products, which was classified as a reduction in
revenue, (iii) $2.1 million related to ongoing restructuring activities
and (iv) $1.5 million related to stock-based compensation. Additionally,
GAAP results reflect credits of $1.5 million decrease in cost of goods
sold due to proceeds from a legal settlement related to our Data
Compression products, and $1.2 million due to the expiration of the
statute of limitations related to certain U.S. federal tax reserves.
Third Quarter and Full Fiscal Year 2016 Non-GAAP Guidance
Mr. Leza continued, "While the industry is bracing for a tough environment into the 2015 calendar year end, we are not anticipating any further decline in revenue. As we refocus Exar's resources on our core strengths, we expect full fiscal year profitability to be higher than the previous year."
For the third quarter ending December 27, 2015, the Company expects revenue to be flat to up 3% sequentially, non-GAAP gross margin to be in the range of 46% to 48%, and non-GAAP EPS on a fully diluted basis to be in the range of $0.06 to $0.08. For fiscal year 2016 the Company expects non-GAAP revenue to be in the range of $153 million to $156 million and Non-GAAP EPS on a fully diluted basis to be in the range of $0.30 to $0.34.
Conference Call and Prepared Remarks
Exar is providing a copy of the prepared remarks in conjunction with its press release. These remarks are offered to provide stockholders and analysts with additional time and detail for analyzing results in advance of the Company's quarterly conference call. The remarks will be available at Exar's Investor webpage in conjunction with the press release.
As previously scheduled, the conference call will begin today, November 5, 2015 at 4:45 p.m. EST (1:45 p.m. PST). To access the conference call, please dial (719) 457-2628 or (888) 364-3108. The passcode for the live call is 1680954. In addition, a live webcast will be available on Exar's Investor webpage.
An archive of the conference call webcast will be available on Exar's Investor webpage after the conference call's conclusion.
About Exar
Exar Corporation designs, develops and markets high performance integrated circuits and system solutions for the industrial, high-end consumer and infrastructure markets. Exar's broad product portfolio includes analog, display, LED lighting, mixed-signal, power management, connectivity, data management and video processing solutions. Exar has locations worldwide providing real-time customer support.
For more information, visit http://www.exar.com.
-Tables follow-
FINANCIAL COMPARISON
(In thousands, except per share amounts) (Unaudited)
Non-GAAP Results THREE MONTHS ENDED SIX MONTHS ENDED
------------------ ----------------
SEPTEMBER 27, 2015 JUNE 28, 2015 SEPTEMBER 28, 2014 SEPTEMBER 27, 2015 SEPTEMBER 28, 2014
------------------ ------------- ------------------ ------------------ ------------------
Industrial $17,925 48% $20,575 51% $19,656 45% $38,500 50% $38,523 51%
High-End Consumer 13,163 35% 13,536 33% 16,362 38% 26,699 34% 21,694 28%
Infrastructure 6,154 17% 6,311 16% 7,304 17% 12,465 16% 15,732 21%
----- --- ----- --- ----- --- ------ --- ------ ---
Net Sales $37,242 100% $40,422 100% $43,322 100% $77,664 100% $75,949 100%
Gross Profit $16,974 45.6% $19,992 49.5% $20,283 46.8% $36,966 47.6% $36,015 47.4%
Operating Expenses $14,072 37.8% $14,723 36.4% $17,797 41.1% $28,795 37.1% $32,837 43.2%
Income from operations $2,902 7.8% $5,269 13.0% $2,486 5.7% $8,171 10.5% $3,178 4.2%
Net income $2,768 7.4% $5,078 12.6% $2,496 5.8% $7,846 10.1% $3,356 4.4%
Net income per share
Basic $0.06 $0.11 $0.05 $0.16 $0.07
Diluted $0.06 $0.10 $0.05 $0.16 $0.07
GAAP Results THREE MONTHS ENDED SIX MONTHS ENDED
------------------ ----------------
SEPTEMBER 27, 2015 JUNE 28, 2015 SEPTEMBER 28, 2014 SEPTEMBER 27, 2015 SEPTEMBER 28, 2014
------------------ ------------- ------------------ ------------------ ------------------
Industrial $15,425 44% $20,575 51% $19,656 46% $36,000 48% $38,523 52%
High-End Consumer 13,163 38% 13,536 33% 16,199 38% $26,699 35% $19,623 27%
Infrastructure 6,154 18% 6,311 16% 7,304 16% $12,465 17% $15,732 21%
----- --- ----- --- ----- --- ------- --- ------- ---
Net Sales $34,742 100% $40,422 100% $43,159 100% $75,164 100% $73,878 100%
Gross Profit $12,656 36.4% $17,437 43.1% $4,132 9.6% $30,093 40.0% $15,088 20.4%
Operating Expenses $17,907 51.5% $19,776 48.9% $26,962 62.5% $37,683 50.1% $49,270 66.7%
Loss from operations $(5,251) -15.1% $(2,339) -5.8% $(22,830) -52.9% $(7,590) -10.1% $(34,182) -46.3%
Net loss $(4,197) -12.1% $(2,510) -6.2% $(23,352) -54.1% $(6,707) -8.9% $(35,457) -48.0%
Net loss per share
Basic $(0.09) $(0.05) $(0.50) $(0.14) $(0.75)
Diluted $(0.09) $(0.05) $(0.50) $(0.14) $(0.75)
Except for historical information contained herein, this press release and matters discussed on the conference call contain forward-looking statements within the meaning of the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. These statements are based on management's current expectations and beliefs and are subject to a number of factors and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. In particular, the statements regarding the demand for our products and the anticipated trends in our sales and profits, future opportunities that are available to the Company, the Company's financial outlook expectations for the third quarter and year ending December 27, 2015 and March 27, 2016, respectively, existence of any viable strategic alternatives and whether any future decisions by the Company will enhance stockholder value, are forward-looking statements. The forward-looking statements are dependent on certain risks and uncertainties. Therefore, actual outcomes and results may differ materially from what is expressed herein. For a discussion of these risks and uncertainties, the Company urges investors to review in detail the risks and uncertainties and other factors described in its Securities and Exchange Commission (SEC) filings, including, but not limited to, the "Risk Factors", "Forward-Looking Statements" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" sections of our public reports filed with the SEC, including our Annual Report on Form 10-K for the fiscal year ended March 29, 2015, which is on file with the SEC and available on our Investor webpage and on the SEC website at www.sec.gov, and the risks and uncertainties of whether any strategic alternative will be identified by the Board of Directors, whether it will be pursued, whether it will receive Board of Directors and stockholder approval if necessary, whether it will be consummated and, if consummated, whether it will enhance value for all stockholders of Exar. The Company assumes no obligation to update any forward-looking statements or information, which speak as of their respective dates.
There can be no assurance that Exar's review of strategic alternatives will result in any specific action. Exar does not currently intend to disclose further developments with respect to this process unless and until its Board of Directors approves a specific action or otherwise concludes the review of strategic alternatives.
The Company's non-GAAP measures exclude charges related to stock-based compensation, amortization of acquired intangible assets and inventory step-up, impairment charges, technology licenses, restructuring charges and exit costs which include costs for personnel whose positions have been eliminated as part of a restructuring or are in the process of being eliminated as part of the discontinuation of a product line, provisions for & proceeds received from dispute resolutions, merger and acquisition and related integration costs, certain income tax benefits and credits, certain warranty charges, net change in the fair value of contingent consideration, the write-down of deferred revenue under business combination accounting, and related income tax effects on certain excluded items. The Company excludes these items primarily because they are significant special expense and gain estimates, which management separates for consideration when evaluating and managing business operations. The Company's management uses non-GAAP net income and non-GAAP earnings per share to evaluate its current operating results and financial results and to compare them against historical financial results. Additionally, we disclose below the non-GAAP measure of free cash flow, which is derived from our net cash provided (used) by operations, less purchases of fixed assets and IP, plus proceeds from the sale of IP. Management believes these non-GAAP measures are useful to investors because they are frequently used by securities analysts, investors and other interested parties in evaluating the Company and provides further clarity on its profitability.
In addition, the Company believes that providing investors with these non-GAAP measurements enhances their ability to compare the Company's business against that of its many competitors who employ and disclose similar non-GAAP measures. This financial measure may be different from non-GAAP methods of accounting and reporting used by the Company's competitors to the extent their non-GAAP measures include or exclude other items. The presentation of this additional information should not be considered a substitute for net income or net income per diluted share or other measures prepared in accordance with GAAP.
EXAR CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)
THREE MONTHS ENDED SIX MONTHS ENDED
------------------ ----------------
SEPTEMBER 27, JUNE 28, SEPTEMBER 28, SEPTEMBER 27, SEPTEMBER 28,
2015 2015 2014 2015 2014
---- ---- ---- ---- ----
Net sales $26,037 $29,045 $34,369 $55,082 $56,067
Net sales, related party 8,705 11,377 8,790 20,082 17,811
Total net sales 34,742 40,422 43,159 75,164 73,878
------ ------ ------ ------ ------
Cost of sales:
Cost of sales (1) 16,447 15,601 19,747 32,048 32,100
Cost of sales, related party 3,906 4,916 3,471 8,822 7,309
Amortization of purchased
intangible assets and inventory
step-up costs 2,493 2,468 3,137 4,961 6,682
Restructuring charges and exit
costs 740 - 4,305 740 4,332
Proceeds from legal settlement (1,500) - - (1,500) -
Impairment of intangibles - - 8,367 - 8,367
Total cost of sales 22,086 22,985 39,027 45,071 58,790
------ ------ ------ ------ ------
Gross profit 12,656 17,437 4,132 30,093 15,088
------ ------ ----- ------ ------
Operating expenses:
Research and development(2) 7,499 9,477 10,369 16,976 18,612
Selling, general and
administrative (3) 9,092 10,299 11,597 19,391 21,674
Restructuring charges and exit
costs 1,316 - 2,265 1,316 2,634
Merger and acquisition costs - - 2,726 - 6,776
Impairment of intangibles - - 3,917 - 3,917
Net change in fair value of
contingent consideration - - (3,912) - (4,343)
Total operating expenses 17,907 19,776 26,962 37,683 49,270
Loss from operations (5,251) (2,339) (22,830) (7,590) (34,182)
Other income and expense, net:
Interest income and other, net (19) (14) 177 (33) 467
Interest expense (49) (52) (494) (101) (980)
--- --- ---- ---- ----
Total other income and expense,
net (68) (66) (317) (134) (513)
Loss before income taxes (5,319) (2,405) (23,147) (7,724) (34,695)
Provision for (benefit from)
income taxes (1,122) 105 107 (1,017) 799
------ --- --- ------ ---
Net loss before noncontrolling
interest (4,197) (2,510) (23,254) (6,707) (35,494)
Net income (loss) attributable
to noncontrolling interest - - 98 - (37)
--- --- --- --- ---
Net loss attributable to Exar $(4,197) $(2,510) $(23,352) $(6,707) $(35,457)
======= ======= ======== ======= ========
Net loss per share:
Basic $(0.09) $(0.05) $(0.50) $(0.14) $(0.75)
====== ====== ====== ====== ======
Diluted $(0.09) $(0.05) $(0.50) $(0.14) $(0.75)
====== ====== ====== ====== ======
Shares used in the computation
of net loss per share:
Basic 48,121 47,927 47,139 48,024 47,188
====== ====== ====== ====== ======
Diluted 48,121 47,927 47,139 48,024 47,188
====== ====== ====== ====== ======
(1)Stock-based compensation
included in cost of sales $85 $87 $227 $172 $487
(2)Stock-based compensation
included in R&D 205 449 870 654 1,682
(3)Stock-based compensation
included in SG&A 1,162 1,401 2,503 2,563 4,558
EXAR CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
SEPTEMBER 27, JUNE 28, MARCH 29,
2015 2015 2015
---- ---- ----
ASSETS
Current assets:
Cash and cash equivalents $53,484 $55,760 $55,233
Accounts receivable, net 26,527 25,434 27,459
Accounts receivable, related party,
net 5,520 541 1,663
Inventories 32,398 33,333 30,767
Other current assets 2,515 3,973 3,090
----- ----- -----
Total current assets 120,444 119,041 118,212
Property, plant and equipment, net 23,327 24,637 26,077
Goodwill 44,871 44,871 44,871
Intangible assets, net 79,327 82,732 86,102
Other non-current assets 790 7,821 7,838
--- ----- -----
Total assets $268,759 $279,102 $283,100
======== ======== ========
LIABILITIES AND STOCKHOLDERS'
EQUITY
Current liabilities:
Accounts payable $16,545 $16,437 $13,526
Accrued compensation and related
benefits 3,601 4,736 5,649
Deferred income and allowances on
sales to distributors 2,595 3,597 3,362
Deferred income and allowances on
sales to distributors, related
party 4,156 3,596 6,982
Other current liabilities 15,306 20,124 21,287
------ ------ ------
Total current liabilities 42,203 48,490 50,806
Long-term lease financing
obligations 4,188 4,629 5,069
Other non-current obligations 3,364 4,420 4,393
----- ----- -----
Total liabilities 49,755 57,539 60,268
Stockholders' equity 219,004 221,563 222,832
------- ------- -------
Total liabilities and stockholders'
equity $268,759 $279,102 $283,100
======== ======== ========
EXAR CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL RECONCILIATION OF GAAP TO NON-GAAP RESULTS
(In thousands, except per share amounts)
(Unaudited)
THREE MONTHS ENDED SIX MONTHS ENDED
------------------ ----------------
SEPTEMBER 27, JUNE 28, SEPTEMBER 28, SEPTEMBER 27, SEPTEMBER 28,
2015 2015 2014 2015 2014
---- ---- ---- ---- ----
GAAP net sales $34,742 $40,422 $43,159 $75,164 $73,878
Provision for dispute 2,500 - - 2,500 -
Deferred revenue write-down - - 163 - 2,071
--- --- -----
Non-GAAP net sales $37,242 $40,422 $43,322 $77,664 $75,949
======= ======= ======= ======= =======
GAAP gross profit $12,656 $17,437 $4,132 $30,093 $15,088
GAAP gross margin 36.4% 43.1% 9.6% 40.0% 20.4%
Provision for dispute 2,500 - - 2,500 -
Amortization of purchased
intangible assets and
inventory step-up costs 2,493 2,468 3,137 4,961 6,682
Restructuring charges and
exit costs 740 - 4,305 740 4,332
Stock-based compensation 85 87 227 172 487
Proceeds from legal
settlement (1,500) - - (1,500) -
Deferred revenue write-down
and associated costs - - 115 - 1,059
Impairment of intangibles - - 8,367 - 8,367
Non-GAAP gross profit $16,974 $19,992 $20,283 $36,966 $36,015
======= ======= ======= ======= =======
Non-GAAP gross margin 45.6% 49.5% 46.8% 47.6% 47.4%
==== ==== ==== ==== ====
GAAP operating expenses $17,907 $19,776 $26,962 $37,683 $49,270
Restructuring charges and
exit costs, net 1,316 1,637 2,265 2,953 2,634
Stock-based compensation -
R&D 205 449 870 654 1,682
Stock-based compensation -
SG&A 1,162 1,401 2,503 2,563 4,558
Amortization of purchased
intangible assets 908 898 796 1,806 1,209
Legal settlement associated
costs 201 - - 201 -
Merger and acquisition costs 43 668 2,726 711 6,776
Impairment of intangibles - - 3,917 - 3,917
Net change in fair value of
contingent consideration - - (3,912) - (4,343)
Non-GAAP operating expenses $14,072 $14,723 $17,797 $28,795 $32,837
======= ======= ======= ======= =======
GAAP operating loss $(5,251) $(2,339) $(22,830) $(7,590) $(34,182)
Amortization of purchased
intangible assets and
inventory step-up costs 3,401 3,366 3,933 6,767 7,891
Provision for dispute 2,500 - - 2,500 -
Restructuring charges and
exit costs, net 2,056 1,637 6,570 3,693 6,966
Stock-based compensation 1,452 1,937 3,600 3,389 6,727
Merger and acquisition costs 43 668 2,726 711 6,776
Proceeds from legal
settlement and associated
costs (1,299) - - (1,299) -
Deferred revenue write-down
and associated costs - - 115 - 1,059
Impairment of intangibles - - 12,284 - 12,284
Net change in fair value of
contingent consideration - - (3,912) - (4,343)
Non-GAAP operating income $2,902 $5,269 $2,486 $8,171 $3,178
====== ====== ====== ====== ======
GAAP net loss $(4,197) $(2,510) $(23,352) $(6,707) $(35,457)
Amortization of purchased
intangible assets and
inventory step-up cost 3,401 3,366 3,933 6,767 7,891
Provision for dispute 2,500 - - 2,500 -
Restructuring charges and
exit costs, net 2,056 1,637 6,570 3,693 6,966
Stock-based compensation 1,452 1,937 3,600 3,389 6,727
Merger and acquisition costs 43 668 3,181 711 7,678
Proceeds from legal
settlement and associated
costs (1,299) - - (1,299) -
Deferred revenue write-down
and associated costs - - 115 - 1,059
Impairment Charges - - 12,284 - 12,284
Net change in fair value of
contingent consideration - - (3,912) - (4,343)
Net loss attributable to
noncontrolling interest - - 98 - (37)
Income tax effects (1,188) (20) (21) (1,208) 588
Non-GAAP net income
attributable to Exar $2,768 $5,078 $2,496 $7,846 $3,356
====== ====== ====== ====== ======
GAAP net loss per share
Basic $(0.09) $(0.05) $(0.50) $(0.14) $(0.75)
Diluted $(0.09) $(0.05) $(0.50) $(0.14) $(0.75)
Non-GAAP net income per share
Basic $0.06 $0.11 $0.05 $0.16 $0.07
Diluted $0.06 $0.10 $0.05 $0.16 $0.07
Shares used in the
computation of Non-GAAP net
income per share:
Basic 48,121 47,927 47,139 48,024 47,188
====== ====== ====== ====== ======
Diluted 49,172 50,167 49,520 49,661 49,850
====== ====== ====== ====== ======
Net cash provided (used) by
operations $(1,539) $1,562 $(1,960) $23 $(10,097)
Less purchases of fixed
assets and IP (462) (105) (105) (567) (656)
---- ---- ----
Free cash flow $(2,001) $1,457 $(2,065) $(544) $(10,753)
======= ====== ======= ===== ========
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SOURCE Exar Corporation
