EXAR CORPORATION FREMONT, Calif., Nov. 5, 2014 /PRNewswire/ -- Exar Corporation (NYSE: EXAR) a leading provider of high-performance integrated circuits and system solutions, today reported financial results for the second quarter of fiscal year 2015, ended September 28, 2014. Non-GAAP revenue for the second quarter of fiscal year 2015 was a record $43.3 million, exceeding the top end of prior expectations, and an increase of 33% from $32.6 million in the prior quarter. Revenue has been adjusted to eliminate the impact of the deferred revenue write-down under business combination accounting. GAAP revenue for the second quarter fiscal 2015 was $43.2 million.
On a non-GAAP basis, gross margin was 47%; operating income was $2.5 million, or 6%; and net income was $2.5 million, or $0.05 per diluted share.
GAAP results include impairment charges for non-cash write-down of intangibles, restructuring costs, and mergers and acquisition costs. These charges were offset by a credit for the reduction in the fair value of contingent consideration of $3.9 million. As a result, GAAP gross margin was 10%; operating loss was $22.8 million; and net loss was $23.4 million, or $0.50 loss per share.
Cash at the end of the quarter was $104 million. The iML merger closed in September; however, payment of the non-controlling interest and repayment of the bridge loan financing occurred in October. Currently, the Company has approximately $55 million in cash and equivalents and no debt.
Louis DiNardo, Exar president and CEO, commented, "During our fiscal second quarter and early in our fiscal third quarter we completed a restructuring to focus on our core competency as a leading provider of analog mixed-signal and power management components. Our goal is to provide innovative solutions for the wide markets served by leading high performance analog mixed-signal and power management integrated circuit providers, while driving industry leading revenue growth by focusing on specific vertical markets including video surveillance, enterprise and server power, LCD displays and LED lighting."
Mr. DiNardo continued, "Our recent restructuring was across all disciplines and is estimated to save approximately $6.5 million in operational and other costs. As a result, these measures will favorably impact COGS in our fiscal year 2016 beginning March 30, 2015. However, a portion of these savings will be invested in the expansion of our sales force. We continue to grow organically and through acquisition while containing cost, thereby providing exceptional operating leverage."
On a non-GAAP basis, for the third fiscal quarter of 2015, ending December 28, 2014, the Company is expecting revenue to be in the range of $43.0 million to $45.0 million, and non-GAAP EPS of $0.04 to $0.06.
Webcast and Conference Call Details
Company officials will be discussing these results in greater detail in a conference call today, Wednesday, November 5, 2014 at 1:45 p.m. PST (4:45 p.m. EST). To access the conference call, please dial (719) 325-2464 or (888) 287-5563. In addition, a live webcast will be available on Exar's Investor webpage. An archive of the webcast will be available on Exar's Investor webpage after its conclusion.
About Exar
Exar Corporation designs, develops and markets high-performance integrated circuits and system solutions for the Industrial & Embedded Systems, 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 about Exar, 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 28, 2014 JUNE 29, 2014 September 29, 2013 September 28, 2014 September 29, 2013
------------------ ------------- ------------------ ------------------ ------------------
Industrial &
Embedded Systems $19,656 45% $18,867 58% $17,943 53% $38,523 51% $34,441 52%
High-End Consumer 16,362 38% 5,332 16% 105 0% 21,694 29% 351 1%
Infrastructure 7,304 17% 8,428 26% 15,970 47% 15,732 21% 31,853 48%
----- --- ----- --- ------ --- ------ --- ------ ---
Net Sales $43,322 100% $32,627 100% $34,018 100% $75,949 100% $66,645 100%
Gross Profit $20,283 46.8% $15,732 48.2% $17,703 52.0% $36,015 47.4% $34,753 52.1%
Operating Expenses $17,797 41.1% $15,040 46.1% $12,854 37.8% $32,837 43.2% $25,336 38.0%
Income from
operations $2,486 5.7% $692 2.1% $4,849 14.3% $3,178 4.2% $9,417 14.1%
Net income $2,496 5.8% $860 2.6% $5,135 15.1% $3,356 4.4% $9,932 14.9%
Net income per
share
Basic $0.05 $0.02 $0.11 $0.07 $0.21
Diluted $0.05 $0.02 $0.10 $0.07 $0.20
GAAP Results THREE MONTHS ENDED SIX MONTHS ENDED
------------------ ----------------
September 28, 2014 JUNE 29, 2014 September 29, 2013 September 28, 2014 September 29, 2013
------------------ ------------- ------------------ ------------------ ------------------
Industrial &
Embedded Systems $19,656 46% $18,867 61% $17,943 53% $38,523 52% $34,441 52%
High-End Consumer 16,199 38% $3,424 11% $105 0% $19,623 27% $351 1%
Infrastructure 7,304 17% $8,428 27% 15,970 47% $15,732 21% $31,853 48%
----- --- ------ --- ------ --- ------- --- ------- ---
Net Sales $43,159 100% $30,719 100% $34,018 100% $73,878 100% $66,645 100%
Gross Profit $4,132 9.6% $10,956 35.7% $13,929 40.9% $15,088 20.4% $29,406 44.1%
Operating Expenses $26,962 62.5% $22,308 72.6% $14,545 42.8% $49,270 66.7% $29,475 44.2%
Income (loss) from
operations $(22,830) -52.9% $(11,352) -37.0% $(616) -1.8% $(34,182) -46.3% $(69) -0.1%
Net income (loss) $(23,352) -54.1% $(12,105) -39.4% $6,482 19.1% $(35,457) -48.0% $7,288 10.9%
Net income (loss)
per share
Basic $(0.50) $(0.26) $0.14 $(0.75) $0.15
Diluted $(0.50) $(0.26) $0.13 $(0.75) $0.15
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 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. The Company urges investors to review in detail the risks and uncertainties and other factors described in its Securities and Exchange Commission, or SEC, filings, including, but not limited to, under the captions "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 30, 2014 and the Quarterly Report on Form 10-Q for the quarter ended June 29, 2014 which are on file with the SEC and are available on our Investor webpage and on the SEC website at www.sec.gov. The Company assumes no obligation to update any forward-looking statements or information, which speak as of their respective dates.
The Company's non-GAAP measures exclude charges related to stock-based compensation, amortization of acquired intangible assets and inventory step-up, impairment charges, restructuring charges and exit costs, provisions for 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 28, JUNE 29, SEPTEMBER 29, SEPTEMBER 28, SEPTEMBER 29,
2014 2014 2013 2014 2013
---- ---- ---- ---- ----
Net sales $34,369 $21,698 $24,978 $56,067 $48,836
Net sales, related party 8,790 9,021 9,040 17,811 17,809
Total net sales 43,159 30,719 34,018 73,878 66,645
------ ------ ------ ------ ------
Cost of sales:
Cost of sales (1) 19,747 12,353 12,371 32,100 24,183
Cost of sales, related party 3,471 3,838 4,156 7,309 8,063
Impairment of Intangibles 8,367 - - 8,367 -
Amortization of purchased
intangible assets and
inventory step-up cost 3,137 3,545 2,098 6,682 3,448
Warranty Reserve - - 1,440 - 1,440
Restructuring charges and exit
costs 4,305 27 24 4,332 105
Total cost of sales 39,027 19,763 20,089 58,790 37,239
------ ------ ------ ------ ------
Gross profit 4,132 10,956 13,929 15,088 29,406
----- ------ ------ ------ ------
Operating expenses:
Research and development(2) 10,369 8,243 7,136 18,612 13,316
Selling, general and
administrative (3) 11,597 10,077 9,376 21,674 16,730
Impairment of Intangibles 3,917 - - 3,917 -
Merger and acquisition costs 2,726 4,050 144 6,776 609
Restructuring charges and exit
costs 2,265 369 384 2,634 1,315
Net change in fair value of
contingent consideration (3,912) (431) (2,495) (4,343) (2,495)
Total operating expenses 26,962 22,308 14,545 49,270 29,475
Income (loss) from operations (22,830) (11,352) (616) (34,182) (69)
Other income and expense, net:
Interest income and other, net 177 290 372 467 659
Interest expense (494) (486) (41) (980) (78)
---- ---- --- ---- ---
Total other income and expense,
net (317) (196) 331 (513) 581
Income (loss) before income
taxes (23,147) (11,548) (285) (34,695) 512
Provision for (benefit from)
income taxes 107 692 (6,767) 799 (6,776)
--- --- ------ --- ------
Net income (loss) before
noncontrolling interests (23,254) (12,240) 6,482 (35,494) 7,288
Net income (loss) attributable
to noncontrolling interests 98 (135) - (37) -
--- ---- --- --- ---
Net income (loss) attributable
to Exar $(23,352) $(12,105) $6,482 $(35,457) $7,288
======== ======== ====== ======== ======
Net income (loss) per share:
Basic $(0.50) $(0.26) $0.14 $(0.75) $0.15
====== ====== ===== ====== =====
Diluted $(0.50) $(0.26) $0.13 $(0.75) $0.15
====== ====== ===== ====== =====
Shares used in the computation
of net income (loss) per
share:
Basic 47,139 47,236 47,496 47,188 47,151
====== ====== ====== ====== ======
Diluted 47,139 47,236 49,150 47,188 48,647
====== ====== ====== ====== ======
(1)Equity compensation included
in cost of sales $227 $260 $212 $487 $354
(2)Equity compensation included
in R&D 870 812 689 1,682 829
(3) Equity compensation
included in SG&A 2,503 2,055 2,722 4,558 3,527
EXAR CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share amounts)
(Unaudited)
SEPTEMBER 28, JUNE 29, MARCH 30,
2014 2014 2014
---- ---- ----
ASSETS
Current assets:
Cash and cash equivalents $78,377 $123,161 $14,614
Restricted cash 26,000 26,000 -
Short-term marketable securities - - 152,420
Accounts receivable, net 25,828 26,596 15,023
Accounts receivable, net related
party 2,108 2,524 3,309
Inventories 31,223 31,988 28,982
Assets held for sale - - -
Other current assets 5,323 5,717 3,549
----- ----- -----
Total current assets 168,859 215,986 217,897
Property, plant and equipment, net 17,212 20,644 21,280
Goodwill 45,106 45,017 30,410
Intangible assets, net 93,136 109,041 31,390
Other non-current assets 1,408 1,448 1,240
----- ----- -----
Total assets $325,721 $392,136 $302,217
======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $17,737 $15,883 $15,488
Accrued compensation and related
benefits 5,175 6,271 4,174
Deferred income to distributors 4,052 3,737 1,765
Deferred income to distributors,
related party 10,342 9,962 9,349
Short-term debt financing 26,000 65,000 -
Liability for acquisition of non-
controlling interest 18,883 - -
Other current liabilities 14,798 16,257 11,370
------ ------ ------
Total current liabilities 96,987 117,110 42,146
Long-term lease financing obligations 19 40 70
Other non-current obligations 5,476 10,651 6,626
----- ------ -----
Total liabilities 102,482 127,801 48,842
Stockholders' equity
Exar Corporation stockholders' equity 223,239 246,598 253,375
Noncontrolling interests - 17,737 -
--- ------ ---
Total stockholders' equity 223,239 264,335 253,375
Total liabilities and stockholders'
equity $325,721 $392,136 $302,217
======== ======== ========
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 28, JUNE 29, SEPTEMBER 29, SEPTEMBER 28, SEPTEMBER 29,
2014 2014 2013 2014 2013
---- ---- ---- ---- ----
GAAP net sales $43,159 $30,719 $34,018 $73,878 $66,645
Deferred revenue write-down 163 1,908 $ - 2,071 -
--- ----- ------------------------------ ----- ---
Non-GAAP net sales $43,322 $32,627 $34,018 $75,949 $66,645
======= ======= ======= ======= =======
GAAP gross profit $4,132 $10,956 $13,929 $15,088 $29,406
GAAP gross margin 9.6% 35.7% 40.9% 20.4% 44.1%
Stock-based compensation 227 260 212 487 354
Amortization of purchased
intangible assets and 3,137 3,545 2,098 6,682 3,448
inventory step-up
Warranty Reserve - - 1,440 - 1,440
Deferred revenue write-down and
associated costs 115 944 - 1,059 -
Impairment of Intangibles 8,367 - - 8,367 -
Restructuring charges and exit
costs 4,305 27 24 4,332 105
Non-GAAP gross profit $20,283 $15,732 $17,703 $36,015 $34,753
======= ======= ======= ======= =======
Non-GAAP gross margin 46.8% 48.2% 52.0% 47.4% 52.1%
==== ==== ==== ==== ====
GAAP operating expenses $26,962 $22,308 $14,545 $49,270 $29,475
Stock-based compensation - R&D 870 812 689 1,682 829
Stock-based compensation -
SG&A 2,503 2,055 2,722 4,558 3,527
Amortization of purchased
intangible assets 796 413 247 1,209 354
Impairment of Intangibles 3,917 - - 3,917 -
Restructuring charges and exit
costs, net 2,265 369 384 2,634 1,315
Merger and acquisition costs 2,726 4,050 144 6,776 609
Net change in fair value of
contingent consideration (3,912) (431) (2,495) (4,343) (2,495)
Non-GAAP operating expenses $17,797 $15,040 $12,854 $32,837 $25,336
======= ======= ======= ======= =======
GAAP operating income (loss) $(22,830) $(11,352) $(616) $(34,182) $(69)
Stock-based compensation 3,600 3,127 3,623 6,727 4,710
Amortization of purchased
intangible assets and 3,933 3,958 2,345 7,891 3,802
inventory step-up
Warranty Reserve - - 1,440 - 1,440
Deferred revenue write-down and
associated costs 115 944 - 1,059 -
Impairment of Intangibles 12,284 - - 12,284 -
Restructuring charges and exit
costs, net 6,570 396 408 6,966 1,420
Merger and acquisition costs 2,726 4,050 144 6,776 609
Net change in fair value of
contingent consideration (3,912) (431) (2,495) (4,343) (2,495)
Non-GAAP operating income $2,486 $692 $4,849 $3,178 $9,417
====== ==== ====== ====== ======
GAAP net income (loss) $(23,352) $(12,105) $6,482 $(35,457) $7,288
Stock-based compensation 3,600 3,127 3,623 6,727 4,710
Amortization of purchased
intangible assets and 3,933 3,958 2,345 7,891 3,802
inventory step-up
Warranty Reserve - - 1,440 - 1,440
Deferred revenue write-down and
associated costs 115 944 - 1,059 -
Impairment of Intangibles 12,284 - - 12,284 -
Restructuring charges and exit
costs, net 6,570 396 408 6,966 1,420
Merger and acquisition costs 3,181 4,497 144 7,678 609
Net change in fair value of
contingent consideration (3,912) (431) (2,495) (4,343) (2,495)
Net income attributable to
nocontrolling interest 98 (135) - (37) -
Income tax effects (21) 609 (6,812) 588 (6,842)
Non-GAAP net income attribute
to Exar $2,496 $860 $5,135 $3,356 $9,932
====== ==== ====== ====== ======
GAAP net income (loss) per share
Basic $(0.50) $(0.26) $0.14 $(0.75) $0.15
Diluted $(0.50) $(0.26) $0.13 $(0.75) $0.15
Non-GAAP net income (loss) per
share
Basic $0.05 $0.02 $0.11 $0.07 $0.21
Diluted $0.05 $0.02 $0.10 $0.07 $0.20
Shares used in the computation
of Non-GAAP net income (loss)
per share
Basic 47,139 47,236 47,496 47,188 47,151
Diluted 49,520 49,826 50,548 49,850 49,965
Net cash provided (used) by
operations $(1,960) $(8,137) $3,569 $(10,097) $4,552
Less purchases of fixed assets
and IP (105) (551) (400) (656) (749)
Add proceeds from sale of IP - - - - 125
Free cash flow $(2,065) $(8,688) $3,169 $(10,753) $3,928
======= ======= ====== ======== ======
SOURCE Exar Corporation
