EXAR CORPORATION FREMONT, Calif., Feb. 3, 2016 /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 third fiscal quarter of 2016, which ended on December 27, 2015.
Richard Leza, Exar's Chairman and interim President and CEO, commented, "As expected, we delivered solid non-GAAP results within our revenue and EPS expectation ranges. Non-GAAP gross margin improved sequentially as we start to see the benefits of our strategic manufacturing cost-down initiatives and this improvement was augmented by further reductions in operating expenses." Mr. Leza continued, "Our new focused initiatives have restored confidence in the Exar brand, paving the way for revenue growth and higher levels of profitability. This strategy has resulted in improved engagements with our top customers, incremental and improved design activity, and increased profitability."
Third 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 either occur relatively infrequently or 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.
Third Quarter Fiscal Year 2016 Highlights on a Non-GAAP Basis:
-- Quarterly revenues of $37.4 million increased $0.2 million or 1% from
the previous quarter's revenue of $37.2 million and decreased $6.9
million or 16% from $44.3 million reported a year ago.
-- Gross margin of 46.1% increased from the 45.6% from the previous quarter
and decreased from the 49.6% reported a year ago.
-- Operating expenses of $13.7 million decreased $0.3 million or 2% from
the previous quarter's expenses of $14.1 million and $2.7 million or 16%
from the same quarter a year ago.
-- Net income of $3.4 million increased $0.6 million or 23% from the
previous quarter's net income of $2.8 million and decreased $2.0 million
or 37% from the third quarter of fiscal year 2015.
-- Diluted earnings per share of $0.07 increased $0.01 per share from the
previous quarter and decreased from $0.11 per share in the third quarter
of fiscal year 2015.
Third Quarter Fiscal Year 2016 Highlights on a GAAP Basis:
-- Quarterly revenues for the third quarter of fiscal year 2016 were $37.4
million.
-- Gross margin of 39.2% increased from the 38.1% reported in the third
quarter of fiscal year 2015 and increased from the 36.4% reported a
quarter ago.
-- Operating expenses of $21.5 million decreased $1.9 million from the same
quarter a year ago and increased $3.6 million from the previous
quarter's expenses of $17.9 million.
-- Net loss of $7.1 million compared to the previous quarter's $4.2 million
net loss and a $6.6 million net loss a year ago.
-- Loss per share of $0.15 compared with $0.09 a quarter ago and $0.14 a
year ago.
-- GAAP results were impacted by charges of (i) $6.4 million related to
amortization and impairment of intangibles, (ii) $1.5 million accrual
for settlement and legal fees related to patent litigation, (iii) $1.5
million related to ongoing restructuring activities and (iv) $1.0
million related to stock-based compensation.
Fourth Quarter of Fiscal Year 2016 Non-GAAP Guidance
Mr. Leza continued, "While the macroeconomic environment has given the industry mixed signals, we expect the fiscal year 2016 to finish strong. Our fourth quarter guidance reflects our improved focus and better execution."
For the fourth quarter ending March 27, 2016, the Company expects revenue to be flat to up 5% sequentially, non-GAAP gross margin to be in the range of 47% to 49%, and non-GAAP EPS on a fully diluted basis to increase to the range of $0.08 to $0.10.
Conference Call and Prepared Remarks
Exar is providing a copy of 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, February 3, 2016 at 4:45 p.m. EST (1:45 p.m. PST). To access the conference call, please dial (918) 534-8424 or (844) 359-0802. The passcode for the live call is 19280332. 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.
Forward-Looking Statements Safe Harbor Disclosure
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 impact of new focused initiatives paving the way for revenue growth and higher levels of profitability, and the Company's financial outlook expectations for the fourth quarter and year ending March 27, 2016, respectively, are forward-looking statements. The forward-looking statements are subject to 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.
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 NINE MONTHS ENDED
------------------ -----------------
DECEMBER 27, 2015 SEPTEMBER 27, 2015 DECEMBER 28, 2014 DECEMBER 27, 2015 DECEMBER 28, 2014
----------------- ------------------ ----------------- ----------------- -----------------
Industrial $18,339 49% $17,925 48% $20,506 46% $56,839 49% $59,029 49%
High-End Consumer 13,207 35% 13,163 35% 16,202 37% 39,906 35% 37,896 32%
Infrastructure 5,893 16% 6,154 17% 7,607 17% 18,358 16% 23,339 19%
----- --- ----- --- ----- --- ------ --- ------ ---
Net Sales $37,439 100% $37,242 100% $44,315 100% $115,103 100% $120,264 100%
Gross Profit $17,264 46.1% $16,974 45.6% $21,971 49.6% $54,230 47.1% $57,986 48.2%
Operating Expenses $13,728 36.7% $14,072 37.8% $16,403 37.0% $42,523 36.9% $49,240 40.9%
Income from
operations $3,536 9.4% $2,902 7.8% $5,568 12.6% $11,707 10.2% $8,746 7.3%
Net income $3,399 9.1% $2,768 7.4% $5,415 12.2% $11,245 9.8% $8,771 7.3%
Net income per
share
Basic $0.07 $0.06 $0.11 $0.23 $0.19
Diluted $0.07 $0.06 $0.11 $0.23 $0.18
GAAP Results THREE MONTHS ENDED NINE MONTHS ENDED
------------------ -----------------
DECEMBER 27, 2015 SEPTEMBER 27, 2015 DECEMBER 28, 2014 DECEMBER 27, 2015 DECEMBER 28, 2014
----------------- ------------------ ----------------- ----------------- -----------------
Industrial $18,339 49% $15,425 44% $20,506 46% $54,339 48% $59,029 50%
High-End Consumer 13,207 35% 13,163 38% 16,202 37% 39,906 36% $35,825 30%
Infrastructure 5,893 16% 6,154 18% 7,607 17% 18,358 16% $23,339 20%
----- --- ----- --- ----- --- ------ --- ------- ---
Net Sales $37,439 100% $34,742 100% $44,315 100% $112,603 100% $118,193 100%
Gross Profit $14,692 39.2% $12,656 36.4% $16,890 38.1% $44,785 39.8% $31,978 27.1%
Operating Expenses $21,545 57.5% $17,907 51.5% $23,425 52.9% $59,228 52.6% $72,695 61.5%
Loss from
operations $(6,853) -18.3% $(5,251) -15.1% $(6,535) -14.7% $(14,443) -12.8% $(40,717) -34.4%
Net loss $(7,137) -19.1% $(4,197) -12.1% $(6,599) -14.9% $(13,844) -12.3% $(42,056) -35.6%
Net loss per share
Basic $(0.15) $(0.09) $(0.14) $(0.29) $(0.89)
Diluted $(0.15) $(0.09) $(0.14) $(0.29) $(0.89)
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, accruals for and proceeds received from dispute resolutions and patent litigation, 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. However, the manner in which we calculate these non-GAAP financial measures 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 material limitation associated with the use of the non-GAAP financial measures is that the non-GAAP measures may not reflect the full economic impact of Exar's activities. Accordingly, investors are cautioned not to place undue reliance on non-GAAP information. 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 NINE MONTHS ENDED
------------------ -----------------
DECEMBER 27, SEPTEMBER 27, DECEMBER 28, DECEMBER 27, DECEMBER 28,
2015 2015 2014 2015 2014
---- ---- ---- ---- ----
Net sales $29,013 $26,037 $35,919 $84,095 $91,986
Net sales, related party 8,426 8,705 8,396 28,508 26,207
Total net sales 37,439 34,742 44,315 112,603 118,193
------ ------ ------ ------- -------
Cost of sales:
Cost of sales (1) 16,261 16,447 19,741 48,309 51,841
Cost of sales, related party 4,025 3,906 3,099 12,847 10,408
Amortization of purchased
intangible assets and inventory
step-up costs 2,461 2,493 2,533 7,422 9,215
Restructuring charges and exit
costs - 740 2,052 740 6,384
Proceeds from legal settlement - (1,500) - (1,500) -
Impairment of intangibles - - - - 8,367
Total cost of sales 22,747 22,086 27,425 67,818 86,215
------ ------ ------ ------ ------
Gross profit 14,692 12,656 16,890 44,785 31,978
------ ------ ------ ------ ------
Operating expenses:
Research and development(2) 7,230 7,499 10,035 24,206 28,647
Selling, general and
administrative (3) 10,280 9,092 11,793 29,665 33,467
Restructuring charges and exit
costs 2,228 1,316 1,418 3,550 4,052
Merger and acquisition costs - - 179 - 6,955
Impairment of intangibles 1,807 - - 1,807 3,917
Net change in fair value of
contingent consideration - - - - (4,343)
Total operating expenses 21,545 17,907 23,425 59,228 72,695
Loss from operations (6,853) (5,251) (6,535) (14,443) (40,717)
Other income and expense, net:
Interest income and other, net (7) (19) 53 (40) 520
Interest expense (69) (49) (46) (170) (1,026)
--- --- --- ---- ------
Total other income and expense,
net (76) (68) 7 (210) (506)
Loss before income taxes (6,929) (5,319) (6,528) (14,653) (41,223)
Provision for (benefit from)
income taxes 208 (1,122) 71 (809) 870
--- ------ --- ---- ---
Net loss before noncontrolling
interest (7,137) (4,197) (6,599) (13,844) (42,093)
Net income (loss) attributable to
noncontrolling interest - - - - (37)
--- --- --- --- ---
Net loss attributable to Exar $(7,137) $(4,197) $(6,599) $(13,844) $(42,056)
======= ======= ======= ======== ========
Net loss per share:
Basic $(0.15) $(0.09) $(0.14) $(0.29) $(0.89)
====== ====== ====== ====== ======
Diluted $(0.15) $(0.09) $(0.14) $(0.29) $(0.89)
====== ====== ====== ====== ======
Shares used in the computation of
net loss per share:
Basic 48,386 48,121 47,119 48,146 47,165
====== ====== ====== ====== ======
Diluted 48,386 48,121 47,119 48,146 47,165
====== ====== ====== ====== ======
(1)Stock-based compensation
included in cost of sales $104 $85 $496 $276 $983
(2)Stock-based compensation
included in R&D 269 205 442 923 2,124
(3)Stock-based compensation
included in SG&A 669 1,162 3,284 3,232 7,842
EXAR CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
DECEMBER 27, SEPTEMBER 27, MARCH 29,
2015 2015 2015
---- ---- ----
ASSETS
Current assets:
Cash and cash equivalents $53,449 $53,484 $55,233
Accounts receivable, net 27,079 26,527 27,459
Accounts receivable, related party,
net 4,554 5,520 1,663
Inventories 28,659 32,398 30,767
Other current assets 2,018 2,515 3,090
----- ----- -----
Total current assets 115,759 120,444 118,212
Property, plant and equipment, net 21,567 23,327 26,077
Goodwill 44,871 44,871 44,871
Intangible assets, net 74,119 79,327 86,102
Other non-current assets 778 790 7,838
--- --- -----
Total assets $257,094 $268,759 $283,100
======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $13,234 $16,545 $13,526
Accrued compensation and related
benefits 4,207 3,601 5,649
Deferred income and allowances on
sales to distributors 2,479 2,595 3,362
Deferred income and allowances on
sales to distributors, related
party 4,141 4,156 6,982
Other current liabilities 12,421 15,306 21,287
------ ------ ------
Total current liabilities 36,482 42,203 50,806
Long-term lease financing
obligations 1,714 4,188 5,069
Other non-current obligations 3,420 3,364 4,393
----- ----- -----
Total liabilities 41,616 49,755 60,268
Stockholders' equity 215,478 219,004 222,832
------- ------- -------
Total liabilities and stockholders'
equity $257,094 $268,759 $283,100
======== ======== ========
EXAR CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL RECONCILIATION OF GAAP TO NON-GAAP RESULTS
(In thousands, except per share amounts)
(Unaudited)
THREE MONTHS ENDED NINE MONTHS ENDED
------------------ -----------------
DECEMBER 27, SEPTEMBER 27, DECEMBER 28, DECEMBER 27, DECEMBER 28,
2015 2015 2014 2015 2014
---- ---- ---- ---- ----
GAAP net sales $37,439 $34,742 $44,315 $112,603 $118,193
Provision for dispute - 2,500 - 2,500 -
Deferred revenue write-down - - - - 2,071
--- --- -----
Non-GAAP net sales $37,439 $37,242 $44,315 $115,103 $120,264
======= ======= ======= ======== ========
GAAP gross profit $14,692 $12,656 $16,890 $44,785 $31,978
GAAP gross margin 39.2% 36.4% 38.1% 39.8% 27.1%
Provision for dispute - 2,500 - 2,500 -
Amortization of purchased
intangible assets and
inventory step-up costs 2,461 2,493 2,533 7,422 9,215
Restructuring charges and
other non-GAAP exit costs,
net 7 740 2,052 747 6,384
Stock-based compensation 104 85 496 276 983
Proceeds from legal settlement - (1,500) - (1,500) -
Deferred revenue write-down
and associated costs - - - - 1,059
Impairment of intangibles - - - - 8,367
Non-GAAP gross profit $17,264 $16,974 $21,971 $54,230 $57,986
======= ======= ======= ======= =======
Non-GAAP gross margin 46.1% 45.6% 49.6% 47.1% 48.2%
==== ==== ==== ==== ====
GAAP operating expenses $21,545 $17,907 $23,425 $59,228 $72,695
Restructuring charges and
other non-GAAP exit costs,
net 2,639 1,316 1,418 5,592 4,052
Stock-based compensation -
R&D 269 205 442 923 2,124
Stock-based compensation -
SG&A 669 1,162 3,284 3,232 7,842
Amortization of purchased
intangible assets 935 908 1,699 2,741 2,908
Accruals for legal settlement
and associated costs 1,498 201 - 1,699 -
Merger and acquisition costs - 43 179 711 6,955
Impairment of intangibles 1,807 - - 1,807 3,917
Net change in fair value of
contingent consideration - - - - (4,343)
Non-GAAP operating expenses $13,728 $14,072 $16,403 $42,523 $49,240
======= ======= ======= ======= =======
GAAP operating loss $(6,853) $(5,251) $(6,535) $(14,443) $(40,717)
Amortization of purchased
intangible assets and
inventory step-up costs 3,396 3,401 4,232 10,163 12,123
Provision for dispute - 2,500 - 2,500 -
Restructuring charges and
other non-GAAP exit costs,
net 2,646 2,056 3,470 6,339 10,436
Stock-based compensation 1,042 1,452 4,222 4,431 10,949
Merger and acquisition costs - 43 179 711 6,955
Accruals for legal settlement
and associated costs 1,498 (1,299) - 199 -
Deferred revenue write-down
and associated costs - - - - 1,059
Impairment of intangibles 1,807 - - 1,807 12,284
Net change in fair value of
contingent consideration - - - - (4,343)
Non-GAAP operating income $3,536 $2,902 $5,568 $11,707 $8,746
====== ====== ====== ======= ======
GAAP net loss $(7,137) $(4,197) $(6,599) $(13,844) $(42,056)
Amortization of purchased
intangible assets and
inventory step-up cost 3,396 3,401 4,232 10,163 12,123
Provision for dispute - 2,500 - 2,500 -
Restructuring charges and
other non-GAAP exit costs,
net 2,668 2,056 3,470 6,361 10,436
Stock-based compensation 1,042 1,452 4,222 4,431 10,949
Merger and acquisition costs - 43 189 711 7,867
Accruals for legal settlement
and associated costs 1,498 (1,299) - 199 -
Deferred revenue write-down
and associated costs - - - - 1,059
Impairment Charges 1,807 - 28 1,807 12,312
Net change in fair value of
contingent consideration - - - - (4,343)
Net loss attributable to
noncontrolling interest - - - - (37)
Income tax effects 125 (1,188) (127) (1,083) 461
Non-GAAP net income
attributable to Exar $3,399 $2,768 $5,415 $11,245 $8,771
====== ====== ====== ======= ======
GAAP net loss per share
Basic $(0.15) $(0.09) $(0.14) $(0.29) $(0.89)
Diluted $(0.15) $(0.09) $(0.14) $(0.29) $(0.89)
Non-GAAP net income per share
Basic $0.07 $0.06 $0.11 $0.23 $0.19
Diluted $0.07 $0.06 $0.11 $0.23 $0.18
Shares used in the computation
of Non-GAAP net income per
share:
Basic 48,386 48,121 47,119 48,146 47,165
====== ====== ====== ====== ======
Diluted 49,064 49,172 49,180 49,512 49,646
====== ====== ====== ====== ======
Net cash provided (used) by
operations $1,081 $(1,539) $(5,914) $1,104 $(16,011)
Less purchases of fixed assets
and IP (387) (462) (1,791) (954) (2,447)
---- ---- ------
Free cash flow $694 $(2,001) $(7,705) $150 $(18,458)
==== ======= ======= ==== ========
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SOURCE Exar Corporation
