EXAR CORPORATION FREMONT, Calif., Aug. 3, 2016 /PRNewswire/ -- Exar Corporation (NYSE: EXAR) a leading supplier of analog mixed-signal application specific technology solutions serving the Industrial, Infrastructure, Automotive, and Audio/Video markets, today announced financial results for the Company's fiscal year 2017 first quarter, which ended on July 3, 2016. Unless otherwise indicated, all non-GAAP financial results exclude the financial results of the iML Display business, which the Company is in the process of divesting, and are presented in the GAAP results as discontinued operations.
Fiscal 2017 First Quarter Highlights
-- Net sales of $27.1 million, up 7 percent sequentially
-- GAAP gross margin of 49.2% (Non-GAAP gross margin of 51.8%)
-- GAAP operating income of $7.9 million (Non-GAAP operating income of $7.3
million, $4.0 million of which is from continuing operations)
-- GAAP EPS from continuing operations of $0.15 (Non-GAAP EPS of $0.08)
-- GAAP EPS from discontinued operations of $0.03 (Non-GAAP EPS of $0.07)
-- GAAP EPS from continuing and discontinued operations of $0.18 (Non-GAAP
EPS of $0.15)
Ryan Benton, Exar's Chief Executive Officer, commented, "We are extremely pleased with our record setting fiscal first quarter results. The team stayed focused on execution and delivered. Revenue came in at the high-end of our guidance range, driven by 16% sequential growth in the Industrial market. As anticipated, the impact of an additional week was offset by a reduction in channel inventory. Non-GAAP gross margin from continuing operations outperformed our guidance range. The impact of our on-going strategic shift of the supply chain to China continues to exceed our expectations, and is increasingly being complemented by growth in advanced product sales. We had strong execution from Exar's core business, as non-GAAP EPS from continuing operations increased sequentially from $0.03 to $0.08."
Mr. Benton added, "We strive to achieve operational excellence. During the quarter, total non-GAAP operating income, including discontinued operations, of $7.3 million represented a record in Exar's 45-year history, a real testament to the strength of the Company's earnings generation. We continue to focus and reshape the vision of Exar, and with our continued progress remain upbeat about our prospects."
Fiscal 2017 First Quarter Highlights (Continuing Operations Only):
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 is attached to this press release.
Exar's fiscal 2017 first quarter was comprised of fourteen weeks, as opposed to the usual thirteen weeks.
-- Net Sales
-- First quarter net sales of $27.1 million increased $1.8 million or
7% from the previous quarter's $25.3 million.
-- Gross Margin
-- GAAP gross margin of 49.2% increased from 47.2% reported in the
previous quarter.
-- Non-GAAP gross margin of 51.8% increased from the 50.0% reported in
the previous quarter.
-- Operating Expenses
-- GAAP operating expenses of $5.5 million decreased $7.0 million from
the previous quarter's expenses of $12.5 million. Fiscal 2017 first
quarter operating expenses included:
-- Gain of $9.3 million related to the sale-leaseback of our
corporate headquarters.
-- Charges of (i) $1.9 million expense related to EDA tool
impairment and maintenance, (ii) $1.1 million stock-based
compensation expense, (iii) $0.9 million mergers and
acquisitions costs, and (iv) $0.7 million purchase amortization.
-- Non-GAAP operating expenses of $10.1 million decreased $1.0 million
or 10% from the previous quarter's expenses of $11.1 million.
-- Net Income
-- GAAP net income of $7.5 million, compared to the previous quarter's
net loss of $0.4 million.
-- Non-GAAP net income of $3.8 million increased $2.3 million or 152%
from the previous quarter's net income of $1.5 million.
-- Earnings Per Share
-- GAAP diluted earnings per share of $0.15, compared to the previous
quarter's loss per share of $0.01.
-- Non-GAAP diluted earnings per share of $0.08 increased $0.05 per
share from the previous quarter.
Keith Tainsky, Exar's Chief Financial Officer, stated, "We remain committed to our fundamental goal of increasing shareholder value. We started the fiscal year with solid earnings and strong cash generation. Increasing advanced product sales and expanding the funnel of cost-down activities is a winning recipe for Exar, as evidenced by the third quarter in a row of increased non-GAAP gross margin for our core business. This contributed to solid non-GAAP EPS from continuing operations of $0.08." Mr. Tainsky continued, "Additionally, during the first quarter we closed the sale and leaseback of our corporate facility, netting $24.1 million in cash."
Fiscal 2017 Second Quarter Guidance (Continuing Operations Only):
For the fiscal 2017 second quarter ending October 2, 2016, the Company expects results to be as follows:
-- Net sales: Flat to up 3% sequentially
-- GAAP gross margin: 47% to 49% (Non-GAAP 51% to 53%)
-- GAAP operating expenses: $12.5 million to $13.0 million (Non-GAAP $10.0
million to $10.5 million)
-- GAAP EPS: $0.00 to $0.02 (Non-GAAP $0.07 to $0.09)
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 this press release.
As previously scheduled, the conference call will begin today, August 3, 2016 at 4:45 p.m. EDT (1:45 p.m. PDT). To access the conference call, please dial (918) 534-8424 or (844) 359-0802. The passcode for the live call is 48010625. 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's mission is to leverage our extensive analog and mixed-signal portfolio, experience and IP to deliver leading-edge application specific technology solutions to target markets where operational excellence and reliability are valued. We service the Industrial, Infrastructure, Automotive, and Audio/Video markets by acting as an extension of the customer's own technology organization and singularly focusing on exceeding customer expectations. For more information, visit http://www.exar.com.
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, including statements regarding the Company remaining upbeat about its prospects, the Company's financial outlook expectations for the second quarter ending October 2, 2016 and the Company's commitment to its strategy to focus on its core competencies, maximize the Company's operating cash and redeploy assets toward its fundamental goal of increasing shareholder value. 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. 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 filed with the SEC on May 27, 2016, and available on our Investor webpage and on the SEC website at www.sec.gov.
Discussion of Non-GAAP Financial Measures
The Company's non-GAAP measures exclude charges related to stock-based compensation, amortization of acquired intangible assets, impairment charges, initial gain upon closing sale-leaseback of our corporate headquarters, 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, severance costs associated with the former CEO, accruals for and proceeds received from dispute resolutions and patent litigation, merger and acquisition and related integration costs, transition services provided to and reimbursement thereof as part of a disposal group, certain income tax benefits and credits, 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 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 fixed assets and 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.
Unless otherwise indicated, all non-GAAP financial results exclude the financial results of the iML Display business, which the Company is in the process of divesting, and are presented in the GAAP results as discontinued operations.
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 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.
Investors should refer to the reconciliation of Non-GAAP Results to GAAP Results, which is contained in this press release.
For more information, visit http://www.exar.com
For Press Inquiries Contact: press@exar.com
For Investor Relations Contact:
Keith Tainsky, CFO Laura Guerrant-Oiye, Investor Relations
Phone: (510) 668-7201 Phone: (510) 668-7201
Email: investorrelations@exar.com Email: laura.guerrant@exar.com
-Tables follow-
Unless otherwise indicated, all financial results presented in the following tables exclude the financial results of the iML Display business, which the Company is in the process of divesting, and are presented as discontinued operations.
FINANCIAL COMPARISON (CONTINUING OPERATIONS ONLY)
(In thousands, except per share amounts) (Unaudited)
GAAP Results THREE MONTHS ENDED
------------------
JULY 3, 2016 MARCH 27, 2016 JUNE 28, 2015
------------ -------------- -------------
Industrial $18,436 67% $15,945 63% $19,465 69%
Infrastructure 5,596 21% 5,757 23% 4,474 16%
Audio/Video 1,852 7% 2,102 8% 1,940 7%
Automotive 779 3% 850 3% 946 3%
Other 473 2% 689 3% 1,358 5%
--- --- -----
Net sales $27,136 100% $25,343 100% $28,183 100%
======= ======= =======
Gross profit $13,362 49% $11,973 47% $12,878 46%
Operating expenses $5,492 20% $12,467 49% $15,949 57%
Income (loss) from operations $7,870 29% $(494) -2% $(3,071) -11%
Net income (loss) $7,543 28% $(415) -2% $(2,354) -8%
Net income (loss) per share
Basic $0.15 $(0.01) $(0.05)
Diluted $0.15 $(0.01) $(0.05)
Non-GAAP Results THREE MONTHS ENDED
------------------
JULY 3, 2016 MARCH 27, 2016 JUNE 28, 2015
------------ -------------- -------------
Industrial $18,436 67% $15,945 63% $19,465 69%
Infrastructure 5,596 21% 5,757 23% 4,474 16%
Audio/Video 1,852 7% 2,102 8% 1,940 7%
Automotive 779 3% 850 3% 946 3%
Other 473 2% 689 3% 1,358 5%
--- --- -----
Net sales $27,136 100% $25,343 100% $28,183 100%
======= ======= =======
Gross profit $14,070 52% $12,664 50% $13,572 48%
Operating expenses $10,087 37% $11,147 44% $12,388 44%
Income from operations $3,983 15% $1,517 6% $1,184 4%
Net income $3,798 14% $1,510 6% $1,077 4%
Net income per share
Basic $0.08 $0.03 $0.02
Diluted $0.08 $0.03 $0.02
EXAR CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)
THREE MONTHS ENDED
------------------
JULY 3, MARCH 27, JUNE 28,
2016 2016 2015
---- ---- ----
Net sales $19,636 $18,060 $16,806
Net sales, related party 7,500 7,283 11,377
Total net sales 27,136 25,343 28,183
------ ------ ------
Cost of sales:
Cost of sales (1) 10,411 9,694 9,776
Cost of sales, related party 2,769 3,082 4,916
Amortization of purchased
intangible assets 594 594 613
Total cost of sales 13,774 13,370 15,305
------ ------ ------
Gross profit 13,362 11,973 12,878
------ ------ ------
Operating expenses: 49.2% 47.2% 45.7%
Research and development(2) 4,931 5,173 6,429
Selling, general and
administrative (3) 6,564 7,188 7,746
Restructuring charges and
exit costs 923 106 1,230
Merger and acquisition costs 855 - 544
Impairment of design tools 1,519 - -
Gain on disposal of property (9,300) - -
Total operating expenses 5,492 12,467 15,949
Income (loss) from operations 7,870 (494) (3,071)
Other income and expense,
net:
Interest income and other,
net 2 73 (22)
Interest expense (38) (42) (48)
--- --- ---
Total other income (expense),
net (36) 31 (70)
Income (loss) before income
taxes 7,834 (463) (3,141)
Provision for (benefit from)
income taxes 291 (48) (787)
--- --- ----
Net income (loss) from
continuing operations 7,543 (415) (2,354)
----- ---- ------
Net income (loss) from
discontinued operations 1,397 (1,767) (156)
Net income (loss) $8,940 $(2,182) $(2,510)
====== ======= =======
Income (loss) per share -
basic
From continuing operations $0.15 $(0.01) $(0.05)
From discontinued operations 0.03 (0.03) (0.00)
Income (loss) per share -
basic $0.18 $(0.04) $(0.05)
===== ====== ======
Income (loss) per share -
diluted
From continuing operations $0.15 $(0.01) $(0.05)
From discontinued operations 0.03 (0.03) (0.00)
Income (loss) per share -
diluted $0.18 $(0.04) $(0.05)
===== ====== ======
Shares used in the
computation of net income
(loss) per share:
Basic 48,680 48,523 47,927
====== ====== ======
Diluted 49,058 48,523 47,927
====== ====== ======
(1)Stock-based compensation
included in cost of sales $114 $97 $81
(2)Stock-based compensation
included in R&D 246 156 293
(3)Stock-based compensation
included in SG&A 733 720 1,349
EXAR CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
JULY 3, MARCH 27, JUNE 28,
2016 2016 2015
---- ---- ----
ASSETS
Current assets:
Cash and cash equivalents $85,276 $55,070 $55,760
Accounts receivable, net 15,539 16,130 12,331
Accounts receivable, related party,
net 3,184 3,247 541
Inventories 22,104 20,807 26,727
Other current assets 2,179 1,922 3,213
Assets held for sale 92,688 93,911 103,015
------ ------ -------
Total current assets 220,970 191,087 201,587
Property, plant and equipment, net 5,159 20,299 24,354
Goodwill 31,613 31,613 31,613
Intangible assets, net 11,012 11,735 13,952
Other non-current assets 1,006 639 7,596
----- --- -----
Total assets $269,760 $255,373 $279,102
======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $11,312 $11,258 $13,278
Accrued compensation and related
benefits 2,273 2,984 3,764
Deferred income and allowances on
sales to distributors 3,213 3,053 2,923
Deferred income and allowances on
sales to distributors, related party 5,885 4,683 3,596
Other current liabilities 12,299 10,669 19,195
Liabilities held for sale 2,479 3,470 5,775
----- ----- -----
Total current liabilities 37,461 36,117 48,531
Long-term lease financing obligations 856 1,285 4,629
Other non-current obligations 4,314 3,422 4,379
----- ----- -----
Total liabilities 42,631 40,824 57,539
Stockholders' equity 227,129 214,549 221,563
------- ------- -------
Total liabilities and stockholders'
equity $269,760 $255,373 $279,102
======== ======== ========
EXAR CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL RECONCILIATION OF GAAP TO NON-GAAP RESULTS
(In thousands, except per share amounts)
(Unaudited)
THREE MONTHS ENDED
JULY 3, 2016
------------
Gross Oper. Oper. Net Income Oper. Income Net Income Net
Margin Expenses Income from Cont. from Disc. from Disc. Income
Operations Operations Operations
---
GAAP amount $13,362 $5,492 $7,870 $7,543 $1,493 $1,397 $8,940
Adjustments to GAAP amounts:
Amortization of
purchased
intangible assets 594 (125) 719 719 1,806 1,806 2,525
Restructuring
charges and other
non-GAAP exit
costs, net - (923) 923 923 109 109 1,032
Stock-based
compensation 114 (979) 1,093 1,093 (52) (52) 1,041
Merger and
acquisition costs - (855) 855 855 - - 855
Transition service
for disposal group - (304) 304 304 - - 304
Impairment of design
tools - (1,519) 1,519 1,519 - - 1,519
Gain on disposal of
property - 9,300 (9,300) (9,300) - - (9,300)
Income tax effects - - - 142 - 160 302
--- --- --- --- --- --- ---
Non-GAAP amount $14,070 $10,087 $3,983 $3,798 $3,356 $3,420 $7,218
======= ======= ====== ====== ====== ====== ======
% of revenue 51.8% 37.2% 14.7% 14.0% 12.4% 12.6% N/A
Non-GAAP net income per share $0.08 $0.07 $0.07 $0.15
Shares used in the computation of Non-GAAP net income per share 49,281 49,281 49,281 49,281
THREE MONTHS ENDED
MARCH 27, 2016
--------------
Gross Oper. Oper. Net Income Oper. Income Net Income Net
Margin Expenses Income from Cont. from Disc. from Disc. Income
Operations Operations Operations
---
GAAP amount $11,973 $12,467 $(494) $(415) $(1,596) $(1,767) $(2,182)
Adjustments to GAAP amounts:
Amortization of
purchased
intangible assets 594 (125) 719 719 2,715 2,715 3,434
Restructuring
charges and other
non-GAAP exit
costs, net - (106) 106 106 245 245 351
Stock-based
compensation 97 (876) 973 973 177 177 1,150
Merger and
acquisition costs - (213) 213 213 - - 213
Accruals for legal
settlement and
associated costs - - - - 822 822 822
Income tax effects - - - (86) - 117 31
--- --- --- --- --- --- ---
Non-GAAP amount $12,664 $11,147 $1,517 $1,510 $2,363 $2,309 $3,819
======= ======= ====== ====== ====== ====== ======
% of revenue 50.0% 44.0% 6.0% 6.0% 9.3% 9.1% N/A
Non-GAAP net income per share $0.03 $0.05 $0.05 $0.08
Shares used in the computation of Non-GAAP net income per share 49,052 49,052 49,052 49,052
THREE MONTHS ENDED
JUNE 28, 2015
-------------
Gross Oper. Oper. Net Income Oper. Income Net Income Net
Margin Expenses Income from Cont. from Disc. from Disc. Income
Operations Operations Operations
---
GAAP amount $12,878 $15,949 $(3,071) $(2,354) $732 $(156) $(2,510)
Adjustments to GAAP amounts:
Amortization of
purchased
intangible assets 613 (144) 757 757 2,609 2,609 3,366
Restructuring
charges and other
non-GAAP exit
costs, net - (1,231) 1,231 1,231 406 406 1,637
Stock-based
compensation 81 (1,642) 1,723 1,723 214 214 1,937
Merger and
acquisition costs - (544) 544 544 124 124 668
Income tax effects - - - (824) - 804 (20)
--- --- --- ---- --- --- ---
Non-GAAP amount $13,572 $12,388 $1,184 $1,077 $4,085 $4,001 $5,078
======= ======= ====== ====== ====== ====== ======
% of revenue 48.2% 44.0% 4.2% 3.8% 14.5% 14.2% N/A
Non-GAAP net income per share $0.02 $0.08 $0.08 $0.10
Shares used in the computation of Non-GAAP net income per share 50,167 50,167 50,167 50,167
THREE MONTHS ENDED
------------------
JULY 3, MARCH 27, JUNE 28,
2016 2016 2015
---- ---- ----
Net cash
provided by
operations 4,144 2,896 1,562
Less
purchases of
fixed assets (125) (325) (105)
Net proceeds
from
building
sale 24,051 - -
Payments for
legal
settlement
and
associated
costs - 1,728 -
Free cash
flow $28,070 $4,299 $1,457
======= ====== ======
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SOURCE Exar Corporation
