ex99-1.htm

EX-99 2 ex99-1.htm EXHIBIT 99.1 ex99-1.htm

Exhibit 99.1

Press Release

Exar Corporation Announces Third Quarter Fiscal 2014 Results

Accelerating New Product Introductions and Design Wins Expected to Drive Future Growth

Fremont, CA, January 29, 2014 – Exar Corporation (NYSE: EXAR), a leading supplier of high performance analog mixed-signal components and data management solutions, today announced financial results for the Company’s third quarter of fiscal year 2014, ended December 29, 2013. Revenue of $30.7 million for the third quarter of fiscal year 2014 decreased from $34.0 million in the previous quarter and $31.0 million in the same quarter a year ago. On a non-GAAP basis, gross margin was 49% and non-GAAP net income was $2.0 million, or $0.04 per fully diluted share. On a GAAP basis, gross margin was 42% and net loss was $1.6 million, or $0.03 loss per share.

Louis DiNardo, the Company’s President and CEO, commented, “As anticipated, our financial results for the quarter were impacted by supply chain inventory exceeding demand in the networking market. We expect the inventory to be consumed over the next several months and a return to growth in this vibrant market based on our strong position at major OEMs. Design win momentum for our compression and security products is robust and new customers are expected to begin production this quarter. As a result, we are building an outstanding diverse customer base in both the structured and unstructured data compression markets, as well as in network security.

“Our core business in the industrial market remains strong and has been enhanced by the addition of new high performance analog products. Additionally, the products and revenue associated with our recent acquisition of Stretch, Inc. will provide meaningful new customer engagements and revenue in the large and growing surveillance market in the near-term,” concluded Mr. DiNardo.

For the fourth quarter of fiscal year 2014 the Company expects total revenue to be in the range of $30.0 to $32.0 million and expects non-GAAP gross margin to be in the range of 48% to 50%.

Recent Product and Business Developments:

	●	Breakthrough Power Management Module XRP9710 and XR9711 provide a fully integrated multiple output power supply.
	●	Industry leading Compression and Security Coprocessor XR9200 delivers 40gbps operation with a PCIe Gen 3 interface for compression and hardware-accelerated encryption.
	●	High Performance Low Drop Out Regulator XR6274 operates to down to 1 Volt with less than 100mV dropout at 2 amps.
	●	Acquisition of Stretch, Inc. supports high definition video security solutions for high definition serial data interface.

Company officials will be discussing these results in greater detail in a conference call today, Wednesday, January 29, 2014 at 1:45 p.m. PDT (4:45 p.m. EDT). To access the conference call, please dial (877) 941-1427 or (480) 629-9664. In addition, a live webcast will be available on Exar's Investor webpage. An archive of the webcast will be available after its conclusion.

Exar Corporation designs, develops and markets high-performance, analog mixed-signal integrated circuits and advanced sub-system solutions for the Networking & Storage, Industrial & Embedded Systems, and Communications Infrastructure markets. Exar's product portfolio includes power management and connectivity components, high-performance analog and mixed-signal products, communications products, and network security and storage optimization solutions. Exar has locations worldwide providing real-time customer support. For more information about Exar, visit http://www.exar.com or contact: investorrelations@exar.com

-Tables follow-

FINANCIAL COMPARISON
(In thousands, except per share amounts)
(Unaudited)

Non-GAAP Results

THREE MONTHS ENDED

NINE MONTHS ENDED

DECEMBER 29, 2013

SEPTEMBER 29, 2013

DECEMBER 30, 2012

DECEMBER 29, 2013

DECEMBER 30, 2012

Net sales
$ 30,690 $ 34,018 $ 30,999 $ 97,335 $ 90,872

Gross margin
48.6 % 52.0 % 49.0 % 51.0 % 47.7 %

Income from operations
$ 1,748 $ 4,849 $ 3,560 $ 11,165 $ 6,678

Net income
$ 1,977 $ 5,135 $ 4,047 $ 11,909 $ 8,346

Net income per share

Basic
$ 0.04 $ 0.11 $ 0.09 $ 0.25 $ 0.18

Diluted
$ 0.04 $ 0.10 $ 0.09 $ 0.24 $ 0.18

GAAP Results

THREE MONTHS ENDED

NINE MONTHS ENDED

DECEMBER 29, 2013

SEPTEMBER 29, 2013

DECEMBER 30, 2012

DECEMBER 29, 2013

DECEMBER 30, 2012

Net sales
$ 30,690 $ 34,018 $ 30,999 $ 97,335 $ 90,872

Gross margin
41.8 % 40.9 % 45.8 % 43.4 % 44.4 %

Income (loss) from operations
$ (3,321 ) $ (616 ) $ (353 ) $ (3,390 ) $ (1,892 )

Net income (loss)
$ (1,634 ) $ 6,482 $ 1,523 $ 5,654 $ 1,210

Net income (loss) per share

Basic
$ (0.03 ) $ 0.14 $ 0.03 $ 0.12 $ 0.03

Diluted
$ (0.03 ) $ 0.13 $ 0.03 $ 0.12 $ 0.03

Supplemental Sales Information

(In thousands)

(Unaudited)

By End Market	THREE MONTHS ENDED												NINE MONTHS ENDED
	DECEMBER 29, 2013				SEPTEMBER 29, 2013				DECEMBER 30, 2012				DECEMBER 29, 2013				DECEMBER 30, 2012
Industrial & Embedded Systems	$	18,429	60	%	$	17,943	53	%	$	16,119	52	%	$	52,870	55	%	$	48,130	53	%
Networking & Storage		7,104	23	%		10,273	30	%		9,300	30	%		27,284	28	%		23,391	26	%
Communications Infrastructure		5,089	17	%		5,697	17	%		5,270	17	%		16,762	17	%		18,735	20	%
Other		68	-			105	-			310	1	%		419	-			616	1	%
Net Sales	$	30,690	100	%	$	34,018	100	%	$	30,999	100	%	$	97,335	100	%	$	90,872	100	%

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 31, 2013 and the Quarterly Reports on Form 10-Q for the quarterly periods ended June 30, 2013 and September 29, 2013, 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, 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, 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									NINE MONTHS ENDED
	DECEMBER 29,			SEPTEMBER 29,			DECEMBER 30,			DECEMBER 29,			DECEMBER 30,
	2013			2013			2012			2013			2012



Net sales	$	21,846		$	24,978		$	22,235		$	70,682		$	63,210
Net sales, related party		8,844			9,040			8,764			26,653			27,662
Total net sales		30,690			34,018			30,999			97,335			90,872

Cost of sales:
Cost of sales ⁽¹⁾		12,393			12,371			11,922			36,576			34,846
Cost of sales, related party		3,556			4,156			4,005			11,619			12,897
Amortization of purchased intangible assets and inventory step-up		1,898			2,098			801			5,346			2,578
Warranty Reserve		-			1,440			-			1,440			-
Restructuring charges and exit costs		17			24			79			122			160
Total cost of sales		17,864			20,089			16,807			55,103			50,481
Gross profit		12,826			13,929			14,192			42,232			40,391
Operating expenses:
Research and development⁽²⁾		6,929			7,136			5,376			20,245			16,598
Selling, general and administrative ⁽³⁾		8,829			9,376			8,645			25,559			24,066
Restructuring charges and exit costs, net		74			384			524			1,389			1,619
Merger and acquisition costs		257			144			-			866			-
Net change in fair value of contingent consideration		58			(2,495	)		-			(2,437	)		-
Total operating expenses		16,147			14,545			14,545			45,622			42,283
Income (loss) from operations		(3,321	)		(616	)		(353	)		(3,390	)		(1,892	)

Other income and expense, net:
Interest income and other, net		321			372			586			980			1,906
Interest expense		(39	)		(41	)		(56	)		(117	)		(128	)
Total other income and expense, net		282			331			530			863			1,778

Income (loss) before income taxes		(3,039	)		(285	)		177			(2,527	)		(114	)
Provision for (benefit from) income taxes		(1,405	)		(6,767	)		(1,346	)		(8,181	)		(1,324	)

Net income (loss)	$	(1,634	)	$	6,482		$	1,523		$	5,654		$	1,210
Net income (loss) per share:
Basic	$	(0.03	)	$	0.14		$	0.03		$	0.12		$	0.03
Diluted	$	(0.03	)	$	0.13		$	0.03		$	0.12		$	0.03

Shares used in the computation of net income (loss) per share:
Basic		47,529			47,496			45,925			47,277			46,228
Diluted		47,529			49,150			46,438			48,815			46,623

⁽¹⁾ Equity compensation included in cost of sales	$	165		$	212		$	106		$	519		$	220
⁽²⁾ Equity compensation included in R&D		566			689			328			1,395			437
⁽³⁾Equity compensation included in SG&A		1,826			2,722			968			5,353			2,266

EXAR CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share amounts)
(Unaudited)

	DECEMBER 29,		SEPTEMBER 29,		MARCH 31,
	2013		2013		2013
ASSETS

Current assets:
Cash and cash equivalents	$	21,070	$	10,051	$	14,718
Short-term marketable securities		154,702		174,862		190,587
Accounts receivable (net of allowances of $570 and $944)		21,699		17,236		12,614
Accounts receivable, related party (net of allowances of $462 and $346)		1,685		3,223		3,374
Inventories		24,950		19,841		19,430
Assets held for sale		13,083		13,083		-
Other current assets		3,645		3,474		3,177
Total current assets		240,834		241,770		243,900

Property, plant and equipment, net		8,784		9,153		24,100
Goodwill		29,573		29,573		10,356
Intangible assets, net		28,063		30,054		13,338
Other non-current assets		1,442		1,482		1,474
Total assets	$	308,696	$	312,032	$	293,168

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
Accounts payable	$	14,824	$	12,782	$	9,455
Accrued compensation and related benefits		4,352		3,770		3,624
Deferred income and allowances on sales to distributors		1,861		2,150		2,399
Deferred income and allowances on sales to distributors, related party		8,017		9,056		9,475
Other current liabilities		11,151		14,375		15,215
Total current liabilities		40,205		42,133		40,168

Long-term lease financing obligations		106		456		1,342
Other non-current obligations		11,530		12,550		11,204
Total liabilities		51,841		55,139		52,714

Stockholders' equity		256,855		256,893		240,454
Total liabilities and stockholders' equity	$	308,696	$	312,032	$	293,168

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 29,			SEPTEMBER 29,			DECEMBER 30,			DECEMBER 29,			DECEMBER 30,
	2013			2013			2012			2013			2012

Net Sales	$	30,690		$	34,018		$	30,999		$	97,335		$	90,872

GAAP gross profit	$	12,826		$	13,929		$	14,192		$	42,232		$	40,391
GAAP gross margin		41.8	%		40.9	%		45.8	%		43.4	%		44.4	%
Stock-based compensation		165			212			106			519			220
Amortization of purchased intangible assets and inventory step-up		1,898			2,098			801			5,346			2,534
Warranty Reserve		-			1,440			-			1,440			-
Restructuring charges and exit costs		17			24			79			122			160
Non-GAAP gross profit	$	14,906		$	17,703		$	15,178		$	49,659		$	43,305
Non-GAAP gross margin		48.6	%		52.0	%		49.0	%		51.0	%		47.7	%

GAAP operating expenses	$	16,147		$	14,545		$	14,545		$	45,622		$	42,283
Stock-based compensation - R&D		566			689			328			1,395			437
Stock-based compensation - SG&A		1,826			2,722			968			5,353			2,266
Amortization of purchased intangible assets		208			247			107			562			334
Restructuring charges and exit costs, net		74			384			524			1,389			1,619
Merger and acquisition costs		257			144			-			866			-
Provision for dispute resolution		-			-			1,000			-			1,000
Net change in fair value of contingent consideration		58			(2,495	)		-			(2,437	)		-
Non-GAAP operating expenses	$	13,158		$	12,854		$	11,618		$	38,494		$	36,627

GAAP operating income (loss)	$	(3,321	)	$	(616	)	$	(353	)	$	(3,390	)	$	(1,892	)
Stock-based compensation		2,557			3,623			1,402			7,267			2,923
Amortization of purchased intangible assets and inventory step-up		2,106			2,345			908			5,908			2,868
Warranty Reserve		-			1,440			-			1,440			-
Restructuring charges and exit costs, net		91			408			603			1,511			1,779
Merger and acquisition costs		257			144			-			866			-
Provision for dispute resolution		-			-			1,000			-			1,000
Net change in fair value of contingent consideration		58			(2,495	)		-			(2,437	)		-
Non-GAAP operating income	$	1,748		$	4,849		$	3,560		$	11,165		$	6,678

GAAP net income (loss)	$	(1,634	)	$	6,482		$	1,523		$	5,654		$	1,210
Stock-based compensation		2,557			3,623			1,402			7,267			2,923
Amortization of purchased intangible assets and inventory step-up		2,106			2,345			908			5,908			2,868
Warranty Reserve		-			1,440			-			1,440			-
Restructuring charges and exit costs, net		91			408			603			1,511			1,779
Merger and acquisition costs		257			144			-			866			-
Provision for dispute resolution		-			-			1,000			-			1,000
Net change in fair value of contingent consideration		58			(2,495	)		-			(2,437	)		-
Income tax effects		(1,458	)		(6,812	)		(1,389	)		(8,300	)		(1,434	)
Non-GAAP net income	$	1,977		$	5,135		$	4,047		$	11,909		$	8,346

GAAP net income (loss) per share
Basic	$	(0.03	)	$	0.14		$	0.03		$	0.12		$	0.03
Diluted	$	(0.03	)	$	0.13		$	0.03		$	0.12		$	0.03

Non-GAAP net income (loss) per share
Basic	$	0.04		$	0.11		$	0.09		$	0.25		$	0.18
Diluted	$	0.04		$	0.10		$	0.09		$	0.24		$	0.18


Net cash provided (used) by operations	$	(5,409	)	$	3,569		$	3,611		$	(857	)	$	3,654
Less purchases of fixed assets and IP		(926	)		(400	)		(147	)		(1,675	)		(1,253	)
Add proceeds from sale of IP		-			-			125			125			250
Free cash flow	$	(6,335	)	$	3,169		$	3,589		$	(2,407	)	$	2,651

###

GAAP Results	THREE MONTHS ENDED									NINE MONTHS ENDED
	DECEMBER 29, 2013			SEPTEMBER 29, 2013			DECEMBER 30, 2012			DECEMBER 29, 2013			DECEMBER 30, 2012
Net sales	$	30,690		$	34,018		$	30,999		$	97,335		$	90,872
Gross margin		41.8	%		40.9	%		45.8	%		43.4	%		44.4	%
Income (loss) from operations	$	(3,321	)	$	(616	)	$	(353	)	$	(3,390	)	$	(1,892	)
Net income (loss)	$	(1,634	)	$	6,482		$	1,523		$	5,654		$	1,210
Net income (loss) per share
Basic	$	(0.03	)	$	0.14		$	0.03		$	0.12		$	0.03
Diluted	$	(0.03	)	$	0.13		$	0.03		$	0.12		$	0.03