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  

  

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