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Exar Corporation Announces Third Quarter Fiscal 2014 Results

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

FREMONT, Calif., Jan. 29, 2014 /PRNewswire/ -- 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: [email protected]

-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












 

For Press Inquiries Contact: [email protected]

For Investor Relations Contact: [email protected], or
Laura J. Guerrant-Oiye, Guerrant Associates
Phone: (510) 668 7201

 

SOURCE Exar Corporation

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The cloud era has reached the stage where it is no longer a question of whether a company should migrate, but when. Enterprises have embraced the outsourcing of where their various applications are stored and who manages them, saving significant investment along the way. Plus, the cloud has become a defining competitive edge. Companies that fail to successfully adapt risk failure. The media, of course, continues to extol the virtues of the cloud, including how easy it is to get there. Migrating...
The use of containers by developers -- and now increasingly IT operators -- has grown from infatuation to deep and abiding love. But as with any long-term affair, the honeymoon soon leads to needing to live well together ... and maybe even getting some relationship help along the way. And so it goes with container orchestration and automation solutions, which are rapidly emerging as the means to maintain the bliss between rapid container adoption and broad container use among multiple cloud host...
Imagine if you will, a retail floor so densely packed with sensors that they can pick up the movements of insects scurrying across a store aisle. Or a component of a piece of factory equipment so well-instrumented that its digital twin provides resolution down to the micrometer.