Exar Corporation Announces Third Quarter Fiscal Year 2016 Financial Results

Third Quarter Non-GAAP Operating Profit of $3.5 Million and Non-GAAP EPS of $0.07

Feb 03, 2016, 16:05 ET from 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)

 

SOURCE Exar Corporation



RELATED LINKS

http://www.exar.com