Exar Reports First Quarter Fiscal 2015 Financial Results
Company Reports Revenue of $32.6 Million, an Increase of 17% Sequentially
FREMONT, Calif., Aug. 6, 2014 /PRNewswire/ -- Exar Corporation (NYSE: EXAR) a leading provider of high-performance integrated circuits and system solutions, today reported financial results for the first quarter of fiscal year 2015, ended June 29, 2014. Non-GAAP revenue for the first quarter of fiscal year 2015 was $32.6 million, an increase of 17% from $28.0 million in the prior quarter. Revenue has been adjusted to eliminate the impact of the deferred revenue write-down under business combination accounting. GAAP revenue for the first quarter was $30.7 million.
Non-GAAP gross margin for the quarter was 48%; and Non-GAAP net income for the quarter was $0.9 million, or $0.02 per diluted share, up from $0.7 million in the prior quarter. GAAP gross margin for the quarter was 36% and GAAP net income for the quarter was a loss of $0.26 per share. GAAP results for the quarter include the impact of consolidating Integrated Memory Logic Limited (iML) as of June 4, 2014, including substantial one-time costs associated with the acquisition, amortization of intangibles, and the elimination of minority interest pending completion of the second-step merger.
"Our focus during the past twenty-four months has been on restructuring our business and developing new products through organic and inorganic means. This quarter marks a transformative point, as our sales and marketing team is demonstrating meaningful traction with both our Component Products and our System Solutions," commented Exar President and CEO, Louis DiNardo.
"Additionally, as we build an enduring business within our traditional product areas serving the industrial, networking, and communications infrastructure markets, we have augmented our offering with high-end consumer products through the recent acquisition of iML. The high-performance analog and mixed-signal products provided by iML are a logical extension of our business. iML gives us a great team, immediate scale, further diversity, with enhanced profitability," concluded Mr. DiNardo.
In the first quarter of fiscal 2015 the Company continued its aggressive introductions of new products, including:
- XRP7720 – A quad output programmable universal power management IC (PMIC).
- XRP7725 – A universal power management IC compatible with Intel Node Manager server power management technology.
- XRP3303x – The industry's widest operation range RS-485 transceivers.
- XR761xx – A new family of PowerBlox™ DC-DC regulators offering exceptional line regulation.
- XR811xx – A new family of universal clocks with ultra-low phase jitter for communications, audio-video, and industrial applications.
On a Non-GAAP basis, for the second fiscal quarter of 2015, ending September 28, 2014, the Company is expecting revenue to be in the range of $40 million to $43 million, gross margin between 47% to 50%, and operating expenses of between $18 million and $20 million.
Company officials will be discussing these results in greater detail in a conference call today, Wednesday, August 6, 2014 at 1:45 p.m. PDT (4:45 p.m. EDT). To access the conference call, please dial (719) 457-2628 or (888) 505-4368. In addition, a live webcast will be available on Exar's Investor webpage. An archive of the webcast will be available Exar's Investor webpage after its conclusion.
Exar Corporation designs, develops and markets high-performance integrated circuits and system solutions for the Communications, High-End Consumer, Industrial & Embedded Systems, and Networking & Storage 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.
Integrated Memory Logic (iML), a subsidiary of Exar Corporation, is a fabless semiconductor company, which develops and markets application specific analog, power management, and mixed-signal integrated circuits. iML ICs are optimized primarily for the display, mobile systems and lighting markets. iML is an industry leader in the field of color control management, and has an extensive portfolio of products in power management and LED drivers. iML maintains a strong footprint close to its customers and supply chain in Asia, and markets extensively to OEMs and system manufacturing houses in China, Taiwan, Korea and Japan. Founded in 1996, iML has offices in the US and Asia.
For more information about Exar, visit http://www.exar.com.
-Tables follow-
| FINANCIAL COMPARISON |
||||||||||
| (In thousands, except per share amounts) (Unaudited) |
||||||||||
| Non-GAAP Results |
THREE MONTHS ENDED |
|||||||||
| JUNE 29, 2014 |
MARCH 30, 2014 |
JUNE 30, 2013 |
||||||||
| Industrial & Embedded Systems |
$ 18,867 |
58% |
$ 19,588 |
70% |
$ 16,498 |
51% |
||||
| Consumer |
5,332 |
16% |
43 |
0% |
246 |
1% |
||||
| Communications Infrastructure |
5,090 |
16% |
5,046 |
18% |
5,976 |
18% |
||||
| Networking & Storage |
3,338 |
10% |
3,310 |
12% |
9,907 |
30% |
||||
| Net Sales |
$ 32,627 |
100% |
$ 27,987 |
100% |
$ 32,627 |
100% |
||||
| Gross Profit |
$ 15,732 |
48.2% |
$ 12,837 |
45.9% |
$ 17,050 |
52.3% |
||||
| Operating Expenses |
$ 15,040 |
46.1% |
$ 12,671 |
45.3% |
$ 12,482 |
38.3% |
||||
| Income from operations |
$ 692 |
2.1% |
$ 166 |
0.6% |
$ 4,568 |
14.0% |
||||
| Net income |
$ 860 |
2.6% |
$ 676 |
2.4% |
$ 4,797 |
14.7% |
||||
| Net income per share |
||||||||||
| Basic |
$ 0.02 |
$ 0.01 |
$ 0.10 |
|||||||
| Diluted |
$ 0.02 |
$ 0.01 |
$ 0.10 |
|||||||
| GAAP Results |
THREE MONTHS ENDED |
|||||||||
| JUNE 29, 2014 |
MARCH 30, 2014 |
JUNE 30, 2013 |
||||||||
| Industrial & Embedded Systems |
$ 18,867 |
61% |
$ 19,588 |
70% |
$ 16,498 |
51% |
||||
| Consumer |
3,424 |
11% |
43 |
0% |
246 |
1% |
||||
| Communications Infrastructure |
5,090 |
17% |
5,046 |
18% |
5,976 |
18% |
||||
| Networking & Storage |
3,338 |
11% |
3,310 |
12% |
9,907 |
30% |
||||
| Net Sales |
$ 30,719 |
100% |
$ 27,987 |
100% |
$ 32,627 |
100% |
||||
| Gross Profit |
$ 10,956 |
35.7% |
$ 8,422 |
30.1% |
$ 15,477 |
47.4% |
||||
| Operating Expenses |
$ 22,308 |
72.6% |
$ 8,733 |
31.2% |
$ 14,930 |
45.8% |
||||
| Income (loss) from operations |
$ (11,352) |
-37.0% |
$ (311) |
-1.1% |
$ 547 |
1.7% |
||||
| Net income (loss) |
$ (12,105) |
-39.4% |
$ 147 |
0.5% |
$ 806 |
2.5% |
||||
| Net income (loss) per share |
||||||||||
| Basic |
$ (0.26) |
$ 0.00 |
$ 0.02 |
|||||||
| Diluted |
$ (0.26) |
$ 0.00 |
$ 0.02 |
|||||||
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 30, 2014 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, impairment charges, 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, 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. 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 |
||||||||
| JUNE 29, |
MARCH 30, |
JUNE 30, |
||||||
| 2014 |
2014 |
2013 |
||||||
| Net sales |
$ 21,698 |
$ 18,913 |
$ 23,858 |
|||||
| Net sales, related party |
9,021 |
9,074 |
8,769 |
|||||
| Total net sales |
30,719 |
27,987 |
32,627 |
|||||
| Cost of sales: |
||||||||
| Cost of sales (1) |
12,353 |
11,491 |
11,812 |
|||||
| Cost of sales, related party |
3,838 |
4,119 |
3,907 |
|||||
| Amortization of purchased intangible assets and inventory step-up cost |
3,545 |
2,254 |
1,350 |
|||||
| Impairment of intangible assets |
- |
1,636 |
- |
|||||
| Restructuring charges and exit costs |
27 |
65 |
81 |
|||||
| Total cost of sales |
19,763 |
19,565 |
17,150 |
|||||
| Gross profit |
10,956 |
8,422 |
15,477 |
|||||
| Operating expenses: |
||||||||
| Research and development(2) |
8,243 |
6,803 |
6,180 |
|||||
| Selling, general and administrative (3) |
10,077 |
7,496 |
7,354 |
|||||
| Restructuring charges and exit costs, net |
369 |
1,438 |
931 |
|||||
| Merger and acquisition costs |
4,050 |
1,014 |
465 |
|||||
| Net change in fair value of contingent consideration |
(431) |
(8,018) |
- |
|||||
| Total operating expenses |
22,308 |
8,733 |
14,930 |
|||||
| Income (loss) from operations |
(11,352) |
(311) |
547 |
|||||
| Other income and expense, net: |
||||||||
| Interest income and other, net |
290 |
523 |
287 |
|||||
| Interest expense |
(486) |
(39) |
(37) |
|||||
| Impairment of long term investment |
- |
(323) |
- |
|||||
| Total other income and expense, net |
(196) |
161 |
250 |
|||||
| Income (loss) before income taxes |
(11,548) |
(150) |
797 |
|||||
| Provision for (benefit from) income taxes |
692 |
(297) |
(9) |
|||||
| Net income (loss) before noncontrolling interest |
(12,240) |
147 |
806 |
|||||
| Net loss attributable to noncontrolling interest |
135 |
- |
- |
|||||
| Net income (loss) attributable to Exar |
$ (12,105) |
$ 147 |
$ 806 |
|||||
| Net income (loss) per share: |
||||||||
| Basic |
$ (0.26) |
$ 0.00 |
$ 0.02 |
|||||
| Diluted |
$ (0.26) |
$ 0.00 |
$ 0.02 |
|||||
| Shares used in the computation of net income (loss) per share: |
||||||||
| Basic |
47,236 |
47,328 |
46,805 |
|||||
| Diluted |
47,236 |
48,778 |
48,085 |
|||||
| (1) Equity compensation included in cost of sales |
$ 260 |
$ 195 |
$ 142 |
|||||
| (2) Equity compensation included in R&D |
812 |
579 |
140 |
|||||
| (3) Equity compensation included in SG&A |
2,055 |
811 |
805 |
|||||
| EXAR CORPORATION AND SUBSIDIARIES |
||||||
| CONDENSED CONSOLIDATED BALANCE SHEETS |
||||||
| (In thousands) |
||||||
| (Unaudited) |
||||||
| JUNE 29, |
MARCH 30, |
JUNE 30, |
||||
| 2014 |
2014 |
2013 |
||||
| ASSETS |
||||||
| Current assets: |
||||||
| Cash and cash equivalents |
$ 149,161 |
$ 14,614 |
$ 36,458 |
|||
| Short-term marketable securities |
- |
152,420 |
169,333 |
|||
| Accounts receivable (net of allowances of $1,029, $1,178 and $673) |
26,596 |
15,023 |
15,811 |
|||
| Accounts receivable, related party (net of allowances of $599, $608 and $318) |
2,524 |
3,309 |
3,203 |
|||
| Inventories |
31,988 |
28,982 |
19,391 |
|||
| Other current assets |
5,717 |
3,549 |
2,853 |
|||
| Total current assets |
215,986 |
217,897 |
247,049 |
|||
| Property, plant and equipment, net |
20,644 |
21,280 |
22,953 |
|||
| Goodwill |
45,017 |
30,410 |
10,356 |
|||
| Intangible assets, net |
109,041 |
31,390 |
11,804 |
|||
| Other non-current assets |
1,448 |
1,240 |
1,489 |
|||
| Total assets |
$ 392,136 |
$ 302,217 |
$ 293,651 |
|||
| LIABILITIES AND STOCKHOLDERS' EQUITY |
||||||
| Current liabilities: |
||||||
| Accounts payable |
$ 15,883 |
$ 15,488 |
$ 12,556 |
|||
| Accrued compensation and related benefits |
6,271 |
4,174 |
3,765 |
|||
| Deferred income and allowances on sales to distributors |
3,737 |
1,765 |
2,040 |
|||
| Deferred income and allowances on sales to distributors, related party |
9,962 |
9,349 |
10,282 |
|||
| Short-term debt financing |
65,000 |
- |
- |
|||
| Other current liabilities |
16,257 |
11,370 |
10,642 |
|||
| Total current liabilities |
117,110 |
42,146 |
39,285 |
|||
| Long-term lease financing obligations |
40 |
70 |
1,012 |
|||
| Other non-current obligations |
10,651 |
6,626 |
11,130 |
|||
| Total liabilities |
127,801 |
48,842 |
51,427 |
|||
| Stockholders' equity: |
||||||
| Exar Corporation stockholders' equity |
246,598 |
253,375 |
242,224 |
|||
| Noncontrolling interest |
17,737 |
- |
- |
|||
| Total stockholders' equity |
264,335 |
253,375 |
242,224 |
|||
| Total liabilities and stockholders' equity |
$ 392,136 |
$ 302,217 |
$ 293,651 |
|||
| EXAR CORPORATION AND SUBSIDIARIES |
|||||||
| SUPPLEMENTAL RECONCILIATION OF GAAP TO NON-GAAP RESULTS |
|||||||
| (In thousands, except per share amounts) |
|||||||
| (Unaudited) |
|||||||
| THREE MONTHS ENDED |
|||||||
| JUNE 29, |
MARCH 30, |
JUNE 30, |
|||||
| 2014 |
2014 |
2013 |
|||||
| GAAP net sales |
$ 30,719 |
$ 27,987 |
$ 32,627 |
||||
| Deferred revenue write-down |
1,908 |
- |
- |
||||
| Non-GAAP net sales |
$ 32,627 |
$ 27,987 |
$ 32,627 |
||||
| GAAP gross profit |
$ 10,956 |
$ 8,422 |
$ 15,477 |
||||
| GAAP gross margin |
35.7% |
30.1% |
47.4% |
||||
| Stock-based compensation |
260 |
195 |
142 |
||||
| Amortization of purchased intangible assets and inventory step-up cost |
3,545 |
2,254 |
1,350 |
||||
| Deferred revenue write-down and associated costs |
944 |
- |
- |
||||
| Impairment Charges |
- |
1,901 |
- |
||||
| Restructuring charges and exit costs |
27 |
65 |
81 |
||||
| Non-GAAP gross profit |
$ 15,732 |
$ 12,837 |
$ 17,050 |
||||
| Non-GAAP gross margin |
48.2% |
45.9% |
52.3% |
||||
| GAAP operating expenses |
$ 22,308 |
$ 8,733 |
$ 14,930 |
||||
| Stock-based compensation - R&D |
812 |
579 |
140 |
||||
| Stock-based compensation - SG&A |
2,055 |
811 |
805 |
||||
| Amortization of purchased intangible assets |
413 |
238 |
107 |
||||
| Restructuring charges and exit costs, net |
369 |
1,438 |
931 |
||||
| Merger and acquisition costs |
4,050 |
1,014 |
465 |
||||
| Net change in fair value of contingent consideration |
(431) |
(8,018) |
- |
||||
| Non-GAAP operating expenses |
$ 15,040 |
$ 12,671 |
$ 12,482 |
||||
| GAAP operating income (loss) |
$ (11,352) |
$ (311) |
$ 547 |
||||
| Stock-based compensation |
3,127 |
1,585 |
1,087 |
||||
| Amortization of purchased intangible assets and inventory step-up cost |
3,958 |
2,492 |
1,457 |
||||
| Deferred revenue write-down and associated costs |
944 |
- |
- |
||||
| Impairment Charges |
- |
1,901 |
- |
||||
| Restructuring charges and exit costs, net |
396 |
1,503 |
1,012 |
||||
| Merger and acquisition costs |
4,050 |
1,014 |
465 |
||||
| Net change in fair value of contingent consideration |
(431) |
(8,018) |
- |
||||
| Non-GAAP operating income |
$ 692 |
$ 166 |
$ 4,568 |
||||
| GAAP net income (loss) |
$ (12,105) |
$ 147 |
$ 806 |
||||
| Stock-based compensation |
3,127 |
1,585 |
1,087 |
||||
| Amortization of purchased intangible assets and inventory step-up cost |
3,958 |
2,492 |
1,457 |
||||
| Deferred revenue write-down and associated costs |
944 |
- |
- |
||||
| Impairment Charges |
- |
2,224 |
- |
||||
| Restructuring charges and exit costs, net |
396 |
1,503 |
1,012 |
||||
| Merger and acquisition costs |
4,497 |
1,014 |
465 |
||||
| Net change in fair value of contingent consideration |
(431) |
(8,018) |
- |
||||
| Net loss attributable to noncontrolling interest |
(135) |
- |
- |
||||
| Income tax effects |
609 |
(271) |
(30) |
||||
| Non-GAAP net income attributable to Exar |
$ 860 |
$ 676 |
$ 4,797 |
||||
| GAAP net income (loss) per share |
|||||||
| Basic |
$ (0.26) |
$ 0.00 |
$ 0.02 |
||||
| Diluted |
$ (0.26) |
$ 0.00 |
$ 0.02 |
||||
| Non-GAAP net income (loss) per share |
|||||||
| Basic |
$ 0.02 |
$ 0.01 |
$ 0.10 |
||||
| Diluted |
$ 0.02 |
$ 0.01 |
$ 0.10 |
||||
| Shares used in the computation of Non-GAAP net income (loss) per share: |
|||||||
| Basic |
47,236 |
47,328 |
46,805 |
||||
| Diluted |
49,826 |
50,220 |
48,557 |
||||
| Net cash provided (used) by operations |
$ (8,137) |
$ 1,708 |
$ 983 |
||||
| Less purchases of fixed assets and IP |
(551) |
(983) |
(349) |
||||
| Add proceeds from sale of IP |
- |
- |
125 |
||||
| Free cash flow |
$ (8,688) |
$ 725 |
$ 759 |
||||
SOURCE Exar Corporation
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