Exar Corporation Announces Fiscal 2013 Second Quarter Results

FREMONT, Calif., Oct. 24, 2012 /PRNewswire/ -- Exar Corporation (Nasdaq: EXAR), a leading supplier of high performance, analog mixed-signal components and data management solutions, today reported financial results for the second quarter of fiscal year 2013 ended September 30, 2012.

(Logo: http://photos.prnewswire.com/prnh/20120716/SF41155LOGO)

Revenue for the quarter was $30.6 million, or 5% growth compared to the prior quarter. Non-GAAP net income for the quarter was $2.9 million, or 98% growth compared to the prior quarter.  Non-GAAP net income per fully diluted share was $0.06 compared to $0.03 in the prior quarter.  Non-GAAP gross margin was 46.7%, and non-GAAP operating expenses were $12.1 million. GAAP net income for the quarter was $0.3 million compared to a net loss of $0.6 million in the prior quarter, and GAAP net income per fully diluted share was $0.01 compared to a net loss of $0.01 in the prior quarter.

"The second quarter of fiscal 2013 exceeded our expectations as both revenue and profit grew nicely.  Data Compression and Security products led revenue growth as our presence in the Big Data Analytics market supported 23% growth quarter-over-quarter.  Our component products, Power Management and Connectivity, also showed growth in the quarter; however this growth was muted by lower overall OEM demand and supply limitations," commented Louis DiNardo, president and CEO.

"During our second fiscal quarter our programmable power management products began to ship to both Intel and ARM based next generation server designs as well as in industrial equipment applications," continued Mr. DiNardo. "As more servers are deployed in data center applications energy monitoring is playing an increasingly important role.  Our programmable power management products provide critical information for data center management. Additionally, our PCIe solutions for Big Data Analytics are gaining momentum in large networking and storage environments as they provide increased system performance and lower overall system cost. We are pleased with our new product development efforts and progress in achieving our goal of consistent profitable growth," concluded Mr. DiNardo.

For the third quarter of fiscal year 2013 the Company expects revenue growth in the range of 2% to 4% and non-GAAP gross margin in the range of 47% to 48%.  Non-GAAP net income per fully diluted share is expected to be in the range of $0.06 to $0.07.

                     

GAAP FINANCIAL COMPARISON

               

(In millions, except per share amounts)

               

(Unaudited)

                   
                     
   

THREE MONTHS ENDED

 

SIX MONTHS ENDED

   

 SEPTEMBER 30, 

 

 JULY 1, 

 

 OCTOBER 2,  

 

 SEPTEMBER 30, 

 

 OCTOBER 2,  

   

2012

 

2012

 

2011

 

2012

 

2011

Net sales

 

$               30.6

 

$               29.3

 

$               36.1

 

$               59.9

 

$               73.1

Gross margin

 

43.5%

 

44.0%

 

46.3%

 

43.8%

 

45.9%

Loss from operations

 

$               (0.4)

 

$               (1.2)

 

$               (1.5)

 

$               (1.5)

 

$               (3.6)

Net income (loss)

 

$                 0.3

 

$               (0.6)

 

$               (1.1)

 

$               (0.3)

 

$               (2.5)

Net income (loss) per share

               

  Basic 

 

$               0.01

 

$             (0.01)

 

$             (0.02)

 

$             (0.01)

 

$             (0.06)

  Diluted 

 

$               0.01

 

$             (0.01)

 

$             (0.02)

 

$             (0.01)

 

$             (0.06)

             
             

 

NON-GAAP FINANCIAL COMPARISON

           

(In millions, except per share amounts)

               

(Unaudited)

                   
                     
   

THREE MONTHS ENDED

 

SIX MONTHS ENDED

   

 SEPTEMBER 30, 

 

 JULY 1, 

 

 OCTOBER 2,  

 

 SEPTEMBER 30, 

 

 OCTOBER 2,  

   

2012

 

2012

 

2011

 

2012

 

2011

Net sales

 

$               30.6

 

$               29.3

 

$               36.1

 

$               59.9

 

$               73.1

Gross margin

 

46.7%

 

47.2%

 

49.0%

 

47.0%

 

48.8%

Income from operations

 

$                 2.2

 

$                 0.9

 

$                 0.8

 

$                 3.1

 

$                 0.9

Net income

 

$                 2.9

 

$                 1.4

 

$                 1.4

 

$                 4.3

 

$                 2.1

Net income per share

                   

  Basic 

 

$               0.06

 

$               0.03

 

$               0.03

 

$               0.09

 

$               0.05

  Diluted 

 

$               0.06

 

$               0.03

 

$               0.03

 

$               0.09

 

$               0.05

                     

 

Results Conference Call

The Company invites investors, financial analysts, and the general public to listen to its conference call discussing the Company's financial results for the second quarter of fiscal year 2013, today, Wednesday, October 24, 2012 at 1:30 p.m. PDT.  To access the conference call, please dial 800-230-1059 after 1:20 p.m. PDT. In addition, a live webcast will be available on Exar's Investor Relations webpage.

To access the webcast, please go to the Company's Investor Relations Homepage at: http://www.exar.com/news/investornews.aspx.  A recorded replay of the conference call will be available starting at 3:00 p.m. PDT the day of the call until 11:59 p.m. PDT on October 31, 2012. To access the replay, please dial 800-475-6701 and use conference ID number 267782.

About Exar

Exar Corporation designs, develops and markets high performance, analog mixed-signal integrated circuits and advanced sub-system solutions for data communication, networking, storage, consumer, and industrial applications.  Exar's product portfolio includes power management and connectivity components, 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.

Forward-Looking Statements

This press release may contain certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.  These statements are based on management's current expectations or belief about the future events and financial, political and social trends and assumptions it has made based on information currently available to it.  Exar cannot assure that any expectations, forecasts or assumptions made by management preparing these forward-looking statements will prove accurate, or that any projections will be realized.  Such forward-looking statements may be affected by inaccurate assumptions or by known or unknown risks or uncertainties.  Actual results may vary materially from those expressed or implied by the statements herein.  Forward-looking statements contained herein speak only as of this release.  Exar does not undertake any obligation to update or revise publicly any forward-looking statements, whether to reflect new information, future events or otherwise.  For factors that could cause actual results to vary, perhaps materially, from these forward-looking statements, please refer to Exar's filings with the Securities and Exchange Commission, including the Annual Report on Form 10-K for the year ended April 1, 2012 and the Quarterly Report on Form 10-Q for the period ended July 1, 2012. 

Generally Accepted Accounting Principles

The Company reports its financial results in accordance with GAAP.  Additionally, the Company supplements reported GAAP financials with non-GAAP measures which are included in related press releases and reports furnished to the SEC, copies of which are available at the Company's website:  http://www.exar.com or the SEC's website at:  http://www.sec.gov.  For the periods presented, we are disclosing non-GAAP gross profit, non-GAAP gross margin, non-GAAP operating expenses, non-GAAP operating income, non-GAAP net income and non-GAAP basic and diluted net income  per share, which are adjusted to exclude from our GAAP results all stock-based compensation, amortization of acquired intangible assets, restructuring charges and exit costs, and income tax effects.  These non-GAAP measures are presented in part to enhance the understanding of the Company's historical financial performance and comparability between reporting periods.  The Company believes the non-GAAP presentation, when shown in conjunction with the corresponding GAAP measures, provide relevant and useful information to analysts, investors, management and other interested parties following the semiconductor industry.  For its internal purposes, the Company uses the foregoing non-GAAP measures to evaluate performance across reporting periods, determine certain employee benefits as well as plan for and forecast the Company's future periods.  These non-GAAP measures are not in accordance with, or an alternative for measures prepared in accordance with GAAP, and may be different from non-GAAP measures used by other companies.  In addition, these non-GAAP measures are not based on any comprehensive set of accounting rules or principles.  The Company believes that non-GAAP measures have limitations in that they do not reflect all of the amounts associated with the Company's results of operations as determined in accordance with GAAP.  These measures should only be used to evaluate the Company's results of operations in conjunction with the corresponding GAAP measures.

EXAR CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share amounts)

(Unaudited)

                     
   

THREE MONTHS ENDED

 

SIX MONTHS ENDED

   

 SEPTEMBER 30, 

 

 JULY 1, 

 

 OCTOBER 2,  

 

 SEPTEMBER 30, 

 

 OCTOBER 2,  

   

2012

 

2012

 

2011

 

2012

 

2011

                     
                     
                     

Net sales

 

$               21,528

 

$   19,447

 

$       25,910

 

$          40,975

 

$         50,983

Net sales, related party

 

9,094

 

9,804

 

10,210

 

18,898

 

22,115

               Total net sales

 

30,622

 

29,251

 

36,120

 

59,873

 

73,098

                     

Cost of sales:

                   

  Cost of sales

 

12,054

 

10,870

 

13,661

 

22,924

 

26,998

  Cost of sales, related party

 

4,380

 

4,512

 

4,825

 

8,892

 

10,568

  Amortization of purchased intangible assets

858

 

919

 

905

 

1,777

 

1,810

  Restructuring charges and exit costs

 

-

 

81

 

-

 

81

 

152

               Total cost of sales

 

17,292

 

16,382

 

19,391

 

33,674

 

39,528

Gross profit

 

13,330

 

12,869

 

16,729

 

26,199

 

33,570

Operating expenses:

                   

  Research and development 

 

5,773

 

5,449

 

8,838

 

11,222

 

18,118

  Selling, general and administrative 

 

7,639

 

7,782

 

9,373

 

15,421

 

18,915

  Restructuring charges and exit costs

 

291

 

804

 

-

 

1,095

 

173

               Total operating expenses

 

13,703

 

14,035

 

18,211

 

27,738

 

37,206

Loss from operations

 

(373)

 

(1,166)

 

(1,482)

 

(1,539)

 

(3,636)

                     

Other income and expense, net:

                   

   Interest income and other, net

 

674

 

646

 

715

 

1,320

 

1,426

   Interest expense

 

(38)

 

(34)

 

(61)

 

(72)

 

(121)

              Total other income and expense, net

636

 

612

 

654

 

1,248

 

1,305

                     

Income (loss) before income taxes

 

263

 

(554)

 

(828)

 

(291)

 

(2,331)

Provision for income taxes

 

-

 

22

 

249

 

22

 

172

                     

Net income (loss)

 

$                   263

 

$      (576)

 

$       (1,077)

 

$             (313)

 

$         (2,503)

Net income (loss) per share:

                   

  Basic

 

$                  0.01

 

$     (0.01)

 

$         (0.02)

 

$            (0.01)

 

$          (0.06)

  Diluted

 

$                  0.01

 

$     (0.01)

 

$         (0.02)

 

$            (0.01)

 

$          (0.06)

                     

Shares used in the computation of
net income (loss) per share:

                   

  Basic

 

45,720

 

45,388

 

44,759

 

45,554

 

44,676

  Diluted

 

46,046

 

45,388

 

44,759

 

45,554

 

44,676


 

EXAR CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS  

(In thousands, except share amounts)

(Unaudited)

         
   

SEPTEMBER 30,

 

APRIL 1,

   

2012

 

2012 (1)

ASSETS

       
         

Current assets:

       

Cash and cash equivalents

 

$            10,423

 

$              8,714

Short-term marketable securities

 

187,629

 

187,668

Accounts receivable (net of allowances of $755 and $781, respectively)

 

12,976

 

8,454

Accounts receivable, related party (net of allowances of $494 and $815, respectively)

3,762

 

2,918

Inventories

 

16,055

 

18,374

Other current assets

 

3,688

 

3,124

Total current assets

 

234,533

 

229,252

         

Property, plant and equipment, net

 

25,817

 

27,793

Goodwill

 

3,184

 

3,184

Intangible assets, net

 

7,740

 

9,755

Other non-current assets

 

1,404

 

1,668

         

Total assets

 

$           272,678

 

$           271,652

         

LIABILITIES AND STOCKHOLDERS' EQUITY

       
         

Current liabilities: 

       

Accounts payable

 

$              8,991

 

$              7,823

Accrued compensation and related benefits

 

3,211

 

3,918

Deferred income and allowances on sales to distributors

 

2,872

 

3,410

Deferred income and allowances on sales to distributors, related party

 

9,506

 

9,608

Other current liabilities

 

10,468

 

13,615

      Total current liabilities

 

35,048

 

38,374

         

Long-term lease financing obligations

 

3,683

 

3,771

Other non-current obligations 

 

6,273

 

6,215

         

Total liabilities

 

45,004

 

48,360

         

Stockholders' equity

 

227,674

 

223,292

Total liabilities and stockholders' equity

 

$           272,678

 

$           271,652

         
         

(1) Due to the correction of an immaterial error in the fourth quarter fiscal of 2012, the balances at April 1, 2012 of Accumulated deficit decreased by $741 thousand and Additional paid-in capital decreased by $741 thousand. Total Stockholders' equity remained the same.

 

EXAR CORPORATION AND SUBSIDIARIES

SUPPLEMENTAL RECONCILIATION OF GAAP TO NON-GAAP RESULTS

(In thousands, except per share amounts)

(Unaudited)

                     
   

THREE MONTHS ENDED

 

SIX MONTHS ENDED

   

 SEPTEMBER 30, 

 

 JULY 1, 

 

 OCTOBER 2,  

 

 SEPTEMBER 30, 

 

 OCTOBER 2,  

   

2012

 

2012

 

2011

 

2012

 

2011

                     

 Net Sales

 

$            30,622

 

$          29,251

 

$       36,120

 

$             59,873

 

$           73,098

                     

 GAAP gross profit

 

$            13,330

 

$          12,869

 

$       16,729

 

$             26,199

 

$           33,570

 GAAP gross margin

 

43.5%

 

44.0%

 

46.3%

 

43.8%

 

45.9%

   Stock-based compensation

 

129

 

(15)

 

69

 

114

 

128

   Amortization of acquired intangible assets

853

 

880

 

905

 

1,733

 

1,810

   Restructuring charges and exit costs

-

 

81

 

-

 

81

 

152

Non-GAAP gross profit 

 

$            14,312

 

$          13,815

 

$       17,703

 

$             28,127

 

$           35,660

Non-GAAP gross margin 

 

46.7%

 

47.2%

 

49.0%

 

47.0%

 

48.8%

                     

GAAP operating expenses

 

$            13,703

 

$          14,035

 

$       18,211

 

$             27,738

 

$           37,206

   Stock-based compensation 

 

1,218

 

189

 

1,108

 

1,407

 

1,933

   Amortization of acquired intangible assets

107

 

120

 

174

 

227

 

348

   Restructuring charges and exit costs

291

 

804

 

-

 

1,095

 

173

Non-GAAP operating expenses

 

$            12,087

 

$          12,922

 

$       16,929

 

$             25,009

 

$           34,752

                     

GAAP operating loss

 

$               (373)

 

$           (1,166)

 

$        (1,482)

 

$             (1,539)

 

$           (3,636)

   Stock-based compensation 

 

1,347

 

174

 

1,177

 

1,521

 

2,061

   Amortization of acquired intangible assets

960

 

1,000

 

1,079

 

1,960

 

2,158

   Restructuring charges and exit costs

291

 

885

 

-

 

1,176

 

325

Non-GAAP operating income

 

$              2,225

 

$               893

 

$            774

 

$              3,118

 

$               908

                     

GAAP net income (loss)

 

$                263

 

$             (576)

 

$        (1,077)

 

$               (313)

 

$           (2,503)

   Stock-based compensation 

 

1,347

 

174

 

1,177

 

1,521

 

2,061

   Amortization of acquired intangible assets

960

 

1,000

 

1,079

 

1,960

 

2,158

   Restructuring charges and exit costs

291

 

885

 

-

 

1,176

 

325

   Income tax effects

 

(6)

 

(39)

 

221

 

(45)

 

79

Non-GAAP net income

 

$              2,855

 

$            1,444

 

$         1,400

 

$              4,299

 

$            2,120

                     

GAAP net income (loss) per share

                 

  Basic

 

$               0.01

 

$            (0.01)

 

$         (0.02)

 

$              (0.01)

 

$            (0.06)

  Diluted

 

$               0.01

 

$            (0.01)

 

$         (0.02)

 

$              (0.01)

 

$            (0.06)

                     

Non-GAAP net income per share 

                 

  Basic

 

$               0.06

 

$              0.03

 

$           0.03

 

$                0.09

 

$              0.05

  Diluted

 

$               0.06

 

$              0.03

 

$           0.03

 

$                0.09

 

$              0.05

 

 

EXAR CORPORATION AND SUBSIDIARIES

SUPPLEMENTAL NET SALES INFORMATION

                     
                     
   

THREE MONTHS ENDED

 

SIX MONTHS ENDED

   

 SEPTEMBER 30, 

 

 JULY 1, 

 

 OCTOBER 2,  

 

 SEPTEMBER 30, 

 

 OCTOBER 2,  

By Product Line

 

2012

 

2012

 

2011

 

2012

 

2011

Connectivity

 

53%

 

55%

 

52%

 

54%

 

52%

Power management

22%

 

23%

 

22%

 

22%

 

21%

Data compression and security

15%

 

12%

 

14%

 

14%

 

12%

Communications

 

10%

 

10%

 

12%

 

10%

 

15%

                     
   

THREE MONTHS ENDED

 

SIX MONTHS ENDED

   

 SEPTEMBER 30, 

 

 JULY 1, 

 

 OCTOBER 2,  

 

 SEPTEMBER 30, 

 

 OCTOBER 2,  

By Geography

 

2012

 

2012

 

2011

 

2012

 

2011

Asia

 

58%

 

64%

 

60%

 

61%

 

59%

Americas

 

27%

 

22%

 

26%

 

24%

 

26%

EMEA

 

15%

 

14%

 

14%

 

15%

 

15%

                     
                     
                     
                     

EXAR CORPORATION AND SUBSIDIARIES

SUPPLEMENTAL RECONCILIATION OF GAAP TO NON-GAAP GUIDANCE

                     
       

GUIDANCE FOR THE QUARTER ENDING DECEMBER 30, 2012

           

ADJUSTMENTS

   
               

AMORTIZATION

   
               

OF ACQUIRED

   
           

 STOCK-BASED 

 

INTANGIBLE

   
       

NON-GAAP

 

COMPENSATION

 

ASSETS

 

GAAP

Net Sales

     

2% - 4%

         

2% - 4%

Gross Margin

     

47% - 48%

 

~$0.2 million

 

~$0.8 million

 

44% - 45%

Net income per share

     

 $0.06 - $0.07 

 

~$1.4 million

 

~$0.9 million

 

 $0.01 - $0.02