EXAR A NEW DIRECTION€¦ · EXAR A NEW DIRECTION Mixed Signal and Data Management Solutions for a...

EXARA NEW DIRECTION

Mixed Signal and Data Management Solutions for a Connected World

Thursday, January 17, 13

Forward-Looking Statements This presentation contains 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. The forward-looking statements contained in this presentation include statements about future financial and operating results, economic growth rates, industry and market conditions, potential synergies and cost savings, the ability to drive growth and expand customer and partner relationships, changes in gross margins, revenues and operating expenses, manufacturing yields or operations, product development initiatives, design win conversion and other such statements. These statements are not guarantees of future performance, involve risks, uncertainties and assumptions that are difficult to predict, and are based upon assumptions as to future events that may not prove accurate. Therefore, actual outcomes and results may differ materially from what is expressed herein. In any forward-looking statement in which the Company expresses an expectation or belief as to future results, such expectation or belief is expressed in good faith and believed to have a reasonable basis, but there can be no assurance that the statement or expectation or belief will result or be achieved or accomplished. Information concerning risk factors are detailed in the Company's SEC reports, 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 quarters ended July 1, 2012, and September 30, 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. In this presentation, we are disclosing non-GAAP gross profit, non-GAAP operating expenses, non-GAAP operating income or loss, non-GAAP net income or loss, and non-GAAP basic and diluted net income or loss per share, which are adjusted to exclude from our GAAP results all stock-based compensation expense, amortization of acquired intangible assets, restructuring charges and exit costs, provision for dispute resolution, and related 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. 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

• Founded: 1971

• Headquarters: Fremont, California

• Design Centers: Silicon Valley and Hangzhou China

• Employees: 275

• Revenue: $131mm*

• Net Margin: 9% September Quarter**

• Balance Sheet: ≈$200mm Cash, No Debt

*Fiscal 2012**Non-GAAP


Management Team

• Louis DiNardo CEO 30-year Semiconductor Veteran - • ADI, LLTC, XICOR, ISIL, EXAR

• Todd Smathers SVP Operations 30-year Semiconductor Veteran - • NSM, LLTC, XICOR, ISIL, EXAR

• Carlos Laber SVP R&D 30-year Semiconductor Veteran - • NSM, MCRL, XICOR, ISIL, ON Semiconductor, EXAR

• Steve Bakos SVP Sales 30-year Semiconductor Veteran - • NSM, LLTC, XICOR, ISIL,, Conexant, EXAR

• Ryan Benton CFO 20-year Finance Executive -• SynapSense, ASMI, eFunds, Exar


Financial Results

• Fiscal Year 2012 Fourth Quarter Restructuring

• 45% Reduction in Headcount

• Overhaul of Executive Staff

• ≈$25M in Expense and Cost Reduction

*Non-GAAP Results


Financial Results

• Fiscal Year 2013 First Quarter Ending June 2012*• Revenue $29.3 million - 5% Growth Q/Q

• Gross Margin 47.2% - 720 Basis Point Increase Q/Q

• Operating Income $0.9 million - $6.3 Increase Q/Q

• EPS $0.03 - $0.13 Increase Q/Q

• Fiscal Year 2013 Second Quarter Ending September 2012*• Revenue $30.6 - 5% Growth

• Gross Margin 46.7% - 50 Basis Point Decrease Q/Q

• Operating Income $2.2 million - 149% Increase Q/Q

• EPS $0.06 - 100% Increase Q/Q

*Non-GAAP Results


Operating Income/Loss

Q1-09 ($1,528)

Q2-09 ($404)

Q3-09 ($2,930)

Q4-09 ($3,725)

Q1-10 ($4,744)

Q2-10 ($4,249)

Q3-10 ($1,544)

Q4-10 $87

Q1-11 ($1,967)

Q2-11 ($1,232)

Q3-11 ($3,079)

Q4-11 ($5,438)

Q1-12 $134

Q2-12 $774

Q3-12 ($2,448)

Q4-12 ($5,384)

Q1-13 $893

Q2-13 $2,225

Q3-13(e) $2,400

Q4-13(e) $2,900

($6,000)

($5,000)

($4,000)

($3,000)

($2,000)

($1,000)

$0

$1,000

$2,000

$3,000

$4,000

Quarterly Non-GAAP Results


Financial Goals and Performance

• Goals

• Consistent Profitable Growth

• Differentiation - Technology and Innovation

• Diversity - Markets, Customers and Products

• Appreciation in Shareholder Value

• Non-GAAP EBIT Growth

• GAAP EPS Growth


Success Model

Exar FY’12Results*

Q1FY13Results*

Q2FY13Results*

Q3FY13Guidance*

ModelLong-Term*

Revenue $131M $29.6M $30.6M 2% - 4% ≈$45M

Gross Margin 47% 47% 47% 47% - 48% 53% - 55%

Operating Expense 52% 44% 40% 38% - 39% 32% - 34%

Operating Inc/(Loss) (5%) 3% 7% 8% - 10% ≈23%

EPS -$0.10 $0.03 $0.06 $0.06 - $0.07 $0.20 - $0.25

*Non-GAAP Results


Strategic VisionAchievement of Success Model

• Serve High Growth Markets with Innovative Value-Added Solutions

• High Performance Analog Mixed Signal

• Market Selection - Networking, Communications, Industrial

• Product Definition - Power Management, Connectivity, Signal Processing

• Sales and Marketing Focus - Dedicated Sales Force

• Data Management Solutions

• Market Selection - Big Data Analytics

• Product Definition - Compression and Security

• Sales and Marketing Focus - Dedicated Sales Force


Market Focus

• Networking and Storage

• Industrial and Embedded Systems

• Communications Infrastructure


Product Focus

• Power Management Products

• Connectivity Products

• Data Management Solutions


Product Line Contribution

22%

53%15%

10%PowerConnectivityData CompressionOther

Q2 Fiscal Year 2013


End Market Contribution

40%

40%

20%NetworkingIndustrialCommunications

Company Estimates Q2 Fiscal Year 2013


Geographic Contribution

27%

58%

15%AmericasAsiaEurope

Q2 Fiscal Year 2013


Power Management Products

• Analog Power Management

• Switching Regulators

• Switching Controllers

• Linear Regulators

• Supervisory Controllers

• Programmable Power

• Multiple Output Synchronous Buck Controllers


End Market FocusServed Available Market (SAM)

Market Volume ASP SAM CustomersSet Top Box 150M $2.00 $300M Pace, Motorola Technicolor

Switches/Routers 20M $5.00 $100M Cisco, HP, Alcatel, HuaweiMF Printers 10M $5.00 $50M HP, Canon, Konica, Minolta

Servers 15M $10.00 $150M HP, IBM, Dell, IntelSurveillance 40M $2.00 $80M Siemens, Johnson, Pelco

Patient Monitor 10M $3.00 $30M GE, Honeywell, MindrayBTS/BSC/RRH 5M $8.00 $40M NSN, Ericsson, ZTE

POS 15M $2.00 $30M Ingenico, HypercomOthers 40M $2.50 $100M Auto, Gateway, ConsumerTOTAL $880M


Power Management Revenue

0

2.25

4.5

6.75

9

Q111 Q211 Q311 Q411 Q112 Q212 Q312 Q412 Q113 Q213

$M


POWERXR

Exar Programmable PowerSuite 5.0


Exar Programmable PowerSINGLE INPUT - FOUR OUTPUT

ANALOG FEATURES EXAR

147 # OF COMPONENTS 33DISCRETE SOFT-START YES

DISCRETE MARGINING YES

DISCRETE SEQUENCE & TRACK YES

NO DYNAMIC CONTROL YES

NO FAULT MANAGEMENT YES

NO I2C INTERFACE YES


Exar Programmable PowerCOMPETITION

• Analog Solutions - Limited Use in Next Generation Server Designs

• No Programmability - Complex Design Implementation

• No Multiple Outputs - Significantly Larger Bill-of-Material

• No Support for Intel Energy Monitoring - Lacks support for next generation requirements in Server Point-of-Load Requirements


Data Compression and SecurityHardware Acceleration and Software Solutions

• Compression

• Decompression

• Acceleration

• Encryption

• Decryption


Data Compression and Security

• High Growth Markets Supporting Social Networking, Industrial Internet and Financial Technology

• Big Data Analytics

• Enterprise

• Cloud

• Off-Load Processing

• Lower Cost - Decrease Array Capacity

• Improve System Performance - Throughput and Latency


1"

10"

100"

1000"

10000"

100000"

1000000"

10000000"

1" 2" 3" 4" 5" 6" 7" 8" 9" 10" 11"

CPU v. Storage IOPSInput Output Operations per Second

STORAGE120X Increase

Bottleneck

CPU12,000X Increase


Data Compression ApplicationOff-Load Processor and Software Compression

Engine with PCIe Interface

WAN

1GbE/10GbE

ExarDX1845

PCIe

PCIe

PCIe

PCIe

EXARDX1845

CLOUD

ENTERPRISE

CPU

SUB

-SYTEM


Panther IFirst Generation Compression/Security Engine

with PCIe Interface

Transform Engine

Hash

Encryption

Compression

DMAPCIe4x

FlashCtlr GPIO RNG Public Key EnginePK

Mgr


Panther II2nd Generation Compression and Security Engine

with PCIe and FPGA Interface

Transform Engine

Hash

Encryption

Compression

Public Key Engine

DMAPCIe4x

FlashCtlr GPIO RNG Config FPGA

Control

External FPGA

Interlacken Interface


Data Compression and Security Revenue

0

1.25

2.5

3.75

5

Q111 Q211 Q311 Q411 Q112 Q212 Q312 Q412 Q113 Q213

$M

Legacy Security Processor Compression Engine


Data Compression and SecurityServed Available Market (SAM)

Market Customers SAM

Enterprise Storage EMC, Hitachi, IBM, NetApp $80M

Big Data Analytics Teradata, Oracle, HP, IBM $80M

Cloud Storage Amazon, Microsoft, Rackspace

$100M

Cloud Computing IBM, Google, Salesforce $70M

Network Security Cisco, Juniper, Huawei, F5 $140M

VOIP Security Acme Packet, Cisco $25M

Remote Replication HP, IBM, Raytheon $30M

TOTAL $525M


Connectivity

• Bridges

• UARTs

• USB

• PCIe

• I2C

• Transceivers

• Differential

• Serial


Connectivity ApplicationUART and Transceiver

UART UARTRS232RS485

RS232RS485

Distance

EQUIPMENT


Connectivity Revenue

0

5.25

10.5

15.75

21

Q111 Q211 Q311 Q411 Q112 Q212 Q312 Q412 Q113 Q213

$M


Connectivity ProductsUARTS, Bridges and Transceivers

Embedded

IndustrialPoint-of-Sale

Comm

ComputingServers

Consumer

Valu

e

VolumeThursday, January 17, 13

Connectivity ProductsTotal Available Market (TAM)

$150M$500M

$300M

$1,500M

UARTsTransceiversBridgesDigital


Exar Summary


Core Assets, Markets and Products

Power ManagementData Management

Connectivity

NetworkingIndustrial

Communications

Management Team - Strong Record of SuccessBrand Recognition - 40 Years of History

Customers - 14,000 WorldwideChannel Partners - Future, Arrow and WT

Balance Sheet ≈ $200M Cash


Success Model

Exar FY’12Results*

Q1FY13Results*

Q2FY13Results*

Q3FY13Guidance*

ModelLong-Term*

Revenue $131M $29.6M $30.6M 2% - 4% ≈$45M

Gross Margin 47% 47% 47% 47% - 48% 53% - 55%

Operating Expense 52% 44% 40% 38% - 39% 32% - 34%

Operating Inc/(Loss) (5%) 3% 7% 8% - 10% ≈23%

EPS -$0.10 $0.03 $0.06 $0.06 - $0.07 $0.20 - $0.25

*Non-GAAP Results


Thank youLouis DiNardo

President and CEO


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