EXAR CORPORATION AND SUBSIDIARIES

SUPPLEMENTAL RECONCILIATION OF GAAP TO NON-GAAP RESULTS

(In thousands, except per share amounts)

(Unaudited)

THREE MONTHS ENDED

TWELVE MONTHS ENDED

 MARCH 27, 

 DECEMBER 27, 

 MARCH 29, 

 MARCH 27, 

 MARCH 29, 

2016

2015

2015

2016

2015

GAAP net sales

$          36,775

$                  37,439

$          43,857

$        149,378

$        162,050

   Provision for dispute

-

-

-

2,500

-

   Deferred revenue write-down

-

-

-

-

2,071

Non-GAAP net sales

$          36,775

$                  37,439

$          43,857

$        151,878

$        164,121

 GAAP gross profit

$          14,773

$                  14,692

$          17,948

$          59,558

$          49,926

 GAAP gross margin

40.2%

39.2%

40.9%

39.9%

30.8%

   Provision for dispute

-

-

-

2,500

-

   Amortization of purchased intangible assets and inventory step-up costs

2,462

2,461

2,525

9,884

11,740

   Restructuring charges and other non-GAAP exit costs, net

151

7

1,213

898

7,597

   Stock-based compensation

103

104

122

379

1,105

   Proceeds from legal settlement

-

-

-

(1,500)

-

   Deferred revenue write-down and associated costs

-

-

-

-

1,059

   Impairment of intangibles

-

-

-

-

8,367

   Reversal of warranty reserve

-

-

(460)

-

(460)

Non-GAAP gross profit 

$          17,489

$                  17,264

$          21,348

$          71,719

$          79,334

Non-GAAP gross margin 

47.6%

46.1%

48.7%

47.2%

48.3%

GAAP operating expenses

$          16,863

$                  21,545

$          20,294

$          76,091

$          92,989

   Restructuring charges and other non-GAAP exit costs, net

200

2,639

537

5,792

4,589

   Stock-based compensation - R&D

293

269

537

1,216

2,661

   Stock-based compensation - SG&A

754

669

2,006

3,986

9,848

   Amortization of purchased intangible assets 

972

935

792

3,713

3,700

   Accruals for legal settlement and associated costs

822

1,498

-

2,521

-

   Merger and acquisition costs

213

-

393

924

7,348

   Impairment of intangibles

-

1,807

539

1,807

4,456

   Net change in fair value of contingent consideration

-

-

-

-

(4,343)

Non-GAAP operating expenses

$          13,609

$                  13,728

$          15,490

$          56,132

$          64,730

GAAP operating loss

$          (2,090)

$                  (6,853)

$          (2,346)

$        (16,533)

$        (43,063)

   Amortization of purchased intangible assets and inventory step-up costs

3,434

3,396

3,317

13,597

15,440

   Restructuring charges and other non-GAAP exit costs, net

351

2,646

1,750

6,690

12,186

   Stock-based compensation 

1,150

1,042

2,665

5,581

13,614

   Provision for dispute

-

-

-

2,500

-

   Merger and acquisition costs

213

-

393

924

7,348

   Accruals for legal settlement and associated costs

822

1,498

-

1,021

-

   Deferred revenue write-down and associated costs

-

-

-

-

1,059

   Impairment of intangibles

-

1,807

539

1,807

12,823

   Reversal of warranty reserve

-

-

(460)

-

(460)

   Net change in fair value of contingent consideration

-

-

-

-

(4,343)

Non-GAAP operating income 

$            3,880

$                    3,536

$            5,858

$          15,587

$          14,604

GAAP net loss

$          (2,182)

$                  (7,137)

$          (2,914)

$        (16,026)

$        (44,970)

   Amortization of purchased intangible assets and inventory step-up costs

3,434

3,396

3,317

13,597

15,440

   Restructuring charges and other non-GAAP exit costs, net

351

2,668

1,750

6,712

12,186

   Stock-based compensation 

1,150

1,042

2,665

5,581

13,614

   Provision for dispute

-

-

-

2,500

-

   Merger and acquisition costs

213

-

393

924

8,260

   Accruals for legal settlement and associated costs

822

1,498

-

1,021

-

   Deferred revenue write-down and associated costs

-

-

-

-

1,059

   Impairment charges

-

1,807

1,048

1,807

13,367

   Reversal of warranty reserve

-

-

(460)

-

(460)

   Net change in fair value of contingent consideration

-

-

-

-

(4,343)

   Net loss attributable to noncontrolling interest

-

-

-

-

(37)

   Income tax effects

31

125

(157)

(1,052)

304

Non-GAAP net income

$            3,819

$                    3,399

$            5,642

$          15,064

$          14,420

GAAP net loss per share

  Basic

$            (0.04)

$                    (0.15)

$            (0.06)

$            (0.33)

$            (0.95)

  Diluted

$            (0.04)

$                    (0.15)

$            (0.06)

$            (0.33)

$            (0.95)

Non-GAAP net income per share 

  Basic

$              0.08

$                      0.07

$              0.12

$              0.31

$              0.31

  Diluted

$              0.08

$                      0.07

$              0.11

$              0.31

$              0.29

Shares used in the computation of Non-GAAP net income per share:

  Basic

48,523

48,386

47,516

48,240

47,253

  Diluted

49,052

49,064

49,877

49,314

49,722

Net cash provided (used) by operations

$            2,896

$                    1,081

$            2,370

$            4,000

$        (13,641)

   Less purchases of fixed assets and IP

(325)

(387)

(1,478)

(1,279)

(3,925)

   Payments for legal settlement and associated costs

1,728

254

-

2,162

-

Free cash flow

$            4,299

$                       948

$               892

$            4,883

$        (17,566)