Press Release

Feb 12, 2018

Quantenna Announces Fourth Quarter and Fiscal 2017 Financial Results

SAN JOSE, Calif., Feb. 12, 2018 (GLOBE NEWSWIRE) -- Quantenna Communications, Inc. (NASDAQ:QTNA), a global leader and innovator of leading-edge performance Wi-Fi solutions, today announced preliminary unaudited financial results for the fourth quarter and fiscal year 2017 ended December 31, 2017.

"Overall, 2017 was a very successful year as we posted 37% year-over-year revenue growth. We are pleased to report that our key cable MSO customer has initiated a nationwide rollout of a gateway solution using our industry leading Wave 3 10G technology. We enter 2018 excited about the opportunities in front of us and believe we are well positioned to extend our Wave 2 market opportunities and garner incremental Wave 3 10G designs," remarked Dr. Sam Heidari, Chairman and Chief Executive Officer.

"We expect the first quarter to bring Quantenna revenue growth from our diversified product portfolio, as we execute to our customer requirements for leading-edge, high performance Wi-Fi products with additional customers deploying Wave 3 10G and our Wave 2 technology solutions."

Financial Summary

 Three Months Ended   Twelve Months Ended  
 December 31,
 January 1,
 % Change December 31,
 January 1,
 % Change
Revenue$41,275  $37,492  10.1% $176,359   $129,069  36.6%
Gross Profit21,279  19,304   10.2% 88,151  64,429  36.8%
Gross Margin51.6% 51.5% 10bps 50.0% 49.9% 10bps
Net income (loss):           
GAAP$32,325  $32    $34,412  $(1,895)  
Non-GAAP455  898    9,989  1,195   
Net income (loss) per share - diluted:           
GAAP$0.84  $0.00    $0.89  $(0.30)  
Non-GAAP0.01  0.03    0.26  0.04   
(in thousands except per share data, unaudited)          

Commentary on the fourth quarter and fiscal year 2017 financial results by Company management is available at http://ir.quantenna.com/events.cfm.

Please see the note below regarding the use of non-GAAP financial measures, including a detailed reconciliation between GAAP and non-GAAP information in the tables included herein.

Fourth Quarter and Fiscal Year 2017 Company Highlights

  • Revenue of $176.4 million in fiscal year 2017 represented year over year growth of 37% compared to fiscal year 2016. Revenue of $41.3 million in the fourth quarter represented year over year growth of 10% over the fourth quarter of 2016.
  • GAAP gross margin of 50.0% in fiscal year 2017 compared to GAAP gross margin of 49.9% in fiscal year 2016. Fourth quarter GAAP gross margin of 51.6% compared to 51.5% in the fourth quarter of fiscal year 2016.
  • GAAP operating loss of $(0.9) million and non-GAAP operating income of $9.9 million in fiscal year 2017, compared to GAAP operating loss of $(0.8) million and non-GAAP operating income of $2.3 million in fiscal year 2016.
  • Cash from operations totaled $6.6 million in fiscal year 2017, compared to $2.3 million in fiscal year 2016.
  • Wave 3 10G has achieved market acceptance as demonstrated by nationwide deployment at a major cable MSO using our technology exclusively in their flagship next generation gateway.
  • Announced the QSR10R-AX, the industry's first solution to combine three 4x4 802.11ax radios and integrated CPU cores for optimal mesh repeating functionality. It supports the newest Wi-Fi standard, 802.11ax.

Business Outlook

 First Quarter 2018
Guidance Range
Revenue $43M to $45M
Gross Margin 
GAAP50% +/- 100bps
Non-GAAP50% +/- 100bps
Operating Expense Growth (sequential) 
GAAP-1% to 4%
Non-GAAPFlat to up 5%
Net income (loss) per share-diluted 
GAAP ($0.08) to ($0.06)
Non-GAAP $0.00 to $0.02
Gross margin, operating expense and net income GAAP to Non-GAAP reconciliation relates to stock based compensation expense and amortization of deferred tax asset.

Webcast and Conference Call

Quantenna management will host a conference call discussing the quarterly results and business outlook following this press release at 2:00 p.m. Pacific Time today. Individuals interested in listening to the conference call may do so by dialing (877) 239-5585 for domestic callers or (661) 378-9806 for international callers. Please reference Conference ID: 9598965. An audio webcast and replay will be available on the "Investor Relations" section of Quantenna's website at http://ir.quantenna.com/events.cfm.

Non-GAAP Financial Measures

In addition to GAAP reporting, Quantenna provides information regarding net income, gross profit, gross margin, and operating expenses on a non-GAAP basis. This non-GAAP information excludes stock-based compensation expense, and non-recurring items comprised of executive severance and the release of the US Federal income tax valuation allowance. These non-GAAP measures are used by the Company's management for the purposes of evaluating the underlying operating performance of the Company, establishing internal budgets, comparing performance with internal forecasts and goals, strategic planning, benchmarking against other companies, to provide a more consistent basis of comparison and to enable more meaningful period to period comparisons. These non-GAAP measures are provided in addition to, and not as a substitute for, measures of financial performance prepared in accordance with GAAP. A reconciliation between GAAP and non-GAAP financial data is included in the supplemental financial tables included in this press release.

About Quantenna Communications

Quantenna (Nasdaq:QTNA) is the global leader and innovator of high performance Wi-Fi solutions. Founded in 2006, Quantenna has demonstrated its leadership in Wi-Fi technologies with many industry firsts in the market. Quantenna continues to innovate with the mission to perfect Wi-Fi by establishing benchmarks for speed, range, efficiency and reliability. Quantenna takes a multidimensional approach, from silicon, system to software for Wi-Fi networks and provides solutions for OEMs and service providers worldwide. For more information, visit www.quantenna.com.

Forward-Looking Statements

This press release contains forward-looking statements based on Quantenna's current expectations, including statements regarding Quantenna's preliminary financial results for the fourth quarter and fiscal year 2017 ended December 31, 2017, expected future business and financial performance, growth opportunities, product technologies and customer relationships. The words "believe," "estimate," "expect," "intend," "anticipate," "plan," "project," "will" and similar phrases as they relate to Quantenna are intended to identify such forward-looking statements. These forward-looking statements reflect the current views and assumptions of Quantenna and are subject to various risks and uncertainties that could cause actual results to differ materially from expectations. Among the factors that could cause actual results to differ materially from those in the forward-looking statements are the following: risks that Quantenna may not be able to maintain its historical growth or achieve similar levels of success with respect to new products; challenges developing new and leading edge products on a timely basis that achieve market acceptance; the complexity of the products, including integration requirements with components from other third parties that are outside of our control; quarterly fluctuations in revenues and operating results; ability to accurately predict future revenue and expenses; ability to attract and retain customers and service providers; dependence on a limited number of products and customers; intense market competition; intellectual property litigation risks; industry consolidation and risks associated with acquisitions, divestitures and strategic partnerships with respect to Quantenna as well as third parties; product liability risks; potential cancellation of customer orders; difficulties managing international operations; risks that Quantenna may not be able to manage strains associated with its growth; dependence on key personnel; stock price volatility; dependence on, and geographic concentration of, contract manufacturers, customers and end customers, assembly and test providers, and other vendors that subject Quantenna's business and results of operations to risks of natural disasters, epidemics, war and political unrest; the cyclical nature of the semiconductor industry; potential changes in tax and other laws affecting Quantenna's business; adjustments to the preliminary financial results reported in this press release and related earnings call announcement and materials for the fourth quarter and fiscal year 2017 ended December 31, 2017 in connection with completion of the final closing process and procedures and preparation of our Annual Report on Form 10-K; and other factors that are detailed in the Securities and Exchange ("SEC") filings of Quantenna, which you may obtain for free at the SEC's website at https://www.sec.gov. Quantenna disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Quantenna Communications, Inc.
Condensed Consolidated Statements of Operations
(in thousands except per share data, unaudited)
 Three Months Ended Twelve Months Ended
 December 31,
 January 1,
 December 31,
 January 1,
Revenue$41,275  $37,492  $176,359  $129,069 
Cost of revenue19,996  18,188  88,208  64,640 
Gross profit21,279  19,304  88,151  64,429 
Operating expenses:       
Research and development16,048  13,691  59,747  46,604 
Sales and marketing4,487  2,520  14,040  8,091 
General and administrative4,069  2,757  15,299  10,559 
Total operating expenses24,604  18,968  89,086  65,254 
Income (loss) from operations(3,325) 336  (935) (825)
Interest expense(272) (252) (713) (665)
Other income (expense), net509  262  1,118  (38)
Income (loss) before income taxes(3,088) 346  (530) (1,528)
Benefit (provision) for income taxes35,413  (314) 34,942  (367)
Net income (loss)$32,325  $32  $34,412  $(1,895)
Net income (loss) per share - basic$0.92  $0.00  $1.00  $(0.30)
Net income (loss) per share - diluted$0.84  $0.00  $0.89  $(0.30)
Shares used in computing net income (loss) per share:       
Basic35,316  21,246  34,259  6,385 
Diluted38,281  35,387  38,484   6,385 

Quantenna Communications, Inc.
Condensed Consolidated Balance Sheets
(in thousands, unaudited)
 December 31,
 January 1,
Current assets   
Cash and cash equivalents$24,432  $117,045 
Marketable securities94,195   
Accounts receivable26,786  14,480 
Inventory12,662  15,820 
Prepaid expenses and other current assets2,744  2,470 
Total current assets160,819  149,815 
Deferred tax assets35,422   
Property and equipment, net12,511  4,742 
Intangible assets, net2,987   
Other long-term assets965  232 
Total assets$212,704  $154,789 
Liabilities and Stockholders' Equity   
Current liabilities   
Accounts payable$2,077  $7,776 
Accrued liabilities and other current liabilities22,742  11,801 
Long-term debt, current portion3,943  2,257 
Total current liabilities28,762  21,834 
Long-term debt  3,680 
Other long-term liabilities3,339  527 
Total liabilities32,101  26,041 
Stockholders' equity   
Common stock3  3 
Additional paid-in capital308,023  290,319 
Accumulated other comprehensive loss(207)   
Accumulated deficit(127,216) (161,574)
Total stockholders' equity180,603  128,748 
Total liabilities and stockholders' equity$212,704  $154,789 

Quantenna Communications, Inc.
Condensed Consolidated Cash Flows
(in thousands, unaudited)
 Years Ended
 December 31,
 January 1,
Cash flows from operating activities   
Net income (loss)$34,412  $(1,895)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:   
Release of valuation allowances for the deferred tax assets(35,333)  
Depreciation and amortization2,669  1,278 
Stock-based compensation expense10,683  3,065 
Accretion of discount on investments207   
Non-cash interest expense, net474  347 
Change in fair value of convertible preferred stock warrants liability  87 
Non-cash foreign exchange gain(46)  
Changes in assets and liabilities:   
Accounts receivable(12,306) 1,237 
Inventory3,158  (8,413)
Prepaid expenses and other current assets(335) (901)
Deferred rent and other assets(467) (50)
Accounts payable(5,752) 1,804 
Accrued liabilities and other current liabilities9,265  5,757 
Net cash provided by operating activities6,629  2,316 
Cash flows from investing activities   
Purchase of property and equipment(8,970) (2,724)
Purchase of marketable securities(131,790)  
Proceeds from sales of marketable securities10,684   
Maturities of marketable securities26,440   
Restricted cash  (59)
Net cash used in investing activities(103,636) (2,783)
Cash flows from financing activities    
Proceeds from issuance of common stock7,675  1,191 
Payment of taxes withheld for vested stock awards(626)  
Proceeds from initial public offering, net of issuance costs(96) 97,483 
Proceeds from revolving line of credit, net of fees paid  2,950 
Repayment of revolving line of credit  (3,000)
Proceeds from issuance of long-term debt, net of fees paid  3,854 
Payments related to intangible asset purchase(266)  
Repayments of long-term debt(2,406) (3,816)
Net cash provided by financing activities4,281  98,662 
Effect of exchange rate changes on cash and cash equivalents113   
Net increase (decrease) in cash and cash equivalents(92,613) 98,195 
Cash and cash equivalents   
Beginning of year117,045  18,850 
End of year$24,432  $117,045 

Quantenna Communications, Inc.
Unaudited reconciliation of GAAP to Non-GAAP Financial Measures
(in thousands, except per share data)
Non-GAAP Income Statement ItemsThree Months Ended December 31, 2017Three Months Ended January 1, 2017
Revenue$41,275    $41,275 $37,492  $37,492 
Gross profit21,279 42    21,321 19,304 18 19,322 
Gross margin51.6%0.1%  51.7%51.5%0.0%51.5%
Research and development16,048 1,630   14,418 13,691 457 13,234 
Sales and marketing4,487 584 199  3,704 2,520 128 2,392 
General and administrative4,069 980   3,089 2,757 263 2,494 
Income (loss) from operations(3,325)3,236 199  110 336 866 1,202 
Benefit (provision) for income taxes35,413   (35,305)108 (314) (314)
Net income (loss)$32,325 $3,236 $199 $(35,305)$455 $32 $866 $898 
Basic shares outstanding35,316     35,316 21,246  21,246 
Basic earnings per share$0.92     $0.01 $0.00  $0.04 
Diluted shares outstanding38,281    38,281 35,387  35,387 
Diluted earnings per share$0.84    $0.01 $0.00  $0.03 

Non-GAAP Income Statement ItemsTwelve months ended December 31, 2017Twelve months ended January 1, 2017
Revenue$176,359    $176,359 $129,069   $129,069 
Gross profit88,151 165   88,316 64,429  33 64,462 
Gross margin50.0%0.1%  50.1%49.9%0.0%49.9%
Research and development59,747 5,616    54,131 46,604 911 45,693 
Sales and marketing14,040 1,763 199  12,078 8,091 248 7,843 
General and administrative15,299 3,139   12,160 10,559 1,898 8,661 
Income (loss) from operations(935)10,683 199  9,947 (825)3,090 2,265 
Benefit (provision) for income taxes34,942   (35,305)(363)(367) (367)
Net income (loss)$34,412 $10,683 $199 $(35,305)$9,989 $(1,895)$3,090 $1,195 
Basic shares outstanding34,259    34,259 6,385   6,385 
Basic earnings per share$1.00    $0.29 $(0.30)  $0.19 
Diluted shares outstanding38,484    38,484 6,385   31,113 
Diluted earnings per share$0.89    $0.26 $(0.30) $0.04 

*Non-recurring items comprised of executive severance.

**Income tax adjustment relating to recognition of US Federal deferred tax asset pursuant to release of valuation allowance.

Quantenna Communications, Inc.
Unaudited Forward-Looking Statements Regarding Business Outlook
Business OutlookThree Months Ended April 1, 2018
 High Low
Estimated GAAP diluted earnings (loss) per share$(0.06) $(0.08)
Estimated stock compensation expense(0.08) (0.08)
Estimated Non-GAAP diluted earnings (loss) per share$0.02  $0.00 
Quantenna Communications, Inc.Vernon Essi, Jr.



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