Press Release

Aug 7, 2017

Quantenna Announces Second Quarter 2017 Financial Results

FREMONT, Calif., Aug. 07, 2017 (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 second quarter ended July 2, 2017.

"We are excited to report strong results, reflecting a material uptick in shipments of our core Wave 2 offerings and an accelerated ramp of our Wave 3 10G customer adoption. Quantenna continues to win and deploy new customer designs with its Wave 2 solutions against world-class competitors and we expect our success to continue with our Wave 3 10G products," stated Dr. Sam Heidari, Chairman and Chief Executive Officer.

Financial Summary

  Three Months Ended   Six Months Ended  
 July 2,
 June 26,
 % Change July 2,
 June 26,
 % Change
Revenue$47,085  $33,035  42.5% $84,976  $57,472  47.9%
Gross Profit23,771  16,364  45.3% 42,355  28,267  49.8%
Gross Margin50.5% 49.5% 100 bps 49.8% 49.2% 60 bps
Net income (loss):           
GAAP$169  $(234)   $(716) $(1,949)  
Non-GAAP2,743  652    3,962  (759)  
Net income (loss) per share - diluted:              
GAAP$0.00  $(0.22)   $(0.02) $(1.83)  
Non-GAAP0.07  0.02    0.10  (0.71)  
(in thousands except per share data, unaudited)

Commentary on the second quarter 2017 financial results by Company management is available at http://ir.quantenna.com/

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

Second Quarter Company Highlights

  • Record revenue of $47.1 million, representing year over year growth of 43% over the second quarter of 2016 and 24% sequential growth over the first quarter of 2017.

  • GAAP operating income grew to $0.3 million, and non-GAAP operating income grew to $2.9 million, or 6.2% of revenue. Non-GAAP operating income was a quarterly record and represented a three-fold increase over the second quarter of 2016.

  • Cash from operations totaled $7.4 million, or $0.19 per fully diluted share, while cash, cash equivalents and marketable securities grew $10.0 million sequentially to $124.4 million, or $3.23 per fully diluted share.

  • Announced a high end GPON gateway product with ZTE featuring Quantenna's award-winning 4x4 802.11ac Wave 2 QSR1000 chipset. This solution addresses the typical Wi-Fi residential bottleneck that occurs when coupled with high speed optical networks.

  • Surpassed 50 service providers in deployment with our solutions as we extend our technology leadership into new market applications and geographies.

Business Outlook

 Third Quarter 2017
Guidance Range
Revenue$49M to $51M
Gross Margin 
GAAP46.9% +/- 100bps
Non-GAAP47.0% +/- 100bps
Operating Expense Growth 
GAAPFlat to down 4%
Non-GAAPFlat to down 5%
Net income (loss) per share-diluted 
GAAP $0.00 - $0.02
Non-GAAP$0.07 - $0.09
Gross margin, operating expense and net income GAAP to Non-GAAP reconciliation relates to stock based compensation expense.

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: 58438758. 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. 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 is a global leader and innovator of leading-edge performance Wi-Fi solutions. Quantenna introduced the world's first 10G Wi-Fi technology for a new generation of access points in home, enterprise and public spaces and continues to innovate. Quantenna's Wi-Fi solutions offer superior performance, and establish benchmarks for speed, range, efficiency and reliability. With MAUI, Quantenna's cloud-based Wi-Fi analytics platform that complement its chipset solutions, service providers can deliver real-time, automated Wi-Fi monitoring, optimization, and self-healing to their customers around the clock to help achieve the best Wi-Fi experience. Quantenna is Wi-Fi perfected. 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 financial results for the second quarter ended July 2, 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; quarterly fluctuations in revenues and operating results; ability to accurately predict future revenue and expenses; challenges developing new and leading edge products on a timely basis that achieve market acceptance; 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; political uncertainty; potential changes in tax and other laws affecting Quantenna's business; risks associated with acquisitions, divestitures and strategic partnerships; 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, adjustments to the preliminary financial results reported in this press release and related earnings call announcement and materials for the second quarter of 2017 in connection with completion of the final closing process and procedures and preparation of our Quarterly Report on Form 10-Q, and other factors that are detailed in the Securities and Exchange ("SEC") filings of Quantenna Communications, Inc., which you may obtain for free at the SEC's website at http://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 Six Months Ended 
 July 2,
 June 26,
 July 2,
 June 26,
Revenue$47,085  $33,035   $84,976  $57,472  
Cost of revenue23,314  16,671  42,621  29,205  
Gross profit23,771  16,364  42,355  28,267  
Operating expenses:        
Research and development16,055  11,524  28,688  21,751  
Sales and marketing3,276  1,769  6,191   3,399  
General and administrative4,106  2,993  7,496  4,555  
Total operating expenses23,437  16,286  42,375  29,705  
Income (loss) from operations334  78  (20) (1,438) 
Interest expense(141) (111) (339) (225) 
Other income (expense), net186  (180) 387  (248) 
Income (loss) before income taxes379  (213) 28  (1,911) 
Provision for income taxes(210) (21) (744) (38) 
Net income (loss)$169  $(234) $(716) $(1,949)  
Net income (loss) per share - basic$0.00  $(0.22) $(0.02) $(1.83) 
Net income (loss) per share - diluted$0.00  $(0.22) $(0.02) $(1.83) 
Shares used in computing net income (loss) per share:        
Basic33,881  1,075 (1)33,494  1,063 (1)
Diluted38,475  1,075  33,494  1,063  
(1) The number of shares reflects the number prior to conversion of preferred stock upon the Company's IPO on November 2, 2016

Quantenna Communications, Inc.
Unaudited reconciliation of GAAP to Non-GAAP Financial Measures
(in thousands, except per share data)
Non-GAAP Income
Statement Items
 Three months ended July 2, 2017 Three months ended June 26, 2016
Revenue $  47,085    $  47,085  $  33,035    $  33,035 
Gross profit 23,771   42  23,813  16,364  3  16,367 
Gross margin 50.5% 0.1% 50.6% 49.5% 0.0% 49.5%
Research and development       16,055  1,414  14,641  11,524  122  11,402 
Sales and marketing 3,276  410  2,866  1,769  30  1,739 
General and administrative 4,106  708  3,398  2,993  731  2,262 
Income from operations 334  2,574  2,908  78  886  964 
Net income (loss) $169  $       2,574  $2,743  $(234) $          886  $652 
Basic shares outstanding 33,881    33,881  1,075     1,075 
Basic earnings per share $0.00    $0.08  $(0.22)   $0.61 
Diluted shares outstanding 38,475    38,475  1,075    29,162 
Diluted earnings per share $0.00    $0.07  $(0.22)   $0.02 

Non-GAAP Income
Statement Items
 Six months ended July 2, 2017 Six months ended June 26, 2016
Revenue $  84,976    $  84,976  $  57,472    $  57,472 
Gross profit 42,355  85  42,440  28,267  6  28,273 
Gross margin 49.8% 0.1% 49.9% 49.2% 0.0% 49.2%
Research and development 28,688  2,619  26,069  21,751  223  21,528 
Sales and marketing 6,191  763  5,428  3,399  60  3,339 
General and administrative 7,496  1,211  6,285  4,555  901  3,654 
Income (loss) from operations   (20) 4,678  4,658  (1,438) 1,190   (248)
Net income (loss) $(716) $        4,678  $3,962  $(1,949) $        1,190  $(759)
Basic shares outstanding 33,494    33,494  1,063    1,063 
Basic earnings per share  $(0.02)   $0.12  $(1.83)   $(0.71)
Diluted shares outstanding 33,494    38,414   1,063    1,063 
Diluted earnings per share $(0.02)   $0.10  $(1.83)   $(0.71)

Quantenna Communications, Inc.
Unaudited Forward-Looking Statements Regarding Business Outlook
Business Outlook Three Months Ended
October 1, 2017
  High Low
Estimated GAAP diluted earnings (loss) per share  $0.00  $0.02 
Estimated stock compensation expense 0.07  0.07 
Estimated Non-GAAP diluted earnings per share $0.07  $0.09 

Quantenna Communications, Inc.
Condensed Consolidated Balance Sheets
(in thousands, unaudited)
 July 2,
  January 1,
Current assets   
Cash and cash equivalents$58,231  $117,045 
Marketable securities66,158   
Accounts receivable17,696  14,480 
Inventory20,985  15,820 
Prepaid expenses and other current assets4,332  2,470 
Total current assets 167,402  149,815 
Property and equipment, net6,380  4,742 
Other long-term assets769  232 
Total assets$  174,551  $ 154,789 
Liabilities and Stockholders' Equity   
Current liabilities   
Accounts payable$10,527  $7,776 
Accrued liabilities and other current liabilities  22,021  11,801 
Long-term debt, current portion2,563  2,257 
Total current liabilities35,111  21,834 
Long-term debt2,445  3,680 
Other long-term liabilities425  527 
Total liabilities37,981  26,041 
Stockholders' equity   
Common stock3  3 
Additional paid-in capital298,943  290,319 
Accumulated other comprehensive loss(32)   
Accumulated deficit(162,344) (161,574)
Total stockholders' equity136,570  128,748 
Total liabilities and stockholders' equity$174,551  $154,789 

Quantenna Communications, Inc.
Condensed Consolidated Cash Flows
(in thousands, unaudited)
 Six Months Ended
  July 2, 2017    June 26, 2016 
Cash flows from operating activities   
Net loss$(716) $(1,949)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:     
Depreciation and amortization1,024  537 
Stock-based compensation expense4,678  1,190 
Non-cash interest expense, net197  30 
Change in fair value of convertible preferred stock warrants liability  45 
Changes in assets and liabilities   
Accounts receivable(3,216) (5,096)
Inventory(5,165) (42)
Prepaid expenses and other current assets (1,898) (42)
Other assets(537) (55)
Accounts payable2,652  (3,589)
Accrued liabilities and other current liabilities9,913  5,009 
  Net cash provided by (used) in operating activities6,932  (3,962)
Cash flows from investing activities   
Purchase of property and equipment(2,446)  (626)
Purchase of marketable securities(71,169)  
Proceeds from sales of marketable securities4,994   
Restricted cash  (1,500)
  Net cash used in investing activities(68,621) (2,126)
Cash flows from financing activities   
Proceeds from issuance of common stock4,076  88 
Payments of offering costs(96)  
Proceeds from revolving line of credit, net of fees paid  2,950 
Proceeds from issuance of long-term debt, net of fees paid  3,854 
Repayments of long-term debt(1,105) (2,711)
  Net cash provided by financing activities2,875  4,181 
  Net decrease in cash and cash equivalents(58,814) (1,907)
Cash and cash equivalents   
Beginning of period117,045  18,850 
End of period$58,231  $16,943 

Quantenna Communications, Inc.Vernon Essi, Jr.



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Source: Quantenna Communications

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