Press Release

Nov 6, 2017

Quantenna Announces Third Quarter 2017 Financial Results

SAN JOSE, Calif., Nov. 06, 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 third quarter ended October 1, 2017.

"We are pleased to report record third quarter results, demonstrating annual revenue growth of 47%, record GAAP EPS of $0.07 and record non-GAAP EPS of $0.14. We experienced growing customer adoption of our newer Wave 3 10G products combined with strong shipment levels of our core Wave 2 offerings and legacy 802.11n products," remarked Dr. Sam Heidari, Chairman and Chief Executive Officer.

"While in the fourth quarter we anticipate a delay in the deployment of a key service provider program coupled with near-term softness at one other service provider customer, we continue to execute to our Wave 2 and Wave 3 10G development plans and anticipate these deployments to resume in 2018."

Financial Summary

 Three Months Ended   Nine Months Ended  
 October 1,
 September 25,
 October 1,
 September 25,
Revenue$50,108  $34,105  46.9% $135,084  $91,577  47.5%
Gross Profit24,517  16,858  45.4% 66,872  45,125  48.2%
Gross Margin48.9% 49.4% (50) bps  49.5% 49.3% 20 bps
Net income (loss):           
GAAP$2,802  $21    $2,087  $(1,927)  
Non-GAAP5,571  1,055    9,534  297   
Net income (loss) per share - diluted:           
GAAP$0.07  $0.00    $0.05  $(1.84)  
Non-GAAP0.14  0.04    0.25   0.01   
(in thousands except per share data, unaudited)          

Commentary on the third 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.

Third Quarter Company Highlights

  • Record revenue of $50.1 million, representing year over year growth of 47% over the third quarter of 2016 and 6% sequential growth over the second quarter of 2017.

  • GAAP operating income grew to $2.4 million, and non-GAAP operating income grew to $5.2 million, or 10.3% of revenue. Non-GAAP operating income reached another quarterly record and grew 78% sequentially over the second quarter of 2017.

  • Cash from operations totaled $7.3 million, or $0.19 per fully diluted share, while cash, cash equivalents and marketable securities grew $2.5 million sequentially to $126.9 million, or $3.29 per fully diluted share.

  • Announced a partnership with AirTies to offer Internet Service Providers (ISPs) a complete turnkey managed Wi-Fi mesh solution with new classes of differentiated, premium Wi-Fi services.

  • Released the Spartan AP Booster which offers service providers a cost-effective Wi-Fi performance upgrade for their existing subscriber legacy home gateways without replacing or upgrading the entire gateway.

  • Entered the Over the Top (OTT) set-top box market with the Zero Memory client solution that offers unparalleled video performance to both STB and OTT clients without the need for incremental memory costs.

  • Announced that Technicolor has adopted the QV860 chipset in its OWA0130 dual-band multi-function extender, augmenting the coverage of Wi-Fi gateways with a mesh network offering seamless connectivity.

  • Demonstrated with Cortina Access a Dual 4x4 802.11ax 10G fiber/PON gateway reference platform at IBC 2017 in Amsterdam, bringing best of breed broadband and Wi-Fi capabilities into a single integrated platform targeting mass deployment.

  • Partnered with SoftAtHome to offer its Smart Wi-Fi software availability on the QV860 chipset, enabling SoftAtHome to offer a high-performance mesh and repeater solution to service providers and OEM partners by levering the Quantenna 802.11ac Wi-Fi ecosystem.

Business Outlook

 Fourth Quarter 2017
Guidance Range
Revenue $40M to $42M
Gross Margin 
GAAP51.4% +/- 100bps
Non-GAAP51.5% +/- 100bps
Operating Expense Growth (sequential) 
GAAPUp 13%
Non-GAAPUp 15%
Net income (loss) per share-diluted 
GAAP ($0.11) - ($0.09)
Non-GAAP ($0.04) - ($0.02)
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: 97831720. 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 (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 third quarter ended October 1, 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; challenges developing new and leading edge products on a timely basis that achieve market acceptance; the complexity of the products; 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; 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 third 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, 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 Nine Months Ended 
 October 1,
 September 25,
 October 1,
 September 25,
Revenue$50,108  $34,105  $135,084  $91,577  
Cost of revenue25,591  17,247  68,212  46,452  
Gross profit24,517   16,858  66,872  45,125  
Operating expenses:        
Research and development15,011  11,162  43,699  32,913  
Sales and marketing3,363  2,172  9,553  5,571  
General and administrative3,735  3,248  11,231  7,802  
Total operating expenses22,109  16,582  64,483  46,286  
Income (loss) from operations2,408  276  2,389  (1,161) 
Interest expense(103) (189) (442) (414) 
Other income (expense), net223  (52) 610  (300) 
Income (loss) before income taxes2,528  35  2,557  (1,875) 
Benefit (provision) for income taxes274  (14) (470) (52) 
Net income (loss)$2,802  $21  $2,087   $(1,927) 
Net income (loss) per share - basic$0.08  $0.02  $0.06  $(1.84) 
Net income (loss) per share - diluted$0.07  $0.00  $0.05  $(1.84) 
Shares used in computing net income (loss) per share:        
Basic34,734  1,157 (1)33,907  1,048 (1)
Diluted 38,525  29,974  38,419  1,048 (1)
(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 October 1, 2017 Three months ended September 25, 2016
Revenue $50,108    $50,108  $34,105    $34,105 
Gross profit 24,517  38  24,555  16,858  9   16,867 
Gross margin 48.9% 0.1% 49.0% 49.4% 0.0% 49.5%
Research and development 15,011  1,367  13,644  11,162  231  10,931 
Sales and marketing 3,363  416  2,947  2,172  60   2,112 
General and administrative 3,735  948  2,787  3,248  734  2,514 
Income from operations 2,408  2,769  5,177  276  1,034  1,310 
Net income  $2,802  $2,769  $5,571  $21  $1,034  $1,055 
Basic shares outstanding 34,734    34,734  1,157    1,157 
Basic earnings per share $0.08    $0.16  $0.02    $0.91 
Diluted shares outstanding  38,525    38,525  29,974    29,974  
Diluted earnings per share $0.07    $0.14  $0.00    $0.04 

Non-GAAP Income
Statement Items
 Nine months ended October 1, 2017 Nine months ended September 25, 2016
Revenue $135,084    $135,084  $ 91,577    $91,577 
Gross profit 66,872  123   66,995  45,125  15  45,140 
Gross margin 49.5% 0.1% 49.6% 49.3% 0.0% 49.3%
Research and development 43,699  3,986  39,713   32,913  454  32,459 
Sales and marketing 9,553  1,179  8,374  5,571  120  5,451 
General and administrative 11,231  2,159  9,072  7,802  1,635  6,167 
Income (loss) from operations 2,389  7,447  9,836  (1,161) 2,224  1,063 
Net income (loss) $2,087  $7,447  $9,534  $(1,927) $2,224  $297 
Basic shares outstanding 33,907    33,907  1,048     1,048 
Basic earnings per share $0.06    $0.28  $(1.84)   $0.28 
Diluted shares outstanding 38,419    38,419  1,048    29,370 
Diluted earnings per share $0.05    $0.25  $(1.84)   $0.01 

Quantenna Communications, Inc.
Unaudited Forward-Looking Statements Regarding Business Outlook
Business Outlook Three Months Ended December 31, 2017
  High Low
Estimated GAAP diluted earnings (loss) per share $(0.11) $(0.09)
Estimated stock compensation expense 0.07  0.07 
Estimated Non-GAAP diluted earnings (loss) per share $(0.04) $(0.02)

Quantenna Communications, Inc.
Condensed Consolidated Balance Sheets
(in thousands, unaudited)
 October 1,
 January 1,
Current assets   
Cash and cash equivalents$38,844  $117,045  
Marketable securities88,022   
Accounts receivable22,820  14,480 
Inventory23,700  15,820 
Prepaid expenses and other current assets2,444  2,470 
Total current assets175,830  149,815 
Property and equipment, net11,215  4,742 
Intangible assets, net3,259   
Other long-term assets1,037  232 
Total assets$191,341  $154,789 
Liabilities and Stockholders' Equity   
Current liabilities   
Accounts payable$12,918  $7,776 
Accrued liabilities and other current liabilities27,941  11,801 
Long-term debt, current portion2,487  2,257 
Total current liabilities43,346  21,834 
Long-term debt1,900  3,680 
Other long-term liabilities3,413  527 
Total liabilities48,659  26,041 
Stockholders' equity   
Common stock3  3 
Additional paid-in capital302,240   290,319 
Accumulated other comprehensive loss(20)  
Accumulated deficit(159,541) (161,574)
Total stockholders' equity142,682  128,748 
Total liabilities and stockholders' equity$191,341  $154,789 

Quantenna Communications, Inc.
Condensed Consolidated Cash Flows
(in thousands, unaudited)
 Nine Months Ended
  October 1,
 September 25,
Cash flows from operating activities   
Net income (loss)$2,087  $(1,927)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:   
Depreciation and amortization1,566  880 
Stock-based compensation expense7,447  2,224 
Accretion of discount on investments93   
Non-cash interest expense, net254  140 
Change in fair value of convertible preferred stock warrants liability  109 
Changes in assets and liabilities:   
Accounts receivable(8,340) (1,589)
Inventory(7,880) (2,861)
Prepaid expenses and other current assets(22) (283)
Deferred rent and other assets(790) 16 
Accounts payable5,119  (1,136)
Accrued liabilities and other current liabilities14,660  6,136 
   Net cash provided by operating activities14,194  1,709 
Cash flows from investing activities   
Purchase of property and equipment(6,961) (1,621)
Purchase of marketable securities(104,044 )  
Proceeds from sales of marketable securities3,670   
Maturities of marketable securities12,239   
Restricted cash  (1,559)
  Net cash used in investing activities(95,096)  (3,180)
Cash flows from financing activities   
Proceeds from issuance of common stock4,553  785 
Payments of offering costs(96) (881)
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 
Repayments of long-term debt(1,756) (3,265)
  Net cash provided by financing activities2,701  443 
  Net decrease in cash and cash equivalents(78,201) (1,028)
Cash and cash equivalents   
Beginning of period117,045  18,850 
End of period$38,844  $ 17,822 

Quantenna Communications, Inc.Vernon Essi, Jr.



Source: Quantenna Communications, Inc.

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