>

Press Release

<< Back
Oct 29, 2018

Quantenna Announces Third Quarter 2018 Financial Results

Another Record Revenue Quarter Highlights Quantenna’s Broad Product Portfolio

SAN JOSE, Calif., Oct. 29, 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 third quarter ended September 30, 2018.

"Our strong third quarter operating results highlight the success of our Wave 3 10G product.  This solution is now also designed into the flagship offering of one of the largest European broadband service providers in addition to its continued deployment by cable MSOs in North America. With strong customer engagement and positive market feedback, we also expanded our 802.11ax product family with the launch of our mainstream offering, the world’s only dual-band, 9-stream 802.11ax solution,” commented Dr. Sam Heidari, Chairman and Chief Executive Officer.

“We expect record revenue in the fourth quarter driven by continued growth across our primary product segments as we are expanding our addressable market into mainstream opportunities that are seeking a superior Wi-Fi experience.”

Financial Summary

  Three Months Ended       Nine Months Ended    
  September 30,
 2018
  October 1,
 2017
  % Change   September 30,
 2018
  October 1,
 2017
  % Change
                       
Revenue $ 59,349     $ 50,108     18.4%   $ 157,893     $ 135,084     16.9%
Gross Profit 29,490     24,517     20.3%   78,119     66,872     16.8%
Gross Margin 49.7 %   48.9 %   80 bps   49.5 %   49.5 %   — bps
                       
Net income:                      
GAAP $ 3,879     $ 2,802         $ 1,664     $ 2,087      
Non-GAAP 6,968     5,571         12,752     9,534      
                       
Net income per share - diluted:                      
GAAP $ 0.10     $ 0.07         $ 0.04     $ 0.05      
Non-GAAP 0.17     0.14         0.32     0.25      
                       
(in thousands except per share data, unaudited)                    
                     

Commentary on the third quarter 2018 financial results by Company management is available at http://ir.quantenna.com/events-and-presentations .

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.

Third Quarter Company Highlights

  • Record revenue of $59.3 million, representing year over year growth of 18% over the third quarter of 2017 and 11% sequential growth over the second quarter of 2018.
     
  • Third quarter GAAP diluted EPS of $0.10 compares to $0.07 in the third quarter of 2017. Third quarter non-GAAP dilutive EPS of $0.17 compares to $0.14 in the third quarter of 2017.
     
  • Third quarter GAAP operating income grew 24% compared to the third quarter of 2017. Third quarter non-GAAP operating income grew 35% compared to the third quarter of 2017.
     
  • Third quarter cash generated from operations grew 118% compared to the third quarter of 2017. Cumulative 2018 year-to-date cash from operations grew 39% compared to 2017.
     
  • Record revenue from both our Wave 3 10G and Wave 2 product segments.
     
  • Expansion of Wave 3 10G into Europe with Deutsche Telekom’s award-winning Speedport Pro gateway powered by Quantenna’s Wave 3 10G solution, using its full 12 stream capabilities for maximum Wi-Fi performance.
     
  • Released and sampled to customers the QSR5GU-AX PLUS, the world’s only dual-band, 9-stream 802.11ax solution.
     
  • The latest North American cable MSO initiated a full volume rollout using our Wave 3 QSR 10G technology in their next generation gateway bringing our total to four cable MSOs in deployment.
     
  • Enabled individual Wi-Fi clients to exceed 1Gbps throughput using Quantenna's QSR10GU-AX PLUS and QSR10G with commercially available mobile products from Intel Corp.
     
  • Orange Poland launched their new dual-band dual-concurrent Wi-Fi repeater, the Smart Wi-Fi Box, based on one of our Wave 2 chipsets.
     
  • Integrated Plume’s Adaptive WiFi™ AI driven mesh solution into our QSR5GU-AX PLUS solution to deliver the next generation of whole-home mesh networking.
     
  • Announced a strategic partnership with Aerial Technologies to bring the latest in Wi-Fi motion detection technology to the market.
     

Business Outlook

  Fourth Quarter 2018
Guidance Range
Revenue $61M to $63M
Gross Margin  
GAAP 49.9% +/- 100bps
Non-GAAP 50.0% +/- 100bps
Operating Expense  
GAAP $27.1M to $28.1M
Non-GAAP $23.0M to $24.0M
Net income per share-diluted  
GAAP $0.08 - $0.10
Non-GAAP $0.18 - $0.20
   
Gross margin, operating expense and net income GAAP to Non-GAAP reconciliation relates to stock-based compensation expense and change in deferred tax assets.  
   

Webcast and Conference Call

Quantenna management will host a conference call discussing the quarterly results and business outlook following this press release at 1:30 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: 1795125. 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 changes to deferred tax balances. 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.

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 September 30, 2018, forecasted financial results for the fourth quarter of fiscal 2018, 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: 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 Quantenna's control; quarterly fluctuations in revenues and operating results; intense market competition, including competition from other companies that are larger and have greater resources and broader product ecosystem offerings; ability to accurately predict future revenue and expenses; potential cancellation of customer orders; risks that Quantenna may not be able to maintain its historical growth or achieve similar levels of success with respect to new products; ability to attract and retain customers and service providers; dependence on a limited number of products and customers; 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; risks related to international operations, including the impact of increased tariffs and escalating trade tensions among countries on Quantenna and its customers, end customers, vendors and partners; dependence of Quantenna's customers on components from other third parties; risks that Quantenna may not be able to manage strains associated with its growth; dependence on key personnel; stock price volatility; the cyclical nature of the semiconductor industry; changes in tax and other laws affecting Quantenna’s business and operations; cyberattacks; adjustments to the preliminary financial results reported in this press release and related earnings call announcement and materials for the third quarter of 2018 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.

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. 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 and system to software, and provides total Wi-Fi solutions. For more information, visit www.quantenna.com.

         
Quantenna Communications, Inc.
Condensed Consolidated Statements of Operations
(in thousands except per share data, unaudited)
         
  Three Months Ended   Nine Months Ended  
  September 30,
 2018
  October 1,
 2017
  September 30,
 2018
  October 1,
 2017
 
                 
Revenue $ 59,349     $ 50,108     $ 157,893     $ 135,084    
Cost of revenue 29,859     25,591     79,774     68,212    
Gross profit 29,490     24,517     78,119     66,872    
Operating expenses:                
Research and development 17,783     15,011     52,468     43,699    
Sales and marketing 3,833     3,363     12,307     9,553    
General and administrative 4,886     3,735     13,602     11,231    
Total operating expenses 26,502     22,109     78,377     64,483    
Income (loss) from operations 2,988     2,408     (258 )   2,389    
Interest expense     (103 )       (442 )  
Other income, net 243     223     807     610    
Income before income taxes 3,231     2,528     549     2,557    
Benefit (provision) for income taxes 648     274     1,115     (470 )  
Net income $ 3,879     $ 2,802     $ 1,664     $ 2,087    
Net income per share - basic $ 0.10     $ 0.08     $ 0.05     $ 0.06    
Net income per share - diluted $ 0.10     $ 0.07     $ 0.04     $ 0.05    
                 
Shares used in computing net income per share:                
Basic 37,070     34,734     36,476     33,907    
Diluted 40,026     38,525     39,425     38,419    
                 

 

     
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 September 30, 2018 Three months ended October 1, 2017
  GAAP
Measure
Stock-based
Compensation
Expense
Income Taxes* Non-GAAP
Measure
GAAP
Measure
Stock-based
Compensation
Expense
Non-GAAP
Measure
Revenue $ 59,349       $ 59,349   $ 50,108     $ 50,108  
Gross profit 29,490   50     29,540   24,517   38   24,555  
Gross margin 49.7 % 0.1 %   49.8 % 48.9 % 0.1 % 49.0 %
Research and development 17,783   2,248     15,535   15,011   1,367   13,644  
Sales and marketing 3,833   541     3,292   3,363   416   2,947  
General and administrative 4,886   1,163     3,723   3,735   948   2,787  
Income from operations 2,988   4,002     6,990   2,408   2,769   5,177  
(Provision) benefit for income taxes 648     (913 ) (265 ) 274     274  
Net income $ 3,879   $ 4,002   $ (913 ) $ 6,968   $ 2,802   $ 2,769   $ 5,571  
Basic shares outstanding 37,070       37,070   34,734     34,734  
Basic earnings per share $ 0.10       $ 0.19   $ 0.08     $ 0.16  
Diluted shares outstanding 40,026       40,026   38,525     38,525  
Diluted earnings per share $ 0.10       $ 0.17   $ 0.07     $ 0.14  
                               

 

Non-GAAP Income Statement Items Nine months ended September 30, 2018 Nine months ended October 1, 2017
  GAAP
Measure
Stock-based
Compensation
Expense
Income Taxes* Non-GAAP
Measure
GAAP
Measure
Stock-based
Compensation
Expense
Non-GAAP
Measure
Revenue $ 157,893       $ 157,893   $ 135,084     $ 135,084  
Gross profit 78,119   146     78,265   66,872   123   66,995  
Gross margin 49.5 % 0.1 %   49.6 % 49.5 % 0.1 % 49.6 %
Research and development 52,468   7,170     45,298   43,699   3,986   39,713  
Sales and marketing 12,307   2,118     10,189   9,553   1,179   8,374  
General and administrative 13,602   3,489     10,113   11,231   2,159   9,072  
Income (loss) from operations (258 ) 12,923     12,665   2,389   7,447   9,836  
(Provision) benefit for income taxes 1,115     (1,835 ) (720 ) (470 )   (470 )
Net income (loss) $ 1,664   $ 12,923   $ (1,835 ) $ 12,752   $ 2,087   $ 7,447   $ 9,534  
Basic shares outstanding 36,476       36,476   33,907     33,907  
Basic earnings per share $ 0.05       $ 0.35   $ 0.06     $ 0.28  
Diluted shares outstanding 39,425       39,425   38,419     38,419  
Diluted earnings per share $ 0.04       $ 0.32   $ 0.05     $ 0.25  
                               
*Income tax adjustment relating to change in US Federal and State deferred tax assets.
                               

 

     
Quantenna Communications, Inc.
Unaudited Forward-Looking Statements Regarding Business Outlook
     
Business Outlook   Three Months Ended December 30, 2018
         
    Low   High
Estimated GAAP diluted earnings per share   $ 0.08     $ 0.10  
Estimated stock compensation expense   $ (0.10 )   (0.10 )
Estimated Non-GAAP diluted earnings per share   $ 0.18     $ 0.20  
                 

 

       
Quantenna Communications, Inc.
Condensed Consolidated Balance Sheets
(in thousands, unaudited)
       
  September 30,
 2018
  December 31,
2017
Assets      
Current assets      
Cash and cash equivalents $ 34,559     $ 24,432  
Marketable securities 97,471     94,195  
Accounts receivable 20,081     26,786  
Inventory 21,578     12,662  
Prepaid expenses and other current assets 6,512     2,744  
Total current assets 180,201     160,819  
Deferred tax assets 37,443     35,422  
Property and equipment, net 13,418     12,511  
Intangible and other assets, net 3,571     3,952  
Total assets $ 234,633     $ 212,704  
Liabilities and Stockholders’ Equity      
Current liabilities      
Accounts payable $ 10,255     $ 3,754  
Accrued liabilities and other current liabilities 23,220     21,065  
Long-term debt, current portion     3,943  
Total current liabilities 33,475     28,762  
Other long-term liabilities 2,670     3,339  
Total liabilities 36,145     32,101  
       
Stockholders’ equity      
Common stock 3     3  
Additional paid-in capital 324,931     308,023  
Accumulated other comprehensive loss (894 )   (207 )
Accumulated deficit (125,552 )   (127,216 )
Total stockholders’ equity 198,488     180,603  
Total liabilities and stockholders’ equity $ 234,633     $ 212,704  
               

 

   
Quantenna Communications, Inc.
Condensed Consolidated Cash Flows
(in thousands, unaudited)
   
  Nine Months Ended
  September 30,
2018
  October 1,
2017
       
Cash flows from operating activities      
Net income $ 1,664     $ 2,087  
Adjustments to reconcile net income to net cash provided by operating activities:      
Depreciation and amortization 3,467     1,566  
Stock-based compensation expense 12,923     7,447  
Deferred income taxes (1,821 )    
Other 705     347  
Changes in assets and liabilities:      
Accounts receivable 6,705     (8,340 )
Inventory (8,916 )   (7,880 )
Prepaid expenses and other current assets (3,768 )   (22 )
Deferred rent and other assets 159     (790 )
Accounts payable 6,498     5,119  
Accrued liabilities and other current liabilities 2,075     14,660  
Net cash provided by operating activities 19,691     14,194  
Cash flows from investing activities      
Purchase of property and equipment (3,962 )   (6,961 )
Purchase of long-term investment (590 )    
Purchase of marketable securities (47,917 )   (104,044 )
Proceeds from sales of marketable securities     3,670  
Maturities of marketable securities 44,259     12,239  
Net cash used in investing activities (8,210 )   (95,096 )
Cash flows from financing activities      
Proceeds from issuance of common stock, net 6,091     5,083  
Payments of taxes withheld for vested stock awards (2,428 )   (626 )
Payments related to intangible asset purchase (815 )    
Repayments of long-term debt (3,943 )   (1,756 )
Net cash (used in) provided by financing activities (1,095 )   2,701  
Effect of exchange rates on cash and cash equivalents (259 )    
Net increase (decrease) in cash and cash equivalents 10,127     (78,201 )
Cash and cash equivalents      
Beginning of period 24,432     117,045  
End of period $ 34,559     $ 38,844  
       


 

 

Quantenna Communications, Inc.Vernon Essi, Jr.
669-209-5647
vessi@quantenna.com

Quantenna_Main_Logo.png

 

Source: Quantenna Communications, Inc.