Document


 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 8-K
 
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (date of earliest event reported): April 30, 2018 
 
QUANTENNA COMMUNICATIONS, INC.
(Exact name of registrant as specified in its charter)
 
 
Delaware
 
001-37927
 
33-1127317
(State or other jurisdiction
of incorporation)
 
(Commission
File No.)
 
(IRS Employer
Identification Number)

1704 Automation Parkway
San Jose, California 95131
(Address of principal executive offices)
(669) 209-5500
(Registrant’s telephone number, including area code)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:  
¨
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
 
 
¨
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
 
 
¨
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
 
 
¨
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company  x
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  x
 




Item 2.02.
Results of Operations and Financial Condition.
On April 30, 2018, Quantenna Communications, Inc. (the “Company”) issued a press release announcing its financial results for the first quarter of fiscal year 2018 ended April 1, 2018. In the press release, the Company also announced that it would be holding a conference call on April 30, 2018 to discuss its financial results for the first quarter of fiscal year 2018. The full text of the press release is attached hereto as Exhibit 99.1. In addition, a copy of the supplemental financial commentary and supplemental earnings presentation is attached hereto as Exhibits 99.2 and 99.3, respectively. The press release, supplementary financial commentary and supplemental earnings presentation are incorporated herein by reference.
This information is intended to be furnished under Item 2.02 and Item 9.01 of Form 8-K, “Results of Operations and Financial Condition” and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that Section, nor shall be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.
Item 9.01.
Financial Statements and Exhibits.
(d) Exhibits.
Exhibit
No.
 
Description
 
Press Release issued by Quantenna Communications, Inc., dated April 30, 2018.
 
Supplemental Financial Commentary, dated April 30, 2018.
 
Supplemental Earnings Presentation, dated April 30, 2018.







EXHIBIT INDEX
 

Exhibit
No.
 
Description
 
Press Release issued by Quantenna Communications, Inc., dated April 30, 2018.
 
Supplemental Financial Commentary, dated April 30, 2018.
 
Supplemental Earnings Presentation, dated April 30, 2018.





SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
 
 
 
 
 
QUANTENNA COMMUNICATIONS, INC.
Date:
April 30, 2018
By: /s/ Tom MacMitchell
 
 
Tom MacMitchell
 
 
General Counsel

Exhibit
Exhibit 99.1
http://api.tenkwizard.com/cgi/image?quest=1&rid=23&ipage=12217215&doc=24
 

News Release
Quantenna Announces First Quarter 2018 Financial Results
Quantenna’s Wave 3 10G Customer Deployments Expanding
San Jose, CA - April 30, 2018 - 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 first quarter ended April 1, 2018.
"Our first quarter strength bolsters our Wave 3 10G growth strategy as we experienced accelerated deployment momentum with our key cable MSO customer coupled with an additional cable MSO initiating full volume rollout. Additionally, these deployments are now sourced through two separate OEM partners, which adds additional capacity to serve demand and diversifies the supply chain. We also continue to receive inbound interest for Wave 3 10G designs due to its superior performance in the Wi-Fi landscape” remarked Dr. Sam Heidari, Chairman and Chief Executive Officer.
“We expect record revenue in the second quarter, driven by record Wave 3 10G revenue shipments, as we extend our customer opportunities into mainstream markets and new and existing high-performance markets that seek a full-featured and unparalleled connectivity experience.”
Financial Summary
 
Three Months Ended
 
 
 
April 1,
2018
 
April 2,
2017
 
% Change
 
 
 
 
 
 
Revenue
$
45,117

 
$
37,891

 
19.1%
Gross Profit
22,765

 
18,584

 
22.5%
Gross Margin
50.5
%
 
49.0
%
 
150 bps
 
 
 
 
 
 
Net income (loss):
 
 
 
 
 
GAAP
$
(3,247
)
 
$
(884
)
 
 
Non-GAAP
1,160

 
1,220

 
 
 
 
 
 
 
 
Net income (loss) per share - diluted:
 
 
 
 
 
GAAP
$
(0.09
)
 
$
(0.03
)
 
 
Non-GAAP
0.03

 
0.03

 
 
 
 
 
 
 
 
(in thousands except per share data, unaudited)
 
 
 
 






Commentary on the first quarter 2018 financial results by Company management is available at http://ir.quantenna.com/events.cfm.
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.
First Quarter Company Highlights
Revenue of $45.1 million, representing year over year growth of 19% over the first quarter of 2017 and 9% sequential growth over the fourth quarter of 2017.

First quarter GAAP gross margin of 50.5% compared to 49.0% in the first quarter of fiscal year 2017. First quarter non-GAAP gross margin of 50.5% compared to 49.2% in the first quarter of fiscal year 2017.

First quarter GAAP and non-GAAP gross profit grew 22% from the first quarter of fiscal year 2017.

Cash from operations generated $6.8 million in the first quarter of fiscal year 2018, compared to ($0.4) million in the first quarter of 2017.

Wave 3 10G continues its leadership position in the first quarter with a cable MSO initiating a full volume rollout using our technology exclusively in their flagship next generation gateway.

Our cable MSO customers using our Wave 3 10G solutions are now sourcing their next generation gateways through two separate OEM partners, which adds substantial capacity to serve subscriber demand while diversifying the supply chain.

Partnered with Canal+ Group to deliver an end-to-end solution that enables wireless HD video redistribution from set-top box to a companion Over-The-Top (OTT) set-top box.

Announced enhanced Wi-Fi features on the Wave 3 QSR10G chipset family targeting gateways and access points that significantly improve the user experience of mobile Wi-Fi clients.

Partnered with Greenwave Systems, Inc., to deliver a full duplex 4x4 802.11ac Wave 2 Wi-Fi extender for superior whole-home coverage.

Collaborated with Icotera to deliver innovative next-generation fiber gateway and Wi-Fi access point solutions to the European market.










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Business Outlook
 
Second Quarter 2018
Guidance Range
Revenue
 $51M to $53M
Gross Margin
 
GAAP
48% +/- 100bps
Non-GAAP
48% +/- 100bps
Operating Expense Growth (sequential)
 
GAAP
Flat to up 4%
Non-GAAP
Flat to up 5%
Net income (loss) per share-diluted
 
GAAP
 ($0.04) - ($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 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 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: 4674009. 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.
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 consumer’s Wi-Fi experience by establishing benchmarks for speed, range, efficiency and reliability. Quantenna takes a multidimensional approach, from silicon to system and software, to provide total Wi-Fi network solutions. 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 first quarter ended April 1, 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

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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 our 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; 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; revenue recognition impacts due to ASC 606; adjustments to the preliminary financial results reported in this press release and related earnings call announcement and materials for the first 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.



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Quantenna Communications, Inc.
Condensed Consolidated Statements of Operations
(in thousands except per share data, unaudited)
 
Three Months Ended
 
April 1,
2018
 
April 2,
2017
 
 
 
 
Revenue
$
45,117

 
$
37,891

Cost of revenue
22,352

 
19,307

Gross profit
22,765

 
18,584

Operating expenses:
 
 
 
Research and development
17,601

 
12,633

Sales and marketing
4,495

 
2,914

General and administrative
4,198

 
3,389

Total operating expenses
26,294

 
18,936

Loss from operations
(3,529
)
 
(352
)
Interest expense

 
(197
)
Other income (expense), net
334

 
200

Loss before income taxes
(3,195
)
 
(349
)
Provision for income taxes
(52
)
 
(535
)
Net loss
$
(3,247
)
 
$
(884
)
Net loss per share - basic and diluted
$
(0.09
)
 
$
(0.03
)
Shares used in computing net loss per share - basic and diluted
35,848

 
33,107

 
 
 
 
















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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 April 1, 2018
Three months ended April 2, 2017
 
GAAP
Measure
Stock-based
Compensation
Expense
Income Taxes*
Non-GAAP
Measure
GAAP
Measure
Stock-based
Compensation
Expense
Non-GAAP
Measure
Revenue
$
45,117

 
 
$
45,117

$
37,891

 
$
37,891

Gross profit
22,765

34

 
22,799

18,584

43

18,627

Gross margin
50.5
%
0.1
%
 
50.5
%
49.0
%
0.1
%
49.2
%
Research and development
17,601

2,393

 
15,208

12,633

1,205

11,428

Sales and marketing
4,495

984

 
3,511

2,914

353

2,561

General and administrative
4,198

1,181

 
3,017

3,389

503

2,886

Income (loss) from operations
(3,529
)
4,592

 
1,063

(352
)
2,104

1,752

Benefit (provision) for income taxes
(52
)

(185
)
(237
)
(535
)

(535
)
Net income (loss)
$
(3,247
)
$
4,592

$
(185
)
$
1,160

$
(884
)
$
2,104

$
1,220

Basic shares outstanding
35,848

 
 
35,848

33,107

 
33,107

Basic earnings per share
$
(0.09
)
 
 
$
0.03

$
(0.03
)
 
$
0.04

Diluted shares outstanding
35,848

 
 
38,703

33,107

 
38,371

Diluted earnings per share
$
(0.09
)
 
 
$
0.03

$
(0.03
)
 
$
0.03


*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 April 1, 2018
 
 
 
 
 
 
 
Low
 
High
Estimated GAAP diluted loss per share
 
$
(0.04
)
 
$
(0.02
)
Estimated stock compensation expense
 
(0.11
)
 
(0.11
)
Estimated Non-GAAP diluted earnings per share
 
$
0.07

 
$
0.09




















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Quantenna Communications, Inc.
Condensed Consolidated Balance Sheets
(in thousands, unaudited)
 
April 1,
2018
 
December 31, 2017
Assets
 
 
 
Current assets
 
 
 
Cash and cash equivalents
$
24,613

 
$
24,432

Marketable securities
95,530

 
94,195

Accounts receivable
26,310

 
26,786

Inventory
18,420

 
12,662

Prepaid expenses and other current assets
2,949

 
2,744

Total current assets
167,822

 
160,819

Deferred tax assets
35,602

 
35,422

Property and equipment, net
12,415

 
12,511

Intangible and other assets, net
4,215

 
3,952

Total assets
$
220,054

 
$
212,704

Liabilities and Stockholders’ Equity
 
 
 
Current liabilities
 
 
 
Accounts payable
$
10,696

 
$
2,077

Accrued liabilities and other current liabilities
23,531

 
22,742

Long-term debt, current portion

 
3,943

Total current liabilities
34,227

 
28,762

Other long-term liabilities
3,222

 
3,339

Total liabilities
37,449

 
32,101

 
 
 
 
Stockholders’ equity
 
 
 
Common stock
3

 
3

Additional paid-in capital
313,503

 
308,023

Accumulated other comprehensive loss
(438
)
 
(207
)
Accumulated deficit
(130,463
)
 
(127,216
)
Total stockholders’ equity
182,605

 
180,603

Total liabilities and stockholders’ equity
$
220,054

 
$
212,704



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Quantenna Communications, Inc.
Condensed Consolidated Cash Flows
(in thousands, unaudited)
 
Three Months Ended
 
April 1, 2018
 
April 2, 2017
 
 
 
 
Cash flows from operating activities
 
 
 
Net loss
$
(3,247
)
 
$
(884
)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
 
 
 
Depreciation and amortization
1,125

 
479

Stock-based compensation expense
4,592

 
2,104

Other
(50
)
 
135

Changes in assets and liabilities:
 
 
 
Accounts receivable
476

 
(3,332
)
Inventory
(5,758
)
 
2,459

Prepaid expenses and other current assets
(205
)
 
(1,324
)
Deferred rent and other assets
58

 
(511
)
Accounts payable
8,725

 
(5,870
)
Accrued liabilities and other current liabilities
1,053

 
6,309

Net cash provided by (used in) operating activities
6,769

 
(435
)
Cash flows from investing activities
 
 
 
Purchase of property and equipment
(924
)
 
(1,700
)
Purchase of long-term investment
(590
)
 

Purchase of marketable securities
(13,211
)
 

Maturities of marketable securities
11,515

 

Net cash used in investing activities
(3,210
)
 
(1,700
)
Cash flows from financing activities
 
 
 
Proceeds from issuance of common stock, net
1,438

 
163

Payments of taxes withheld for vested stock awards
(601
)
 

Payments related to intangible asset purchase
(272
)
 

Repayments of long-term debt
(3,943
)
 
(672
)
Net cash used in financing activities
(3,378
)
 
(509
)
Net increase (decrease) in cash and cash equivalents
181

 
(2,644
)
Cash and cash equivalents
 
 
 
Beginning of period
24,432

 
117,045

End of period
$
24,613

 
$
114,401

 
 
 
 

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

# # #


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a992quantennaq1fy2018sup
Financial Commentary Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Jun 26 '16 Sep 25 '16 Jan 01 '17 Apr 02 '17 Jul 02 '17 Oct 01 '17 Dec 31 '17 Apr 01 '18 802.11n 19% 29% 15% 18% 17% 15% 9% 4% 802.11ac Wave 2 80% 71% 84% 79% 79% 72% 83% 83% 802.11ac Wave 3 (10G) 0% 0% 1% 3% 4% 13% 6% 13% Total Semi Revenue 99% 100% 100% 100% 100% 100% 98% 100% Other 1% 0% 0% 0% 0% 0% 2% 0% Total Revenue 100% 100% 100% 100% 100% 100% 100% 100% First Quarter Fiscal 2018 Quantenna Communications Period Ending April 30, 2018 Quantenna Communications, Inc. Revenue Segmentation by WiFi Technology (in percentage of revenue, unaudited) Key Financial Metrics from the Quarter • Revenue of $45.1 million vs: ▪ $37.9 million in Q1'FY17 grew 19% Y/Y ▪ $41.3 million in Q4'FY17 grew 9% Q/Q • GAAP gross margin of 50.5% • Non-GAAP gross margin of 50.5% vs: ▪ 49.2% in Q1'FY17 increased 130bps Y/Y ▪ 51.7% in Q4'FY17 declined 120bps Q/Q • Operating margin in Q1'FY18: ▪ (7.8%) GAAP ▪ 2.4% Non-GAAP • GAAP diluted EPS ($0.09) in Q1'FY18 • Non-GAAP diluted EPS $0.03 in Q1'FY18 vs: ▪ $0.03 in Q1'FY17 ▪ $0.01 in Q4'FY17 • Operating cash flow of $6.8 million vs: ▪ ($0.4) million in Q1'FY017 ▪ ($7.6) million in Q4'2017 • Cash, cash equivalents & marketable securities $120.1 million • DSO 52 days, down 6 days Q/Q • Annualized inventory turns 4.8x, down from 6.3x Q/Q Second Quarter FY 2018 Guidance • Revenue: $51.0 to $53.0 million • GAAP gross margin: 48%, +/- 100bps • Non-GAAP gross margin: 48%, +/- 100bps • GAAP OPEX: flat to up 4% Q/Q • Non-GAAP OPEX: flat to up 5% Q/Q • Non-GAAP Tax Exp: Approximately $200,000 • GAAP loss per share: ($0.04) - ($0.02) • Non-GAAP earnings per share: $0.07 to $0.09 Key Highlights from the Quarter and Fiscal Year • Wave 3 10G continues its leadership position in Q1 with a MSO initiating a full volume rollout using our technology exclusively in their flagship next generation gateway. • Our cable MSO customers using our Wave 3 10G solutions are now sourcing their next generation gateways through two separate OEM partners, which adds substantial capacity to serve subscriber demand while diversifying the supply chain. • Partnered with Canal+ Group to deliver an end-to-end solution that enables wireless HD video redistribution from set-top box to a companion Over-The-Top (OTT) set-top box. • Announced enhanced Wi-Fi features on the Wave 3 QSR10G chipset family targeting gateways and access points that significantly improve the user experience of mobile Wi-Fi clients. • Partnered with Greenwave Systems, Inc., to deliver a full duplex 4x4 802.11ac Wave 2 Wi-Fi extender for superior whole-home coverage. • Collaborated with Icotera to deliver innovative next- generation fiber gateway and Wi-Fi access point solutions to the European market. Financial Results Call and Webcast Our Q1 financial results webcast and call will commence on April 30, 2018 at 2:00 p.m. PT (5:00 p.m. ET). The webcast may be accessed at http://ir.quantenna.com/. An archive of the webcast will be available for 90 days from the date of this release. April 30, 2018 Quantenna Q1 2018 Financial Results Page 1 of 4


 
Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Jun 26 '16 Sep 25 '16 Jan 01 '17 Apr 02 '17 Jul 02 '17 Oct 01 '17 Dec 31 '17 Apr 01 '18 Revenue 33,035$ 34,105$ 37,492$ 37,891$ 47,085$ 50,108$ 41,275$ 45,117$ COGS 16,671 17,247 18,188 19,307 23,314 25,591 19,996 22,352 Gross Margin 16,364 16,858 19,304 18,584 23,771 24,517 21,279 22,765 GM % of revenue 49.5% 49.4% 51.5% 49.0% 50.5% 48.9% 51.6% 50.5% R&D 11,524 11,162 13,691 12,633 16,055 15,011 16,048 17,601 S&M 1,769 2,172 2,520 2,914 3,276 3,363 4,487 4,495 G&A 2,993 3,248 2,757 3,389 4,106 3,735 4,069 4,198 OPEX 16,286 16,582 18,968 18,936 23,437 22,109 24,604 26,294 OPEX % of revenue 49.3% 48.6% 50.6% 50.0% 49.8% 44.1% 59.6% 58.3% Operating Income (loss) 78$ 276$ 336$ (352)$ 334$ 2,408$ (3,325)$ (3,529)$ OpInc % of revenue 0.2% 0.8% 0.9% -0.9% 0.7% 4.8% -8.1% -7.8% Interest & Other Income (loss) (291) (241) 10 3 45 120 237 334 Pretax Income (loss) (213) 35 346 (349) 379 2,528 (3,088) (3,195) Taxes 21 14 314 535 210 (274) (35,413) 52 Tax Rate -10% 40% 91% -153% 55% -11% 1147% -2% Net Income (loss) (234)$ 21$ 32$ (884)$ 169$ 2,802$ 32,325$ (3,247)$ Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Jun 26 '16 Sep 25 '16 Jan 01 '17 Apr 02 '17 Jul 02 '17 Oct 01 '17 Dec 31 '17 Apr 01 '18 Revenue 33,035$ 34,105$ 37,492$ 37,891$ 47,085$ 50,108$ 41,275$ 45,117$ COGS 16,668 17,238 18,170 19,264 23,272 25,553 19,954 22,318 Gross Margin 16,367 16,867 19,322 18,627 23,813 24,555 21,321 22,799 GM % of revenue 49.5% 49.5% 51.5% 49.2% 50.6% 49.0% 51.7% 50.5% R&D 11,402 10,931 13,234 11,428 14,641 13,644 14,418 15,208 S&M 1,739 2,112 2,392 2,561 2,866 2,947 3,704 3,511 G&A 2,262 2,514 2,494 2,886 3,398 2,787 3,089 3,017 OPEX 15,403 15,557 18,120 16,875 20,905 19,378 21,211 21,736 OPEX % of revenue 46.6% 45.6% 48.3% 44.5% 44.4% 38.7% 51.4% 48.2% Operating Income (loss) 964$ 1,310$ 1,202$ 1,752$ 2,908$ 5,177$ 110$ 1,063$ OpInc % of revenue 2.9% 3.8% 3.2% 4.6% 6.2% 10.3% 0.3% 2.4% Interest & Other Income (loss) (291) (241) 10 3 45 120 237 334 Pretax Income (loss) 673 1,069 1,212 1,755 2,953 5,297 347 1,397 Taxes 21 14 314 535 210 (274) (108) 237 Tax Rate 3% 1% 26% 30% 7% -5% -31% 17% Net Income (loss) 652$ 1,055$ 898$ 1,220$ 2,743$ 5,571$ 455$ 1,160$ Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Jun 26 '16 Sep 25 '16 Jan 01 '17 Apr 02 '17 Jul 02 '17 Oct 01 '17 Dec 31 '17 Apr 01 '18 Stock Based Compensation COGS 3$ 9$ 18$ 43$ 42$ 38$ 42$ 34$ R&D 122 231 457 1,205 1,414 1,367 1,630 2,393 S&M 30 60 128 353 410 416 584 984 G&A 731 734 263 503 708 948 980 1,181 Total 886$ 1,034$ 866$ 2,104$ 2,574$ 2,769$ 3,236$ 4,592$ Non-Recurring Items S&M 199$ Income Taxes (35,305)$ 185$ Quantenna Communications, Inc. Consolidated Statements of Operations (GAAP) (in thousands, unaudited) Period Ending Period Ending Period Ending Consolidated Statements of Operations (Non-GAAP) GAAP to Non-GAAP Reconciling Items (in thousands, unaudited) (in thousands, unaudited) April 30, 2018 Quantenna Q1 2018 Financial Results Page 2 of 4


 
Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Period Ending Jun 26 '16 Sep 25 '16 Jan 01 '17 Apr 02 '17 Jul 02 '17 Oct 01 '17 Dec 31 '17 Apr 01 '18 Assets Current assets Cash, cash equivalents & marketable securities 16,943$ 17,822$ 117,045$ 114,401$ 124,389$ 126,866$ 118,627$ 120,143$ Accounts receivable 20,813 17,306 14,480 17,812 17,696 22,820 26,786 26,310 Inventory 7,449 10,268 15,820 13,361 20,985 23,700 12,662 18,420 Restricted Cash 1,500 1,559 - - - - - - Prepaid expenses and other current assets 1,666 1,842 2,470 3,745 4,332 2,444 2,744 2,949 Total current assets 48,371 48,797 149,815 149,319 167,402 175,830 160,819 167,822 Deferred tax asset - - - - - - 35,422 35,602 Property and equipment, net 3,548 3,842 4,742 6,025 6,380 11,215 12,511 12,415 Intangible and other assets, net 1,311 2,443 232 743 769 4,296 3,952 4,215 Total assets 53,230$ 55,082$ 154,789$ 156,087$ 174,551$ 191,341$ 212,704$ 220,054$ Liabilities, Convertible Preferred Stock, and Stockholders’ Equity (Deficit) Current liabilities Accounts payable 3,778$ 6,038$ 7,776$ 1,896$ 10,527$ 12,918$ 2,077$ 10,696$ Accrued liabilities and other current liabilities 10,626 11,910 11,801 18,163 22,021 27,941 22,742 23,531 Long-term debt, current portion 2,102 2,218 2,257 2,288 2,563 2,487 3,943 - Total current liabilities 16,506 20,166 21,834 22,347 35,111 43,346 28,762 34,227 Long-term debt 7,967 4,342 3,680 3,539 2,445 1,900 - - Other long term liabilities - 578 527 - 425 3,413 3,339 3,222 Convertible preferred stock warrant liability 300 364 - - - - Total liabilities 24,773 25,450 26,041 25,886 37,981 48,659 32,101 37,449 Convertible preferred stock 184,704 184,704 - - - - - - Stockholders’ equity (deficit) Common stock - - 3 3 3 3 3 3 Additional paid-in capital 5,381 6,534 290,319 292,710 298,943 302,240 308,023 313,503 Accumulated deficit (161,628) (161,606) (161,574) (162,512) (162,376) (159,561) (127,423) (130,901) Total stockholders’ equity (deficit) (156,247) (155,072) 128,748 130,201 136,570 142,682 180,603 182,605 Total liabilities, conv prfrrd stock and stockholders' equity 53,230$ 55,082$ 154,789$ 156,087$ 174,551$ 191,341$ 212,704$ 220,054$ Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Period Ending Jun 26 '16 Sep 25 '16 Jan 01 '17 Apr 02 '17 Jul 02 '17 Oct 01 '17 Dec 31 '17 Apr 01 '18 Cash flows from operating activities Net income (loss) (234)$ 21$ 32$ (884)$ 169$ 2,802$ 32,325$ (3,247)$ Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities Deferred income taxes - - - - - - (35,333) Depreciation and amortization 268 343 398 479 545 542 1,103 1,125 Stock-based compensation expense 886 1,034 866 2,104 2,574 2,769 3,236 4,592 Other 31 174 160 135 62 150 288 (50) Changes in assets and liabilities Accounts receivable (7,244) 3,508 2,826 (3,332) 116 (5,124) (3,966) 476 Inventory (190) (2,819) (5,552) 2,459 (7,624) (2,715) 11,038 (5,758) Prepaid expenses and other current assets 273 (241) (618) (1,324) (574) 1,876 (313) (205) Other assets (59) 71 (66) (511) (27) (252) 323 58 Accounts payable (3,599) 2,453 2,940 (5,870) 8,522 2,467 (10,871) 8,725 Accrued liabilities 3,109 1,127 (379) 6,309 3,604 4,747 (5,395) 1,053 Net cash provided by (used in) operating activities (6,759) 5,671 607 (435) 7,367 7,262 (7,565) 6,769 Cash flows from investing activities Purchase of property and equipment (612) (995) (1,103) (1,700) (746) (4,515) (2,009) (924) Purchase of long-term investment - - - - - - - (590) Purchase of marketable securities - - - - (71,169) (32,875) (27,746) (13,211) Proceeds from sale of marketable securities - - - - 4,994 (1,324) 7,014 - Maturities of marketable securities - - - - - 12,239 14,201 11,515 Restricted cash (1,500) (59) 1,500 - - - - - Net cash provided by (used in) investing activities (2,112) (1,054) 397 (1,700) (66,921) (26,475) (8,540) (3,210) Cash flows from financing activities Proceeds from issuance of common stock, net of issuance cost 35 697 406 194 3,882 477 3,122 1,438 Proceeds from initial public offering, net of issuance costs - - 97,483 - - - - - Principal payments on debt (1,769) (554) (551) (672) (433) (651) (650) (3,943) Other 6,804 (3,881) 881 (31) (65) - (892) (873) Net cash provided by (used in) financing activities 5,070 (3,738) 98,219 (509) 3,384 (174) 1,580 (3,378) Effect of exchange rate changes on cash & cash equivalents - - - - - - 113 - Net increase (decrease) in cash and cash equivalents (3,801) 879 99,223 (2,644) (56,170) (19,387) (14,412) 181 Cash and cash equivalents Beginning of period 20,744 16,943 17,822 117,045 114,401 58,231 38,844 24,432 End of period 16,943 17,822 117,045 114,401 58,231 38,844 24,432 24,613 Quantenna Communications, Inc. Consolidated Balance Sheet (in thousands, unaudited) Condensed Consolidated Cash Flows (in thousands, unaudited) April 30, 2018 Quantenna Q1 2018 Financial Results Page 3 of 4


 
Quantenna Communications, Inc. 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 financial commentary. Forward-Looking Statements This financial commentary contains forward-looking statements based on Quantenna’s current expectations, including statements regarding Quantenna’s preliminary financial results for the first quarter ended April 1, 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 our 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; 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; revenue recognition impacts due to ASC 606; adjustments to the preliminary financial results reported in this financial commentary and related earnings call announcement and materials for the first 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 consumer’s Wi-Fi experience by establishing benchmarks for speed, range, efficiency and reliability. Quantenna takes a multidimensional approach, from silicon to system and software, to provide total Wi-Fi network solutions. For more information, visit www.quantenna.com. April 30, 2018 Quantenna Q1 2018 Financial Results Page 4 of 4


 
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Investor Presentation Q1 2018 Semiconductors Cloud Analytics System Software Wi-Fi Perfected is


 
Safe Harbor and Non-GAAP Financial Measures 2 This presentation contains “forward-looking” statements that are based on our beliefs and assumptions and on information currently available to us. Forward-looking statements include information concerning our possible or assumed future results of operations, business strategies, product development plans, competitive position, potential growth opportunities, use of proceeds and the effects of competition. Forward-looking statements include all statements that are not historical facts and can be identified by terms such as “anticipate,” “believe,” “could,” “seek,” “estimate,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “should,” “will,” “would” or similar expressions and the negatives of those terms. Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. These risks, uncertainties and other factors include, but are not limited to, the risk factors listed in our 10-K filed on February 28, 2018 and subsequent 10-Q filings. Forward-looking statements represent our beliefs and assumptions only as of the date of this presentation. Except as required by law, we assume no obligation to update these forward-looking statements publicly, or to update the reasons actual results could differ materially from those anticipated in the forward-looking statements, even if new information becomes available in the future. This presentation includes certain non-GAAP financial measures as defined by the SEC rules. We have provided a reconciliation of those measures to the most directly comparable GAAP measures, which is available in the appendix to this presentation.


 
$40 $67 $84 $129 $176 $45 2013 2014 2015 2016 2017 2018 $52 Q2 guide midpoint At a Glance 3 Strong Revenue Growth Profile $MM 150 million+ chips shipped 60+ products with Quantenna inside 50+ service providers 40+ OEMs / ODMs ~400 employees 45% CAGR 85+ patents


 
Company Highlights High-performance Wi-Fi leader Pioneer in both 8x8 and 4x4 advanced MIMO technology Trendsetter and influencer within IEEE 802.11 standards body Proven execution & innovation across four generations of solutions Land and expand within each product generation yields rapid revenue growth with less incremental selling expense Sustainable advantage & multiple barriers to entry Over 1,400 man years of R&D and IP development Long product lifecycles and sticky design wins Service provider positioning in Wi-Fi is unmatched Over 90% follow-on design success with existing sockets Demonstrated initial success with multiple growth drivers Service provider telco opened up satellite opportunity >> current opportunity is cable MSO >> future is retail and enterprise Attractive financial model with significant operating leverage Drove a 45% CAGR in revenue over last five years Generated cash from operations for the last two fiscal years Strong gross margin profile of ~50% 4


 
Premium Strategy Drives Share Gains Each Tech Cycle 5 Current Wi-Fi Generation Future Wi-Fi Generation Mainstream Low Cost Premium Mainstream Low Cost Premium Launch next- generation products  Continue leadership in the premium market with new products  Extend the previous generation to mainstream with cost-optimized products and introduce new products


 
Diverse Applications Retail Access Point Video Bridge Broadband Gateway Wi-Fi Booster Mesh Repeaters Video Client Enterprise / Outdoor 6


 
Sizing Up the Premium Wi-Fi Market 7 Total Wi-Fi Chipset Revenue $2.1 B $2.6 B $1.5 B $1.4 B $0.2 B $1.3 B 2016 2021 Source: ABI Research Wi-Fi Market Data 3Q 2016, Table 4, Table 11 and Table 26 and Quantenna assumptions Portable Devices include cellular phones, laptops, netbooks, Ultrabooks, Chromebooks, PC accessories, mobile devices, gaming controllers, OEM remote controls, 3D glasses, and wearables and healthcare devices Non-Portable Devices include networking, set-top boxes, televisions, gaming consoles, DVD / Blu-ray players, desktop PCs, printers, smart home, automotive, industrial, and others 2.1 B 2.9 B 0.7 B 1.1 B 0.0 B 0.2 B 2016 2021 Total Wi-Fi Enabled Device Shipments 53% 2016-2021 CAGR 8% 7% 50% 2016-2021 CAGR -2% 4% Premium Wi-Fi * in Non-Portable Devices Mainstream Wi-Fi in Non-Portable Devices Wi-Fi in Portable Devices * Premium Wi-Fi chipsets are defined by 4x4 MIMO or higher performance. Quantenna’s premium Wi-Fi technology leads the high performance, non-portable device market.


 
Q1 2018 Financial Highlights 0 40 80 120 160 200 0 10 20 30 40 50 Q1 2017 Q1 2018 TTM Q1 2017 TTM Q1 2018 Strong Revenue Growth Profile $MM 8 *Gross margin, income and EPS figures are fully diluted based on non-GAAP reporting which excludes stock-based compensation and other specified one-time items. See reconciliation table. TTM means trailing twelve months. 29% YoY 19% YoY Quarterly revenue of $45.1 million • 19% Y/Y growth vs Q1 2017 • 9% Q/Q growth vs Q4 2017 Gross margin of 50.5% • Grew 130bps Y/Y vs Q1 2017 • Down 120bps Q/Q vs Q4 2017 Operating cash flow positive • Cash from ops $6.8 million or $0.17/share Strong Earnings Performance • $1.2 million net income • $0.03 in EPS – Exceeded $0.00 to $0.02 guidance range $MM


 
Technology Cycles Drive Growth $MM 0 10 20 30 40 50 Q2'16 Q3'16 Q4'16 Q1'17 Q2'17 Q3'17 Q4'17 Q1'18 Other 802.11n 802.11ac Wave2 802.11ac Wave3 (10G) • 802.11ac Wave 3 (10G) revenue – Q1 grew 137% Q/Q to $5.9 million – Q2 revenue expected to more than double Q/Q to the range of $12-14 million • 802.11ac Wave 2 revenue – Q1 grew $3.1 million or 9% Q/Q – Q1 grew 25% Y/Y to $37.4 million – Q2 revenue is expected to be flat Q/Q • 802.11n revenue – Q1 declined 51% Q/Q to $1.8 million – Q2 revenue is expected to decline Q/Q Wi-Fi Technology Segmentation Highlights 9


 
Operating Results & Guidance 2016 2017 Q4 2017 Q1 2018 Q2 2018 Guidance Revenue $129.1 $176.4 $41.3 $45.1 $51 - $53 Gross Margin 50% 50% 52% 51% GAAP: 48% +/-100bps non-GAAP: 48% +/-100bps OPEX 48% 44% 51% 48% GAAP: flat to up 4% Q/Q non-GAAP: flat to up 5% Q/Q EPS $0.04 $0.26 $0.01 $0.03 GAAP: ($0.04) – ($0.02) non-GAAP: $0.07 – $0.09 10 *Gross margin, OPEX and EPS figures are based on non-GAAP reporting which excludes stock-based compensation and other one-time items.


 
Balance Sheet Summary 2015 2016 Q3 2017 2017 Q1 2018 Cash, Cash Equivalents & Marketable Securities $18.9 $117.0 $126.9 $118.6 $120.1 Total Assets $46.7 $154.8 $191.3 $212.7 $220.1 Total Debt $5.8 $5.9 $4.4 $3.9 $0.0 Total Liabilities $17.6 $26.0 $48.7 $32.1 $37.4 Total Stockholders’ Equity (Deficit) ($155.7) $128.7 $142.7 $180.6 $182.6 11


 
Appendix 12


 
Non-GAAP to GAAP Operating Margin Reconciliation 13 SBC means stock-based compensation, non-recurring items comprised of executive severance, percentages may not total due to rounding 2015 2016 Q4 2017 2017 Q1 2018 Non-GAAP Gross Margin 49% 50% 52% 50% 51% SBC: Gross Margin 0% 0% 0% 0% 0% GAAP Gross Margin 49% 50% 52% 50% 51% Non-GAAP Operating Margin (6%) 2% 0% 6% 2% SBC: R&D 0% 1% 4% 3% 5% SBC: S&M 1% 0% 1% 1% 2% SBC: G&A 1% 1% 2% 2% 3% Non-recurring items 0% 0% 0% 0% 0% GAAP Operating Margin (7%) (1%) (8%) (1%) (8%)


 
Non-GAAP to GAAP Net Margin Reconciliation 14 SBC means stock-based compensation, non-recurring items comprised of executive severance and income tax adjustment relating to recognition of US Federal deferred tax asset pursuant to release of valuation allowance. Percentages may not total due to rounding 2015 2016 Q4 2017 2017 Q1 2018 Non-GAAP Net Margin (7%) 1% 1% 6% 3% SBC: Gross Margin 0% 0% 0% 0% 0% SBC: R&D 0% 1% 4% 3% 5% SBC: S&M 1% 0% 1% 1% 2% SBC: G&A 1% 1% 2% 2% 3% Non-recurring items 0% 0% (85%) (20%) (0%) GAAP Net Margin (8%) (1%) 78% 20% (7%)


 
Wi-Fi Perfected™ 15 Semiconductors Cloud Analytics System Software