Quantenna Communications
QUANTENNA COMMUNICATIONS INC (Form: 8-K, Received: 02/12/2018 16:19:26)


 
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): February 12, 2018 (February 6, 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 February 12, 2018 , Quantenna Communications, Inc. (the “Company”) issued a press release announcing its financial results for the fourth quarter and fiscal year ended December 31, 2017 . In the press release, the Company also announced that it would be holding a conference call on February 12, 2018 to discuss its financial results for the fourth quarter and fiscal year ended December 31, 2017 . The full text of the press release is attached hereto as Exhibit 99.1, and a copy of the supplemental financial commentary and supplemental earnings presentation is attached hereto as Exhibit 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 5.02.
Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
Director Resignation
(b)     On February 6, 2018, Mr. Lip-Bu Tan announced that he plans to resign as a member of the Board of Directors of Quantenna Communications, Inc. at our upcoming 2018 Annual Meeting of Stockholders in mid-2018.  Mr. Tan is resigning to reduce the total number of public companies on which he serves as a director.
Item 9.01.
Financial Statements and Exhibits.
(d) Exhibits.
Exhibit
No.
 
Description
 
Press Release issued by Quantenna Communications, Inc., dated February 12, 2018.
 
Supplemental Financial Commentary, dated February 12, 2018.
 
Supplemental Earnings Presentation, dated February 12, 2018.








EXHIBIT INDEX
 

Exhibit
No.
 
Description
 
Press Release issued by Quantenna Communications, Inc., dated February 12, 2018.
 
Supplemental Financial Commentary, dated February 12, 2018.
 
Supplemental Earnings Presentation, dated February 12, 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:
February 12, 2018
 
By: /s/ Tom MacMitchell
 
 
Tom MacMitchell
 
 
General Counsel

Exhibit 99.1
QUANTENNA_IMAGE14.JPG
News Release
QUANTENNA_IMAGE14.JPG

Quantenna Announces Fourth Quarter and Fiscal 2017 Financial Results
Major Cable MSO Initiates Nationwide Rollout of Quantenna's Wave 3 10G Solution
San Jose, CA – February 12, 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 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,
2017
 
January 1,
2017
 
% Change
 
December 31,
2017
 
January 1,
2017
 
% Change
 
 
 
 
 
 
 
 
 
 
 
 
Revenue
$
41,275

 
$
37,492

 
10.1%
 
$
176,359

 
$
129,069

 
36.6%
Gross Profit
21,279

 
19,304

 
10.2%
 
88,151

 
64,429

 
36.8%
Gross Margin
51.6
%
 
51.5
%
 
10
 bps
 
50.0
%
 
49.9
%
 
10
 bps
 
 
 
 
 
 
 
 
 
 
 
 
Net income (loss):
 
 
 
 
 
 
 
 
 
 
 
GAAP
$
32,325

 
$
32

 
 
 
$
34,412

 
$
(1,895
)
 
 
Non-GAAP
455

 
898

 
 
 
9,989

 
1,195

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income (loss) per share - diluted:
 
 
 
 
 
 
 
 
 
 
 
GAAP
$
0.84

 
$
0.00

 
 
 
$
0.89

 
$
(0.30
)
 
 
Non-GAAP
0.01

 
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/.
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 .








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Business Outlook
 
First Quarter 2018
Guidance Range
Revenue
 $43M to $45M
Gross Margin
 
GAAP
50% +/- 100bps
Non-GAAP
50% +/- 100bps
Operating Expense Growth (sequential)
 
GAAP
-1% to 4%
Non-GAAP
Flat 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,

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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.


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Quantenna Communications, Inc.
Condensed Consolidated Statements of Operations
(in thousands except per share data, unaudited)
 
Three Months Ended
 
Twelve Months Ended
 
December 31,
2017
 
January 1,
2017
 
December 31,
2017
 
January 1,
2017
 
 
 
 
 
 
 
 
Revenue
$
41,275

 
$
37,492

 
$
176,359

 
$
129,069

Cost of revenue
19,996

 
18,188

 
88,208

 
64,640

Gross profit
21,279

 
19,304

 
88,151

 
64,429

Operating expenses:
 
 
 
 
 
 
 
Research and development
16,048

 
13,691

 
59,747

 
46,604

Sales and marketing
4,487

 
2,520

 
14,040

 
8,091

General and administrative
4,069

 
2,757

 
15,299

 
10,559

Total operating expenses
24,604

 
18,968

 
89,086

 
65,254

Income (loss) from operations
(3,325
)
 
336

 
(935
)
 
(825
)
Interest expense
(272
)
 
(252
)
 
(713
)
 
(665
)
Other income (expense), net
509

 
262

 
1,118

 
(38
)
Income (loss) before income taxes
(3,088
)
 
346

 
(530
)
 
(1,528
)
Benefit (provision) for income taxes
35,413

 
(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:
 
 
 
 
 
 
 
Basic
35,316

 
21,246

 
34,259

 
6,385

Diluted
38,281

 
35,387

 
38,484

 
6,385



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Quantenna Communications, Inc.
Condensed Consolidated Balance Sheets
(in thousands, unaudited)
 
December 31,
2017
 
January 1, 2017
Assets
 
 
 
Current assets
 
 
 
Cash and cash equivalents
$
24,432

 
$
117,045

Marketable securities
94,195

 

Accounts receivable
26,786

 
14,480

Inventory
12,662

 
15,820

Prepaid expenses and other current assets
2,744

 
2,470

Total current assets
160,819

 
149,815

Deferred tax assets
35,422

 

Property and equipment, net
12,511

 
4,742

Intangible assets, net
2,987

 

Other long-term assets
965

 
232

Total assets
$
212,704

 
$
154,789

Liabilities and Stockholders’ Equity
 
 
 
Current liabilities
 
 
 
Accounts payable
$
2,077

 
$
7,776

Accrued liabilities and other current liabilities
22,742

 
11,801

Long-term debt, current portion
3,943

 
2,257

Total current liabilities
28,762

 
21,834

Long-term debt

 
3,680

Other long-term liabilities
3,339

 
527

Total liabilities
32,101

 
26,041

 
 
 
 
Stockholders’ equity
 
 
 
Common stock
3

 
3

Additional paid-in capital
308,023

 
290,319

Accumulated other comprehensive loss
(207
)
 

Accumulated deficit
(127,216
)
 
(161,574
)
Total stockholders’ equity
180,603

 
128,748

Total liabilities and stockholders’ equity
$
212,704

 
$
154,789



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Quantenna Communications, Inc.
Condensed Consolidated Cash Flows
(in thousands, unaudited)
 
Years Ended
 
December 31, 2017
 
January 1, 2017
 
 
 
 
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 amortization
2,669

 
1,278

Stock-based compensation expense
10,683

 
3,065

Accretion of discount on investments
207

 

Non-cash interest expense, net
474

 
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

Inventory
3,158

 
(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 liabilities
9,265

 
5,757

Net cash provided by operating activities
6,629

 
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 securities
10,684

 

Maturities of marketable securities
26,440

 

Restricted cash

 
(59
)
Net cash used in investing activities
(103,636
)
 
(2,783
)
Cash flows from financing activities
 
 
 
Proceeds from issuance of common stock
7,675

 
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 activities
4,281

 
98,662

Effect of exchange rate changes on cash and cash equivalents
113

 

Net increase (decrease) in cash and cash equivalents
(92,613
)
 
98,195

Cash and cash equivalents
 
 
 
Beginning of year
117,045

 
18,850

End of year
$
24,432

 
$
117,045

 

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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 December 31, 2017
Three Months Ended January 1, 2017
 
GAAP
Measure
Stock-based
Compensation
Expense
Non-Recurring Items*
Income Taxes**
Non-GAAP
Measure
GAAP
Measure
Stock-based
Compensation
Expense
Non-GAAP
Measure
Revenue
$
41,275

 
 
 
$
41,275

$
37,492

 
$
37,492

Gross profit
21,279

42

 
 
21,321

19,304

18

19,322

Gross margin
51.6
%
0.1
%
 
 
51.7
%
51.5
%
0.0
%
51.5
%
Research and development
16,048

1,630

 
 
14,418

13,691

457

13,234

Sales and marketing
4,487

584

199

 
3,704

2,520

128

2,392

General and administrative
4,069

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 taxes
35,413



(35,305
)
108

(314
)

(314
)
Net income (loss)
$
32,325

$
3,236

$
199

$
(35,305
)
$
455

$
32

$
866

$
898

Basic shares outstanding
35,316

 
 
 
35,316

21,246

 
21,246

Basic earnings per share
$
0.92

 
 
 
$
0.01

$
0.00

 
$
0.04

Diluted shares outstanding
38,281

 
 
 
38,281

35,387

 
35,387

Diluted earnings per share
$
0.84

 
 
 
$
0.01

$
0.00

 
$
0.03


Non-GAAP Income Statement Items
Twelve months ended December 31, 2017
Twelve months ended January 1, 2017
 
GAAP
Measure
Stock-based
Compensation
Expense
Non-Recurring Items*
Income Taxes**
Non-GAAP
Measure
GAAP
Measure
Stock-based
Compensation
Expense
Non-GAAP
Measure
Revenue
$
176,359

 
 
 
$
176,359

$
129,069

 
$
129,069

Gross profit
88,151

165

 
 
88,316

64,429

33

64,462

Gross margin
50.0
%
0.1
%
 
 
50.1
%
49.9
%
0.0
%
49.9
%
Research and development
59,747

5,616

 
 
54,131

46,604

911

45,693

Sales and marketing
14,040

1,763

199

 
12,078

8,091

248

7,843

General and administrative
15,299

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 taxes
34,942



(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 outstanding
34,259

 
 
 
34,259

6,385

 
6,385

Basic earnings per share
$
1.00

 
 
 
$
0.29

$
(0.30
)
 
$
0.19

Diluted shares outstanding
38,484

 
 
 
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 adj ustment relating to recognition of US Federal deferred tax asset pursuant to release of valuation allowance.


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Quantenna Communications, Inc.
Unaudited Forward-Looking Statements Regarding Business Outlook
Business Outlook
Three 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.
669-209-5647
vessi@quantenna.com

# # #


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Financial Commentary Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Mar 27 '16 Jun 26 '16 Sep 25 '16 Jan 01 '17 Apr 02 '17 Jul 02 '17 Oct 01 '17 Dec 31 '17 802.11n 37% 19% 29% 15% 18% 17% 15% 9% 802.11ac Wave 2 61% 80% 71% 84% 79% 79% 72% 83% 802.11ac Wave 3 (10G) 0% 0% 0% 1% 3% 4% 13% 6% Total Semi Revenue 98% 99% 100% 100% 100% 100% 100% 98% Other 2% 1% 0% 0% 0% 0% 0% 2% Total Revenue 100% 100% 100% 100% 100% 100% 100% 100% Fourth Quarter and Fiscal Year 2017 Quantenna Communications Period Ending February 12, 2018 Quantenna Communications, Inc. Revenue Segmentation by WiFi Technology (in percentage of revenue, unaudited) Key Financial Metrics from the Quarter • Revenue of $41.3 million vs: ▪ $37.5 million in Q4'FY16 grew 10% Y/Y ▪ $50.1 million in Q3'FY17 declined 18% Q/Q • GAAP gross margin of 51.6% • Non-GAAP gross margin of 51.7% vs: ▪ 51.5% in Q4'FY16 increased 20bps Y/Y ▪ 49.0% in Q3'FY17 increased 270bps Q/Q • Operating margin in Q4'FY17: ▪ (8.1%) GAAP ▪ 0.3% Non-GAAP • GAAP diluted EPS $0.84 in Q4'FY17 • Non-GAAP diluted EPS $0.01 in Q4'FY17 vs: ▪ $0.03 in Q4'FY16 ▪ $0.14 in Q3'FY17 • Cash, cash equivalents & marketable securities $118.6 million • DSO 58 days, up 17 days Q/Q • Annualized inventory turns 6.3x, up from 4.3x Q/Q First Quarter FY 2018 Guidance • Revenue: $43.0 to $45.0 million • GAAP gross margin: 50%, +/- 100bps • Non-GAAP gross margin: 50%, +/- 100bps • GAAP OPEX: down 1% to up 4% Q/Q • Non-GAAP OPEX: flat to up 5% Q/Q • Non-GAAP Tax Exp: Approximately $150,000 • GAAP loss per share: ($0.08) - ($0.06) • Non-GAAP earnings per share: $0.00 to $0.02 Key Highlights from the Quarter and Fiscal Year • Revenue of $176.4 million in FY2017, representing year over year growth of 37% compared to FY2016. • GAAP gross margin of 50.0% in FY2017 compared to GAAP gross margin of 49.9% in FY2016. • GAAP operating loss of ($0.9) million and non-GAAP operating income of $9.9 million in FY2017, compared to GAAP operating loss of ($0.8) million and non-GAAP operating income of $2.3 million in FY2016. • Cash from operations totaled $6.6 million in FY2017, compared to $2.3 million in FY2016. • 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. Financial Results Call and Webcast Our Q4 financial results webcast and call will commence on February 12, 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. February 12, 2018 Quantenna Q4 2017 Financial Results Page 1 of 4


 
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Mar 27 '16 Jun 26 '16 Sep 25 '16 Jan 01 '17 Apr 02 '17 Jul 02 '17 Oct 01 '17 Dec 31 '17 Revenue 24,437$ 33,035$ 34,105$ 37,492$ 37,891$ 47,085$ 50,108$ 41,275$ COGS 12,534 16,671 17,247 18,188 19,307 23,314 25,591 19,996 Gross Margin 11,903 16,364 16,858 19,304 18,584 23,771 24,517 21,279 GM % of revenue 48.7% 49.5% 49.4% 51.5% 49.0% 50.5% 48.9% 51.6% R&D 10,227 11,524 11,162 13,691 12,633 16,055 15,011 16,048 S&M 1,630 1,769 2,172 2,520 2,914 3,276 3,363 4,487 G&A 1,562 2,993 3,248 2,757 3,389 4,106 3,735 4,069 OPEX 13,419 16,286 16,582 18,968 18,936 23,437 22,109 24,604 OPEX % of revenue 54.9% 49.3% 48.6% 50.6% 50.0% 49.8% 44.1% 59.6% Operating Income (loss) (1,516)$ 78$ 276$ 336$ (352)$ 334$ 2,408$ (3,325)$ OpInc % of revenue -6.2% 0.2% 0.8% 0.9% -0.9% 0.7% 4.8% -8.1% Interest & Other Income (loss) (182) (291) (241) 10 3 45 120 237 Pretax Income (loss) (1,698) (213) 35 346 (349) 379 2,528 (3,088) Taxes 17 21 14 314 535 210 (274) (35,413) Tax Rate -1% -10% 40% 91% -153% 55% -11% 1147% Net Income (loss) (1,715)$ (234)$ 21$ 32$ (884)$ 169$ 2,802$ 32,325$ Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Mar 27 '16 Jun 26 '16 Sep 25 '16 Jan 01 '17 Apr 02 '17 Jul 02 '17 Oct 01 '17 Dec 31 '17 Revenue 24,437$ 33,035$ 34,105$ 37,492$ 37,891$ 47,085$ 50,108$ 41,275$ COGS 12,531 16,668 17,238 18,170 19,264 23,272 25,553 19,954 Gross Margin 11,906 16,367 16,867 19,322 18,627 23,813 24,555 21,321 GM % of revenue 48.7% 49.5% 49.5% 51.5% 49.2% 50.6% 49.0% 51.7% R&D 10,126 11,402 10,931 13,234 11,428 14,641 13,644 14,418 S&M 1,600 1,739 2,112 2,392 2,561 2,866 2,947 3,704 G&A 1,392 2,262 2,514 2,494 2,886 3,398 2,787 3,089 OPEX 13,118 15,403 15,557 18,120 16,875 20,905 19,378 21,211 OPEX % of revenue 53.7% 46.6% 45.6% 48.3% 44.5% 44.4% 38.7% 51.4% Operating Income (loss) (1,212)$ 964$ 1,310$ 1,202$ 1,752$ 2,908$ 5,177$ 110$ OpInc % of revenue -5.0% 2.9% 3.8% 3.2% 4.6% 6.2% 10.3% 0.3% Interest & Other Income (loss) (182) (291) (241) 10 3 45 120 237 Pretax Income (loss) (1,394) 673 1,069 1,212 1,755 2,953 5,297 347 Taxes 17 21 14 314 535 210 (274) (108) Tax Rate -1% 3% 1% 26% 30% 7% -5% -31% Net Income (loss) (1,411)$ 652$ 1,055$ 898$ 1,220$ 2,743$ 5,571$ 455$ Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Mar 27 '16 Jun 26 '16 Sep 25 '16 Jan 01 '17 Apr 02 '17 Jul 02 '17 Oct 01 '17 Dec 31 '17 Stock Based Compensation COGS 3$ 3$ 9$ 18$ 43$ 42$ 38$ 42$ R&D 101 122 231 457 1,205 1,414 1,367 1,630 S&M 30 30 60 128 353 410 416 584 G&A 170 731 734 263 503 708 948 980 Total 304$ 886$ 1,034$ 866$ 2,104$ 2,574$ 2,769$ 3,236$ Non-Recurring Items S&M 199$ Income Taxes (35,305)$ Period Ending Quantenna Communications, Inc. Period Ending Period Ending GAAP to Non-GAAP Reconciling Items (in thousands, unaudited) (in thousands, unaudited) Consolidated Statements of Operations (Non-GAAP ) Consolidated Statements of Operations (GAAP) (in thousands, unaudited) February 12, 2018 Quantenna Q4 2017 Financial Results Page 2 of 4


 
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Period Ending Mar 27 '16 Jun 26 '16 Sep 25 '16 Jan 01 '17 Apr 02 '17 Jul 02 '17 Oct 01 '17 Dec 31 '17 Assets Current assets Cash, cash equivalents & marketable securities 20,744$ 16,943$ 17,822$ 117,045$ 114,401$ 124,389$ 126,866$ 118,627$ Accounts receivable 13,569 20,813 17,306 14,480 17,812 17,696 22,820 26,786 Inventory 7,259 7,449 10,268 15,820 13,361 20,985 23,700 12,662 Restricted Cash - 1,500 1,559 - - - - - Prepaid expenses and other current assets 1,743 1,666 1,842 2,470 3,745 4,332 2,444 2,744 Total current assets 43,315 48,371 48,797 149,815 149,319 167,402 175,830 160,819 Deferred tax asset 35,422 Property and equipment, net 2,828 3,548 3,842 4,742 6,025 6,380 11,215 12,511 Intangible assets, net - - - - - - 3,259 2,987 Other assets 178 1,311 2,443 232 743 769 1,037 965 Total assets 46,321$ 53,230$ 55,082$ 154,789$ 156,087$ 174,551$ 191,341$ 212,704$ Liabilities, Redeemable Convertible Preferred Stock, and Stockholders’ Equity (Deficit) Current liabilities Accounts payable 5,927$ 3,778$ 6,038$ 7,776$ 1,896$ 10,527$ 12,918$ 2,077$ Accrued liabilities and other current liabilities 7,517 10,626 11,910 11,801 18,163 22,021 27,941 22,742 Long-term debt, current portion 3,552 2,102 2,218 2,257 2,288 2,563 2,487 3,943 Total current liabilities 16,996 16,506 20,166 21,834 22,347 35,111 43,346 28,762 Long-term debt 1,386 7,967 4,342 3,680 3,539 2,445 1,900 - Other long term liabilities 578 527 0 425 3,413 3,339 Convertible preferred stock warrant liability 265 300 364 - - - - Total liabilities 18,647 24,773 25,450 26,041 25,886 37,981 48,659 32,101 Convertible preferred stock 184,704 184,704 184,704 - - - - - Stockholders’ equity (deficit) Common stock - - - 3 3 3 3 3 Additional paid-in capital 4,364 5,381 6,534 290,319 292,710 298,943 302,240 308,023 Accumulated deficit (161,394) (161,628) (161,606) (161,574) (162,512) (162,376) (159,561) (127,423) Total stockholders’ equity (deficit) (157,030) (156,247) (155,072) 128,748 130,201 136,570 142,682 180,603 Total liabilities, conv prfrrd stock and stockholders' equity 46,321$ 53,230$ 55,082$ 154,789$ 156,087$ 174,551$ 191,341$ 212,704$ Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Period Ending Mar 27 '16 Jun 26 '16 Sep 25 '16 Jan 01 '17 Apr 02 '17 Jul 02 '17 Oct 01 '17 Dec 31 '17 Cash flows from operating activities Net income (loss) (1,715)$ (234)$ 22$ 32$ (884)$ 169$ 2,802$ 32,325$ Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities Release of valuation allowance for the deferred tax asset (35,333) Depreciation and amortization 269 268 343 398 479 545 542 1,103 Stock-based compensation expense 304 886 1,009 866 2,104 2,574 2,769 3,236 Non-cash interest expense 34 (4) 110 182 135 77 108 220 Other 10 35 89 (22) - (15) 42 68 Changes in assets and liabilities Accounts receivable 2,148 (7,244) 3,507 2,826 (3,332) 116 (5,124) (3,966) Inventory 148 (190) (2,819) (5,552) 2,459 (7,624) (2,715) 11,038 Prepaid expenses and other current assets (315) 273 (241) (618) (1,324) (574) 1,876 (313) Other assets 4 (59) 71 (66) (511) (27) (252) 323 Accounts payable 10 (3,599) 2,453 2,940 (5,870) 8,522 2,467 (10,871) Accrued liabilities 1,900 3,109 1,127 (379) 6,309 3,604 4,747 (5,395) Net cash provided by (used in) operating activities 2,797 (6,759) 5,671 607 (435) 7,367 7,262 (7,565) Cash flows from investing activities Purchase of property and equipment (14) (612) (995) (1,103) (1,700) (746) (4,515) (2,009) Purchase of marketable securities - - - - - (71,169) (32,875) (27,746) Proceeds from sale of marketable securities - - - - - 4,994 (1,324) 7,014 Maturities of marketable securities - - - - - - 12,239 14,201 Restricted cash - (1,500) (59) 1,500 - - - - Net cash provided by (used in) investing activities (14) (2,112) (1,054) 397 (1,700) (66,921) (26,475) (8,540) Cash flows from financing activities Proceeds from issuance of common stock, net of issuance cost 53 35 697 406 194 3,882 477 3,122 Proceeds from initial public offering, net of issuance costs - - - 97,483 - - - - Principal payments on debt (942) (1,769) (554) (551) (672) (433) (651) (650) Other - 6,804 (3,881) 881 (31) (65) - (892) Net cash provided by (used in) financing activities (889) 5,070 (3,738) 98,219 (509) 3,384 (174) 1,580 Effect of exchange rate changes on cash & cash equivalents 113 Net increase (decrease) in cash and cash equivalents 1,894 (3,801) 879 99,223 (2,644) (56,170) (19,387) (14,412) Cash and cash equivalents Beginning of period 18,850 20,744 16,943 17,822 117,045 114,401 58,231 38,844 End of period 20,744 16,943 17,822 117,045 114,401 58,231 38,844 24,432 Quantenna Communications, Inc. Consolidated Balance Sheet (in thousands, unaudited) Condensed Consolidated Cash Flows (in thousands, unaudited) February 12, 2018 Quantenna Q4 2017 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 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. 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 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 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. February 12, 2018 Quantenna Q4 2017 Financial Results Page 4 of 4


 
Fourth Quarter 2017 Earnings Presentation February 12, 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 dated March 2, 2017 and subsequent 10Q 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 2013 2014 2015 2016 2017 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 Repeater & Mesh Node 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.


 
Q4 2017 Financial Highlights Quarterly revenue of $41.3 million • 10% Y/Y growth vs Q4 2016 Gross margin of 51.7% • Within the 50.5% to 52.5% guidance range • Up 270bps Q/Q vs Q3 2017 Earnings of $0.5 million • $0.01 in EPS exceeded ($0.02) to ($0.04) guidance range 0 30 60 90 120 150 180 Q4 2016 Q4 2017 2016 2017 37% YoY Strong Revenue Growth Profile $MM 10% YoY 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.


 
Technology Cycles Drive Growth $MM 0 10 20 30 40 50 Q1'16 Q2'16 Q3'16 Q4'16 Q1'17 Q2'17 Q3'17 Q4'17 Other 802.11n 802.11ac Wave2 802.11ac Wave3 (10G) • 802.11ac Wave 3 (10G) revenue – Declined 62% Q/Q to $2.5 million – Q1 revenue expected to grow Q/Q but not exceed Q3 levels • 802.11ac Wave 2 revenue – Declined $1.8 million or -5% Q/Q – Grew 9% Y/Y to $34.3 million – Q1 revenue expected grow Q/Q • 802.11n revenue – As expected, declined 51% Q/Q to $3.7 million – Q1 revenue is expected to decline Q/Q Q4 Wi-Fi Technology Segmentation Highlights 9


 
Operating Results & Guidance 2016 2017 Q3 2017 Q4 2017 Q1 2018 Guidance Revenue $129.1 $176.4 $50.1 $41.3 $43 - $45 Gross Margin 50% 50% 49% 52% GAAP: 50% +/-100bps non-GAAP: 50% +/-100bps OPEX 48% 44% 39% 51% GAAP: down 1% to up 4% Q/Q non-GAAP: flat to up 5% Q/Q EPS $0.04 $0.26 $0.14 $0.01 GAAP: ($0.08) – ($0.06) non-GAAP: $0.00 – $0.02 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 Q2 2017 Q3 2017 2017 Cash, Cash Equivalents & Marketable Securities $18.9 $117.0 $124.4 $126.9 $118.6 Total Assets $46.7 $154.8 $174.6 $191.3 $212.7 Total Debt $5.8 $5.9 $5.0 $4.4 $3.9 Total Liabilities $17.6 $26.0 $38.0 $48.7 $32.1 Total Stockholders’ Equity (Deficit) ($155.7) $128.7 $136.6 $142.7 $180.6 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 Q3 2017 Q4 2017 2017 Non-GAAP Gross Margin 49% 50% 49% 52% 50% SBC: Gross Margin 0% 0% 0% 0% 0% GAAP Gross Margin 49% 50% 49% 52% 50% Non-GAAP Operating Margin (6%) 2% 10% 0% 6% SBC: R&D 0% 1% 3% 4% 3% SBC: S&M 1% 0% 1% 1% 1% SBC: G&A 1% 1% 2% 2% 2% Non-recurring items 0% 0% 0% 0% 0% GAAP Operating Margin (7%) (1%) 5% (8%) (1%)


 
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 Q3 2017 Q4 2017 2017 Non-GAAP Net Margin (7%) 1% 11% 1% 6% SBC: Gross Margin 0% 0% 0% 0% 0% SBC: R&D 0% 1% 3% 4% 3% SBC: S&M 1% 0% 1% 1% 1% SBC: G&A 1% 1% 2% 2% 2% Non-recurring items 0% 0% 0% (85%) (20%) GAAP Net Margin (8%) (1%) 6% 78% 20%


 
Wi-Fi Perfected™ 15 Semiconductors Cloud Analytics System Software