SAN JOSE, Calif., Feb. 12, 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 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/events.cfm.

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 4×4 802.11ax radios and integrated CPU cores for optimal mesh repeating functionality. It supports the newest Wi-Fi standard, 802.11ax.

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, 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.

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  
                       

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  
               

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  
               

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

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  
               
CONTACT: Quantenna Communications, Inc.
Vernon Essi, Jr.
669-209-5647
[email protected]