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News Release
 

Quantenna Announces Fourth Quarter and Fiscal 2018 Financial Results
Record Quarterly Revenue Grew 52% Annually Driven by Quantenna’s Product Strategy
San Jose, CA – February 4, 2019 – 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 2018 ended December 30, 2018.
"Our strong fourth quarter and annual operating results showcase the success of our broad product portfolio as both our premium Wave 3 10G product and high-performance mainstream Wave 2 product experienced record revenue. We continue to experience strong customer engagement with our products, including our family of Wi-Fi 6 product offerings,” commented Dr. Sam Heidari, Chairman and Chief Executive Officer.
Financial Summary
 
Three Months Ended
 
 
 
Twelve Months Ended
 
 
 
December 30,
2018
 
December 31,
2017
 
% Change
 
December 30,
2018
 
December 31,
2017
 
% Change
(in thousands except per share data, unaudited)
 
 
 
 
 
 
 
 
 
 
Revenue
$
62,567

 
$
41,275

 
51.6%
 
$
220,460

 
$
176,359

 
25.0%
Gross Profit
31,283

 
21,279

 
47.0%
 
109,402

 
88,151

 
24.1%
Gross Margin
50.0
%
 
51.6
%
 
(160) bps
 
49.6
%
 
50.0
%
 
(40) bps
 
 
 
 
 
 
 
 
 
 
 
 
Net income:
 
 
 
 
 
 
 
 
 
 
 
GAAP
$
1,419

 
$
32,325

 
 
 
$
3,083

 
$
34,412

 
 
Non-GAAP
7,619

 
455

 
 
 
20,371

 
9,989

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income per share - diluted:
 
 
 
 
 
 
 
 
 
 
 
GAAP
$
0.04

 
$
0.84

 
 
 
$
0.08

 
$
0.89

 
 
Non-GAAP
0.19

 
0.01

 
 
 
0.51

 
0.26

 
 
 
 
 
 
 
 
 
 
 
 
 
 

Commentary on the fourth quarter and fiscal year 2018 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 2018 Company Highlights
•
Record revenue of $220.5 million in fiscal year 2018 represented year over year growth of 25% compared to fiscal year 2017. Record revenue of $62.6 million in the fourth quarter represented year over year growth of 52% over the fourth quarter of 2017.

•
Fiscal year 2018 GAAP diluted EPS of $0.08 compared to $0.89 in fiscal year 2017. Fourth quarter GAAP diluted EPS of $0.04 compared to $0.84 in the fourth quarter of 2017.

•
Record fiscal year 2018 non-GAAP diluted EPS of $0.51 compared to $0.26 in fiscal year 2017. Record fourth quarter of 2018 non-GAAP diluted EPS of $0.19 compared to $0.01 in the fourth quarter of 2017.

•
GAAP operating income of $2.8 million and non-GAAP operating income of $20.1 million in fiscal year 2018, compared to GAAP operating loss of $(0.9) million and non-GAAP operating income of $9.9 million in fiscal year 2017.

•
Cash from operations totaled $24.8 million in fiscal year 2018, compared to $6.6 million in fiscal year 2017, representing annual growth of 274%. Fourth quarter cash from operations totaled $5.1 million compared to $(7.6) million in the fourth quarter of 2017.

•
Record revenue from both our Wave 3 10G and Wave 2 product segments.

•
Reinforced our strategic partnership with Telefónica, a leading global service provider, with the development of new product offerings utilizing our Wi-Fi 6 solutions.

•
Starry Inc., a next generation service provider using 5G millimeter wave technology, will use our Wi-Fi 6 chipsets in their base station technology.

•
Delivered Wi-Fi 6 reference designs for next generation GPON gateways and routers with Cortina Access, Inc.

•
Introduced Spartan Essential, a turn-key design targeting multiple consumer Wi-Fi applications such as mesh, access point for wired extenders and boosters for upgrading existing gateways.

•
Orange S.A., the largest broadband provider in France, is using our Wave 2 technology for its latest generation of repeaters and set-top boxes.

 

 






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Business Outlook
 
First Quarter 2019
Guidance Range
Revenue
 $56M to $59M
Gross Margin
 
GAAP
50.4% +/- 50bps
Non-GAAP
50.5% +/- 50bps
Operating Expenses
 
GAAP
$27.4M to $28.4M
Non-GAAP
$23.0M to $24.0M
Net income per share-diluted
 
GAAP
$0.02 to $0.04
Non-GAAP
$0.13 to $0.15
 
 
Gross margin, operating expense and net income GAAP to Non-GAAP reconciliation relates to stock-based compensation expense and change in deferred tax assets.
 

Webcast and Conference Call
Quantenna management will host a conference call discussing the quarterly results and business outlook following this press release at 1:30 p.m. Pacific Time today. Individuals interested in listening to the conference call may do so by dialing (877) 239-5585 for domestic callers or (661) 378-9806 for international callers. Please reference Conference ID: 5966507. An audio webcast and replay will be available on the “Investor Relations” section of Quantenna’s website at http://ir.quantenna.com/events.cfm.
Non-GAAP Financial Measures
In addition to GAAP reporting, Quantenna provides information regarding net income, gross profit, gross margin, and operating expenses on a non-GAAP basis. This non-GAAP information excludes stock-based compensation expense and changes to deferred tax balances. These non-GAAP measures are used by the Company’s management for the purposes of evaluating the underlying operating performance of the Company, establishing internal budgets, comparing performance with internal forecasts and goals, strategic planning, benchmarking against other companies, to provide a more consistent basis of comparison and to enable more meaningful period to period comparisons. These non-GAAP measures are provided in addition to, and not as a substitute for, measures of financial performance prepared in accordance with GAAP. A reconciliation between GAAP and non-GAAP financial data is included in the supplemental financial tables included in this press release.
Forward-Looking Statements
This press release contains forward-looking statements based on Quantenna’s current expectations, including statements regarding Quantenna’s preliminary financial results for the fourth quarter and fiscal year 2018 ended December 30, 2018, forecasted financial results for the first quarter of fiscal 2019, 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

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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; quarterly fluctuations in revenues and operating results; risks and uncertainties related to international operations, including the impact of increased tariffs and escalating trade tensions with China directly and indirectly impacting Quantenna and its customers, end customers, vendors and partners; potential cancellation, delay or volatility of customer orders; 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; 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; the complexity of the products, including integration requirements with components from other third parties that are outside of Quantenna's control; 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; dependence of Quantenna's customers on components from other third parties; risks that Quantenna may not be able to manage strains associated with its growth; dependence on key personnel; stock price volatility; the cyclical nature of the semiconductor industry; changes in tax and other laws affecting Quantenna’s business and operations; cyberattacks; adjustments to the preliminary financial results reported in this press release and related earnings call announcement and materials for the fourth quarter of 2018 in connection with completion of the final closing process and procedures and preparation of our 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. Quantenna continues to innovate with the mission to perfect Wi-Fi by establishing benchmarks for speed, range, efficiency and reliability. Quantenna takes a multidimensional approach, from silicon and system to software, and provides total Wi-Fi solutions. For more information, visit www.quantenna.com.


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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 30,
2018
 
December 31,
2017
 
December 30,
2018
 
December 31,
2017
 
 
 
 
 
 
 
 
Revenue
$
62,567

 
$
41,275

 
$
220,460

 
$
176,359

Cost of revenue
31,284

 
19,996

 
111,058

 
88,208

Gross profit
31,283

 
21,279

 
109,402

 
88,151

Operating expenses:
 
 
 
 
 
 
 
Research and development
19,054

 
16,048

 
71,522

 
59,747

Sales and marketing
3,996

 
4,487

 
16,303

 
14,040

General and administrative
5,165

 
4,069

 
18,767

 
15,299

Total operating expenses
28,215

 
24,604

 
106,592

 
89,086

Income (loss) from operations
3,068

 
(3,325
)
 
2,810

 
(935
)
Interest expense
—

 
(272
)
 
—

 
(713
)
Other income, net
432

 
509

 
1,239

 
1,118

Income (loss) before income taxes
3,500

 
(3,088
)
 
4,049

 
(530
)
Benefit (provision) for income taxes
(2,081
)
 
35,413

 
(966
)
 
34,942

Net income
$
1,419

 
$
32,325

 
$
3,083

 
$
34,412

Net income per share - basic
$
0.04

 
$
0.92

 
$
0.08

 
$
1.00

Net income per share - diluted
$
0.04

 
$
0.84

 
$
0.08

 
$
0.89

 
 
 
 
 
 
 
 
Shares used in computing net income per share:
 
 
 
 
 
 
 
Basic
37,527

 
35,316

 
36,744

 
34,259

Diluted
40,027

 
38,281

 
39,663

 
38,484



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Quantenna Communications, Inc.
Condensed Consolidated Balance Sheets
(in thousands, unaudited)
 
December 30,
2018
 
December 31, 2017
Assets
 
 
 
Current assets
 
 
 
Cash and cash equivalents
$
38,881

 
$
24,432

Marketable securities
97,268

 
94,195

Accounts receivable
28,326

 
26,786

Inventory
20,218

 
12,662

Prepaid expenses and other current assets
5,325

 
2,744

Total current assets
190,018

 
160,819

Deferred tax assets, net
35,563

 
35,422

Property and equipment, net
13,691

 
12,511

Intangible and other assets, net
6,384

 
3,952

Total assets
$
245,656

 
$
212,704

Liabilities and Stockholders’ Equity
 
 
 
Current liabilities
 
 
 
Accounts payable
$
9,852

 
$
3,754

Accrued liabilities and other current liabilities
25,946

 
21,065

Long-term debt, current portion
—

 
3,943

Total current liabilities
35,798

 
28,762

Other long-term liabilities
3,371

 
3,339

Total liabilities
39,169

 
32,101

 
 
 
 
Stockholders’ equity
 
 
 
Common stock
4

 
3

Additional paid-in capital
331,551

 
308,023

Accumulated other comprehensive loss
(935
)
 
(207
)
Accumulated deficit
(124,133
)
 
(127,216
)
Total stockholders’ equity
206,487

 
180,603

Total liabilities and stockholders’ equity
$
245,656

 
$
212,704



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Quantenna Communications, Inc.
Condensed Consolidated Cash Flows
(in thousands, unaudited)
 
Year Ended
 
December 30, 2018
 
December 31, 2017
 
 
 
 
Cash flows from operating activities
 
 
 
Net income
$
3,083

 
$
34,412

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Stock based compensation
17,289

 
10,683

Depreciation and amortization
4,861

 
2,669

Deferred income taxes
53

 
(35,333
)
Other
1,067

 
635

Changes in assets and liabilities:
 
 
 
Accounts receivable
(1,540
)
 
(12,306
)
Inventory
(7,556
)
 
3,158

Prepaid expenses and other current assets
(2,581
)
 
(335
)
Deferred rent and other assets
313

 
(467
)
Accounts payable
5,791

 
(5,752
)
Accrued liabilities and other current liabilities
4,040

 
9,265

Net cash provided by operating activities
24,820

 
6,629

Cash flows from investing activities
 
 
 
Purchase of property and equipment
(5,100
)
 
(8,970
)
Purchase of long-term investment
(590
)
 
—

Purchase of intangible asset
(1,732
)
 
—

Purchase of marketable securities
(69,716
)
 
(131,790
)
Proceeds from sales of marketable securities
—

 
10,684

Maturities of marketable securities
66,173

 
26,440

Net cash used in investing activities
(10,965
)
 
(103,636
)
Cash flows from financing activities
 
 
 
Proceeds from issuance of common stock
8,418

 
7,675

Payment of taxes withheld for vested stock awards
(2,501
)
 
(626
)
Proceeds from initial public offering, net of issuance costs
—

 
(96
)
Payments related to intangible asset purchase
(1,086
)
 
(266
)
Repayments of long-term debt
(3,943
)
 
(2,406
)
Net cash provided by financing activities
888

 
4,281

Effect of exchange rate changes on cash and cash equivalents
(294
)
 
113

Net increase (decrease) in cash and cash equivalents
14,449

 
(92,613
)
Cash and cash equivalents
 
 
 
Beginning of year
24,432

 
117,045

End of year
$
38,881

 
$
24,432

 

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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 30, 2018
 
Three Months Ended December 31, 2017
 
GAAP
Measure
Stock-based
Compensation
Expense
Income Taxes*
Non-GAAP
Measure
 
GAAP
Measure
Stock-based
Compensation
Expense
Non-Recurring Items**
Income Taxes*
Non-GAAP
Measure
Revenue
$
62,567

 
 
$
62,567

 
$
41,275

 
 
 
$
41,275

Gross profit
31,283

53

 
31,336

 
21,279

42

 
 
21,321

Gross margin
50.0
%
0.1
%
 
50.1
%
 
51.6
%
0.1
%
 
 
51.7
%
Research and development
19,054

2,506

 
16,548

 
16,048

1,630

 
 
14,418

Sales and marketing
3,996

578

 
3,418

 
4,487

584

199

 
3,704

General and administrative
5,165

1,229

 
3,936

 
4,069

980

 
 
3,089

Income (loss) from operations
3,068

4,366

—

7,434

 
(3,325
)
3,236

199

—

110

Benefit (provision) for income taxes
(2,081
)
—

1,834

(247
)
 
35,413

—

—

(35,305
)
108

Net income (loss)
$
1,419

$
4,366

$
1,834

$
7,619

 
$
32,325

$
3,236

$
199

$
(35,305
)
$
455

Basic shares outstanding
37,527

 
 
37,527

 
35,316

 
 
 
35,316

Basic earnings per share
$
0.04

 
 
$
0.20

 
$
0.92

 
 
 
$
0.01

Diluted shares outstanding
40,027

 
 
40,027

 
38,281

 
 
 
38,281

Diluted earnings per share
$
0.04

 
 
$
0.19

 
$
0.84

 
 
 
$
0.01


Non-GAAP Income Statement Items
Twelve months ended December 30, 2018
 
Twelve months ended December 31, 2017
 
GAAP
Measure
Stock-based
Compensation
Expense
Income Taxes*
Non-GAAP
Measure
 
GAAP
Measure
Stock-based
Compensation
Expense
Non-Recurring Items**
Income Taxes*
Non-GAAP
Measure
Revenue
$
220,460

 
 
$
220,460

 
$
176,359

 
 
 
$
176,359

Gross profit
109,402

199

 
109,601

 
88,151

165

 
 
88,316

Gross margin
49.6
%
0.1
%
 
49.7
%
 
50.0
%
0.1
%
 
 
50.1
%
Research and development
71,522

9,676

 
61,846

 
59,747

5,616

 
 
54,131

Sales and marketing
16,303

2,696

 
13,607

 
14,040

1,763

199

 
12,078

General and administrative
18,767

4,718

 
14,049

 
15,299

3,139

 
 
12,160

Income (loss) from operations
2,810

17,289

—

20,099

 
(935
)
10,683

199

—

9,947

Benefit (provision) for income taxes
(966
)
—

(1
)
(967
)
 
34,942

—

—

(35,305
)
(363
)
Net income (loss)
$
3,083

$
17,289

$
(1
)
$
20,371

 
$
34,412

$
10,683

$
199

$
(35,305
)
$
9,989

Basic shares outstanding
36,744

 
 
36,744

 
34,259

 
 
 
34,259

Basic earnings per share
$
0.08

 
 
$
0.55

 
$
1.00

 
 
 
$
0.29

Diluted shares outstanding
39,663

 
 
39,663

 
38,484

 
 
 
38,484

Diluted earnings per share
$
0.08

 
 
$
0.51

 
$
0.89

 
 
 
$
0.26


*Income tax adjustment relating to change in US Federal and State deferred tax assets.
**Non-recurring items comprised of executive severance.

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Quantenna Communications, Inc.
Unaudited Forward-Looking Statements Regarding Business Outlook
Business Outlook
Three Months Ended March 31, 2019





Low

High
Estimated GAAP diluted earnings per share
$
0.02


$
0.04

Estimated stock compensation expense
(0.11
)

(0.11
)
Estimated Non-GAAP diluted earnings per share
$
0.13


$
0.15



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

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