Another Record Revenue Quarter Highlights Quantenna’s Broad Product Portfolio

SAN JOSE, Calif., Oct. 29, 2018 (GLOBE NEWSWIRE) -- Quantenna Communications, Inc. (NASDAQ:QTNA), a global leader and innovator of leading-edge performance Wi-Fi solutions, today announced preliminary unaudited financial results for the third quarter ended September 30, 2018.

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

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

Financial Summary

 Three Months Ended   Nine Months Ended  
 September 30,
 2018		 October 1,
 2017		 % Change September 30,
 2018		 October 1,
 2017		 % Change
            
Revenue$59,349  $50,108  18.4% $157,893  $135,084  16.9%
Gross Profit29,490  24,517  20.3% 78,119  66,872  16.8%
Gross Margin49.7% 48.9% 80 bps 49.5% 49.5% — bps
            
Net income:           
GAAP$3,879  $2,802    $1,664  $2,087   
Non-GAAP6,968  5,571    12,752  9,534   
            
Net income per share - diluted:           
GAAP$0.10  $0.07    $0.04  $0.05   
Non-GAAP0.17  0.14    0.32  0.25   
            
(in thousands except per share data, unaudited)          
           

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

Third Quarter Company Highlights

  • Record revenue of $59.3 million, representing year over year growth of 18% over the third quarter of 2017 and 11% sequential growth over the second quarter of 2018.

  • Third quarter GAAP diluted EPS of $0.10 compares to $0.07 in the third quarter of 2017. Third quarter non-GAAP dilutive EPS of $0.17 compares to $0.14 in the third quarter of 2017.

  • Third quarter GAAP operating income grew 24% compared to the third quarter of 2017. Third quarter non-GAAP operating income grew 35% compared to the third quarter of 2017.

  • Third quarter cash generated from operations grew 118% compared to the third quarter of 2017. Cumulative 2018 year-to-date cash from operations grew 39% compared to 2017.

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

  • Expansion of Wave 3 10G into Europe with Deutsche Telekom’s award-winning Speedport Pro gateway powered by Quantenna’s Wave 3 10G solution, using its full 12 stream capabilities for maximum Wi-Fi performance.

  • Released and sampled to customers the QSR5GU-AX PLUS, the world’s only dual-band, 9-stream 802.11ax solution.

  • The latest North American cable MSO initiated a full volume rollout using our Wave 3 QSR 10G technology in their next generation gateway bringing our total to four cable MSOs in deployment.

  • Enabled individual Wi-Fi clients to exceed 1Gbps throughput using Quantenna's QSR10GU-AX PLUS and QSR10G with commercially available mobile products from Intel Corp.

  • Orange Poland launched their new dual-band dual-concurrent Wi-Fi repeater, the Smart Wi-Fi Box, based on one of our Wave 2 chipsets.

  • Integrated Plume’s Adaptive WiFi™ AI driven mesh solution into our QSR5GU-AX PLUS solution to deliver the next generation of whole-home mesh networking.

  • Announced a strategic partnership with Aerial Technologies to bring the latest in Wi-Fi motion detection technology to the market.

Business Outlook

 Fourth Quarter 2018
Guidance Range
Revenue$61M to $63M
Gross Margin 
GAAP49.9% +/- 100bps
Non-GAAP50.0% +/- 100bps
Operating Expense 
GAAP$27.1M to $28.1M
Non-GAAP$23.0M to $24.0M
Net income per share-diluted 
GAAP$0.08 - $0.10
Non-GAAP$0.18 - $0.20
  
Gross margin, operating expense and net income GAAP to Non-GAAP reconciliation relates to stock-based compensation expense and change in deferred tax assets. 
  

Webcast and Conference Call

Quantenna management will host a conference call discussing the quarterly results and business outlook following this press release at 1:30 p.m. Pacific Time today. Individuals interested in listening to the conference call may do so by dialing (877) 239-5585 for domestic callers or (661) 378-9806 for international callers. Please reference Conference ID: 1795125. An audio webcast and replay will be available on the “Investor Relations” section of Quantenna’s website at http://ir.quantenna.com/events.cfm.

Non-GAAP Financial Measures

In addition to GAAP reporting, Quantenna provides information regarding net income, gross profit, gross margin, and operating expenses on a non-GAAP basis. This non-GAAP information excludes stock-based compensation expense and changes to deferred tax balances. These non-GAAP measures are used by the Company’s management for the purposes of evaluating the underlying operating performance of the Company, establishing internal budgets, comparing performance with internal forecasts and goals, strategic planning, benchmarking against other companies, to provide a more consistent basis of comparison and to enable more meaningful period to period comparisons. These non-GAAP measures are provided in addition to, and not as a substitute for, measures of financial performance prepared in accordance with GAAP. A reconciliation between GAAP and non-GAAP financial data is included in the supplemental financial tables included in this press release.

Forward-Looking Statements

This press release contains forward-looking statements based on Quantenna’s current expectations, including statements regarding Quantenna’s preliminary financial results for the third quarter ended September 30, 2018, forecasted financial results for the fourth quarter of fiscal 2018, expected future business and financial performance, growth opportunities, product technologies and customer relationships. The words "believe," "estimate," "expect," "intend," "anticipate," "plan," "project," "will" and similar phrases as they relate to Quantenna are intended to identify such forward-looking statements. These forward-looking statements reflect the current views and assumptions of Quantenna and are subject to various risks and uncertainties that could cause actual results to differ materially from expectations. Among the factors that could cause actual results to differ materially from those in the forward-looking statements are the following: challenges developing new and leading edge products on a timely basis that achieve market acceptance; the complexity of the products, including integration requirements with components from other third parties that are outside of Quantenna's control; quarterly fluctuations in revenues and operating results; intense market competition, including competition from other companies that are larger and have greater resources and broader product ecosystem offerings; ability to accurately predict future revenue and expenses; potential cancellation of customer orders; risks that Quantenna may not be able to maintain its historical growth or achieve similar levels of success with respect to new products; ability to attract and retain customers and service providers; dependence on a limited number of products and customers; intellectual property litigation risks; industry consolidation and risks associated with acquisitions, divestitures and strategic partnerships with respect to Quantenna as well as third parties; product liability risks; risks related to international operations, including the impact of increased tariffs and escalating trade tensions among countries on Quantenna and its customers, end customers, vendors and partners; dependence of Quantenna's customers on components from other third parties; risks that Quantenna may not be able to manage strains associated with its growth; dependence on key personnel; stock price volatility; the cyclical nature of the semiconductor industry; changes in tax and other laws affecting Quantenna’s business and operations; cyberattacks; adjustments to the preliminary financial results reported in this press release and related earnings call announcement and materials for the third quarter of 2018 in connection with completion of the final closing process and procedures and preparation of our Quarterly Report on Form 10-Q; and other factors that are detailed in the Securities and Exchange (“SEC”) filings of Quantenna, which you may obtain for free at the SEC’s website at http://www.sec.gov. Quantenna disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

About Quantenna Communications

Quantenna (Nasdaq:QTNA) is the global leader and innovator of high performance Wi-Fi solutions. Founded in 2006, Quantenna has demonstrated its leadership in Wi-Fi technologies with many industry firsts. Quantenna continues to innovate with the mission to perfect Wi-Fi by establishing benchmarks for speed, range, efficiency and reliability. Quantenna takes a multidimensional approach, from silicon and system to software, and provides total Wi-Fi solutions. For more information, visit www.quantenna.com.

     
Quantenna Communications, Inc.
Condensed Consolidated Statements of Operations
(in thousands except per share data, unaudited)
     
 Three Months Ended Nine Months Ended 
 September 30,
 2018		 October 1,
 2017		 September 30,
 2018		 October 1,
 2017		 
         
Revenue$59,349  $50,108  $157,893  $135,084  
Cost of revenue29,859  25,591  79,774  68,212  
Gross profit29,490  24,517  78,119  66,872  
Operating expenses:        
Research and development17,783  15,011  52,468  43,699  
Sales and marketing3,833  3,363  12,307  9,553  
General and administrative4,886  3,735  13,602  11,231  
Total operating expenses26,502  22,109  78,377  64,483  
Income (loss) from operations2,988  2,408  (258) 2,389  
Interest expense—  (103) —  (442) 
Other income, net243  223  807  610  
Income before income taxes3,231  2,528  549  2,557  
Benefit (provision) for income taxes648  274  1,115  (470) 
Net income$3,879  $2,802  $1,664  $2,087  
Net income per share - basic$0.10  $0.08  $0.05  $0.06  
Net income per share - diluted$0.10  $0.07  $0.04  $0.05  
         
Shares used in computing net income per share:        
Basic37,070  34,734  36,476  33,907  
Diluted40,026  38,525  39,425  38,419  
         


   
Quantenna Communications, Inc.
Unaudited reconciliation of GAAP to Non-GAAP Financial Measures
(in thousands, except per share data)
   
Non-GAAP Income Statement ItemsThree months ended September 30, 2018Three months ended October 1, 2017
 GAAP
Measure		Stock-based
Compensation
Expense		Income Taxes*Non-GAAP
Measure		GAAP
Measure		Stock-based
Compensation
Expense		Non-GAAP
Measure
Revenue$59,349   $59,349 $50,108  $50,108 
Gross profit29,490 50  29,540 24,517 38 24,555 
Gross margin49.7%0.1% 49.8%48.9%0.1%49.0%
Research and development17,783 2,248  15,535 15,011 1,367 13,644 
Sales and marketing3,833 541  3,292 3,363 416 2,947 
General and administrative4,886 1,163  3,723 3,735 948 2,787 
Income from operations2,988 4,002  6,990 2,408 2,769 5,177 
(Provision) benefit for income taxes648 — (913)(265)274 — 274 
Net income$3,879 $4,002 $(913)$6,968 $2,802 $2,769 $5,571 
Basic shares outstanding37,070   37,070 34,734  34,734 
Basic earnings per share$0.10   $0.19 $0.08  $0.16 
Diluted shares outstanding40,026   40,026 38,525  38,525 
Diluted earnings per share$0.10   $0.17 $0.07  $0.14 
                


Non-GAAP Income Statement ItemsNine months ended September 30, 2018Nine months ended October 1, 2017
 GAAP
Measure		Stock-based
Compensation
Expense		Income Taxes*Non-GAAP
Measure		GAAP
Measure		Stock-based
Compensation
Expense		Non-GAAP
Measure
Revenue$157,893   $157,893 $135,084  $135,084 
Gross profit78,119 146  78,265 66,872 123 66,995 
Gross margin49.5%0.1% 49.6%49.5%0.1%49.6%
Research and development52,468 7,170  45,298 43,699 3,986 39,713 
Sales and marketing12,307 2,118  10,189 9,553 1,179 8,374 
General and administrative13,602 3,489  10,113 11,231 2,159 9,072 
Income (loss) from operations(258)12,923  12,665 2,389 7,447 9,836 
(Provision) benefit for income taxes1,115 — (1,835)(720)(470)— (470)
Net income (loss)$1,664 $12,923 $(1,835)$12,752 $2,087 $7,447 $9,534 
Basic shares outstanding36,476   36,476 33,907  33,907 
Basic earnings per share$0.05   $0.35 $0.06  $0.28 
Diluted shares outstanding39,425   39,425 38,419  38,419 
Diluted earnings per share$0.04   $0.32 $0.05  $0.25 
                
*Income tax adjustment relating to change in US Federal and State deferred tax assets.
                


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


    
Quantenna Communications, Inc.
Condensed Consolidated Balance Sheets
(in thousands, unaudited)
    
 September 30,
 2018		 December 31,
2017
Assets   
Current assets   
Cash and cash equivalents$34,559  $24,432 
Marketable securities97,471  94,195 
Accounts receivable20,081  26,786 
Inventory21,578  12,662 
Prepaid expenses and other current assets6,512  2,744 
Total current assets180,201  160,819 
Deferred tax assets37,443  35,422 
Property and equipment, net13,418  12,511 
Intangible and other assets, net3,571  3,952 
Total assets$234,633  $212,704 
Liabilities and Stockholders’ Equity   
Current liabilities   
Accounts payable$10,255  $3,754 
Accrued liabilities and other current liabilities23,220  21,065 
Long-term debt, current portion—  3,943 
Total current liabilities33,475  28,762 
Other long-term liabilities2,670  3,339 
Total liabilities36,145  32,101 
    
Stockholders’ equity   
Common stock3  3 
Additional paid-in capital324,931  308,023 
Accumulated other comprehensive loss(894) (207)
Accumulated deficit(125,552) (127,216)
Total stockholders’ equity198,488  180,603 
Total liabilities and stockholders’ equity$234,633  $212,704 
        


  
Quantenna Communications, Inc.
Condensed Consolidated Cash Flows
(in thousands, unaudited)
  
 Nine Months Ended
 September 30,
2018		 October 1,
2017
    
Cash flows from operating activities   
Net income$1,664  $2,087 
Adjustments to reconcile net income to net cash provided by operating activities:   
Depreciation and amortization3,467  1,566 
Stock-based compensation expense12,923  7,447 
Deferred income taxes(1,821) — 
Other705  347 
Changes in assets and liabilities:   
Accounts receivable6,705  (8,340)
Inventory(8,916) (7,880)
Prepaid expenses and other current assets(3,768) (22)
Deferred rent and other assets159  (790)
Accounts payable6,498  5,119 
Accrued liabilities and other current liabilities2,075  14,660 
Net cash provided by operating activities19,691  14,194 
Cash flows from investing activities   
Purchase of property and equipment(3,962) (6,961)
Purchase of long-term investment(590) — 
Purchase of marketable securities(47,917) (104,044)
Proceeds from sales of marketable securities—  3,670 
Maturities of marketable securities44,259  12,239 
Net cash used in investing activities(8,210) (95,096)
Cash flows from financing activities   
Proceeds from issuance of common stock, net6,091  5,083 
Payments of taxes withheld for vested stock awards(2,428) (626)
Payments related to intangible asset purchase(815) — 
Repayments of long-term debt(3,943) (1,756)
Net cash (used in) provided by financing activities(1,095) 2,701 
Effect of exchange rates on cash and cash equivalents(259) — 
Net increase (decrease) in cash and cash equivalents10,127  (78,201)
Cash and cash equivalents   
Beginning of period24,432  117,045 
End of period$34,559  $38,844 
    



 

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

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