QTNA - Quantenna Announces Fourth Quarter and Fiscal 2018 Financial Results

February, 04 2019 04:05 PM Quantenna Communications Inc.

SAN JOSE, Calif., Feb. 04, 2019 (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 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 TelefÃ³nica, 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.

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 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.

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

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

Quantenna Communications, Inc.
Condensed Consolidated Cash Flows
(in thousands, unaudited)


Years 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

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.

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

Company Name:	Quantenna Communications Inc.
Stock Symbol:	QTNA
Market:	NASDAQ

Twitter