QUANTENNA COMMUNICATIONS INC - FORM 8-K - EX-99.1 - EXHIBIT 99.1 - November 6, 2017

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EX-99.3 - EXHIBIT 99.3 - QUANTENNA COMMUNICATIONS INCexhibit993quantennaq3201.htm
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Exhibit 99.1
quantennaannouncesfo_image12.jpg
 

News Release
Quantenna Announces Third Quarter 2017 Financial Results
Revenue and Earnings Reach Record Levels
San Jose, CA - November 6, 2017 - 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 October 1, 2017.
“We are pleased to report record third quarter results, demonstrating annual revenue growth of 47%, record GAAP EPS of $0.07 and record non-GAAP EPS of $0.14. We experienced growing customer adoption of our newer Wave 3 10G products combined with strong shipment levels of our core Wave 2 offerings and legacy 802.11n products,” remarked Dr. Sam Heidari, Chairman and Chief Executive Officer.
“While in the fourth quarter we anticipate a delay in the deployment of a key service provider program coupled with near-term softness at one other service provider customer, we continue to execute to our Wave 2 and Wave 3 10G development plans and anticipate these deployments to resume in 2018.”
Financial Summary
 
Three Months Ended
 
 
 
Nine Months Ended
 
 
 
October 1,
2017
 
September 25,
2016
 
% Change
 
October 1,
2017
 
September 25,
2016
 
% Change
 
 
 
 
 
 
 
 
 
 
 
 
Revenue
$
50,108

 
$
34,105

 
46.9%
 
$
135,084

 
$
91,577

 
47.5%
Gross Profit
24,517

 
16,858

 
45.4%
 
66,872

 
45,125

 
48.2%
Gross Margin
48.9
%
 
49.4
%
 
(50) bps
 
49.5
%
 
49.3
%
 
20 bps
 
 
 
 
 
 
 
 
 
 
 
 
Net income (loss):
 
 
 
 
 
 
 
 
 
 
 
GAAP
$
2,802

 
$
21

 
 
 
$
2,087

 
$
(1,927
)
 
 
Non-GAAP
5,571

 
1,055

 
 
 
9,534

 
297

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income (loss) per share - diluted:
 
 
 
 
 
 
 
 
 
 
 
GAAP
$
0.07

 
$
0.00

 
 
 
$
0.05

 
$
(1.84
)
 
 
Non-GAAP
0.14

 
0.04

 
 
 
0.25

 
0.01

 
 
 
 
 
 
 
 
 
 
 
 
 
 
(in thousands except per share data, unaudited)
 
 
 
 
 
 
 
 
 
 





Commentary on the third quarter 2017 financial results by Company management is available at http://ir.quantenna.com/.
Please see the note regarding the use of non-GAAP financial measures below, including a detailed reconciliation between GAAP and non-GAAP information in the tables included herein.
Third Quarter Company Highlights
•
Record revenue of $50.1 million, representing year over year growth of 47% over the third quarter of 2016 and 6% sequential growth over the second quarter of 2017.

•
GAAP operating income grew to $2.4 million, and non-GAAP operating income grew to $5.2 million, or 10.3% of revenue. Non-GAAP operating income reached another quarterly record and grew 78% sequentially over the second quarter of 2017.

•
Cash from operations totaled $7.3 million, or $0.19 per fully diluted share, while cash, cash equivalents and marketable securities grew $2.5 million sequentially to $126.9 million, or $3.29 per fully diluted share.

•
Announced a partnership with AirTies to offer Internet Service Providers (ISPs) a complete turnkey managed Wi-Fi mesh solution with new classes of differentiated, premium Wi-Fi services.

•
Released the Spartan AP Booster which offers service providers a cost-effective Wi-Fi performance upgrade for their existing subscriber legacy home gateways without replacing or upgrading the entire gateway.

•
Entered the Over the Top (OTT) set-top box market with the Zero Memory client solution that offers unparalleled video performance to both STB and OTT clients without the need for incremental memory costs.

•
Announced that Technicolor has adopted the QV860 chipset in its OWA0130 dual-band multi-function extender, augmenting the coverage of Wi-Fi gateways with a mesh network offering seamless connectivity.

•
Demonstrated with Cortina Access a Dual 4x4 802.11ax 10G fiber/PON gateway reference platform at IBC 2017 in Amsterdam, bringing best of breed broadband and Wi-Fi capabilities into a single integrated platform targeting mass deployment.

•
Partnered with SoftAtHome to offer its Smart Wi-Fi software availability on the QV860 chipset, enabling SoftAtHome to offer a high-performance mesh and repeater solution to service providers and OEM partners by levering the Quantenna 802.11ac Wi-Fi ecosystem.













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Business Outlook
 
Fourth Quarter 2017
Guidance Range
Revenue
 $40M to $42M
Gross Margin
 
GAAP
51.4% +/- 100bps
Non-GAAP
51.5% +/- 100bps
Operating Expense Growth (sequential)
 
GAAP
Up 13%
Non-GAAP
Up 15%
Net income (loss) per share-diluted
 
GAAP
 ($0.11) - ($0.09)
Non-GAAP
 ($0.04) - ($0.02)
 
 
Gross margin, operating expense and net income GAAP to Non-GAAP reconciliation relates to stock based compensation expense.
 
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: 97831720. 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. 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 third quarter ended October 1, 2017, expected future business and financial performance, growth opportunities, product technologies and customer relationships. The words "believe," "estimate," "expect,

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" "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; quarterly fluctuations in revenues and operating results; challenges developing new and leading edge products on a timely basis that achieve market acceptance; the complexity of the products; 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; 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 third quarter of 2017 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.



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Quantenna Communications, Inc.
Condensed Consolidated Statements of Operations
(in thousands except per share data, unaudited)
 
Three Months Ended
 
Nine Months Ended
 
 
October 1,
2017
 
September 25,
2016
 
October 1,
2017
 
September 25,
2016
 
 
 
 
 
 
 
 
 
 
Revenue
$
50,108

 
$
34,105

 
$
135,084

 
$
91,577

 
Cost of revenue
25,591

 
17,247

 
68,212

 
46,452

 
Gross profit
24,517

 
16,858

 
66,872

 
45,125

 
Operating expenses:
 
 
 
 
 
 
 
 
Research and development
15,011

 
11,162

 
43,699

 
32,913

 
Sales and marketing
3,363

 
2,172

 
9,553

 
5,571

 
General and administrative
3,735

 
3,248

 
11,231

 
7,802

 
Total operating expenses
22,109

 
16,582

 
64,483

 
46,286

 
Income (loss) from operations
2,408

 
276

 
2,389

 
(1,161
)
 
Interest expense
(103
)
 
(189
)
 
(442
)
 
(414
)
 
Other income (expense), net
223

 
(52
)
 
610

 
(300
)
 
Income (loss) before income taxes
2,528

 
35

 
2,557

 
(1,875
)
 
Benefit (provision) for income taxes
274

 
(14
)
 
(470
)
 
(52
)
 
Net income (loss)
$
2,802

 
$
21

 
$
2,087

 
$
(1,927
)
 
Net income (loss) per share - basic
$
0.08

 
$
0.02

 
$
0.06

 
$
(1.84
)
 
Net income (loss) per share - diluted
$
0.07

 
$
0.00

 
$
0.05

 
$
(1.84
)
 
 
 
 
 
 
 
 
 
 
Shares used in computing net income (loss) per share:
 
 
 
 
 
 
 
 
Basic
34,734

 
1,157

(1)
33,907

 
1,048

(1)
Diluted
38,525

 
29,974

 
38,419

 
1,048

(1)
 
 
 
 
 
 
 
 
 
(1) The number of shares reflects the number prior to conversion of preferred stock upon the Company's IPO on November 2, 2016
 
 
 
















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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 October 1, 2017
 
Three months ended September 25, 2016
 
 
GAAP
Measure
 
Stock-based
Compensation
Expense
 
Non-GAAP
Measure
 
GAAP
Measure
 
Stock-based
Compensation
Expense
 
Non-GAAP
Measure
Revenue
 
$
50,108

 
 
 
$
50,108

 
$
34,105

 
 
 
$
34,105

Gross profit
 
24,517

 
38

 
24,555

 
16,858

 
9

 
16,867

Gross margin
 
48.9
%
 
0.1
%
 
49.0
%
 
49.4
%
 
0.0
%
 
49.5
%
Research and development
 
15,011

 
1,367

 
13,644

 
11,162

 
231

 
10,931

Sales and marketing
 
3,363

 
416

 
2,947

 
2,172

 
60

 
2,112

General and administrative
 
3,735

 
948

 
2,787

 
3,248

 
734

 
2,514

Income from operations
 
2,408

 
2,769

 
5,177

 
276

 
1,034

 
1,310

Net income
 
$
2,802

 
$
2,769

 
$
5,571

 
$
21

 
$
1,034

 
$
1,055

Basic shares outstanding
 
34,734

 
 
 
34,734

 
1,157

 
 
 
1,157

Basic earnings per share
 
$
0.08

 
 
 
$
0.16

 
$
0.02

 
 
 
$
0.91

Diluted shares outstanding
 
38,525

 
 
 
38,525

 
29,974

 
 
 
29,974

Diluted earnings per share
 
$
0.07

 
 
 
$
0.14

 
$
0.00

 
 
 
$
0.04


Non-GAAP Income Statement Items
 
Nine months ended October 1, 2017
 
Nine months ended September 25, 2016
 
 
GAAP
Measure
 
Stock-based
Compensation
Expense
 
Non-GAAP
Measure
 
GAAP
Measure
 
Stock-based
Compensation
Expense
 
Non-GAAP
Measure
Revenue
 
$
135,084

 
 
 
$
135,084

 
$
91,577

 
 
 
$
91,577

Gross profit
 
66,872

 
123

 
66,995

 
45,125

 
15

 
45,140

Gross margin
 
49.5
%
 
0.1
%
 
49.6
%
 
49.3
%
 
0.0
%
 
49.3
%
Research and development
 
43,699

 
3,986

 
39,713

 
32,913

 
454

 
32,459

Sales and marketing
 
9,553

 
1,179

 
8,374

 
5,571

 
120

 
5,451

General and administrative
 
11,231

 
2,159

 
9,072

 
7,802

 
1,635

 
6,167

Income (loss) from operations
 
2,389

 
7,447

 
9,836

 
(1,161
)
 
2,224

 
1,063

Net income (loss)
 
$
2,087

 
$
7,447

 
$
9,534

 
$
(1,927
)
 
$
2,224

 
$
297

Basic shares outstanding
 
33,907

 
 
 
33,907

 
1,048

 
 
 
1,048

Basic earnings per share
 
$
0.06

 
 
 
$
0.28

 
$
(1.84
)
 
 
 
$
0.28

Diluted shares outstanding
 
38,419

 
 
 
38,419

 
1,048

 
 
 
29,370

Diluted earnings per share
 
$
0.05

 
 
 
$
0.25

 
$
(1.84
)
 
 
 
$
0.01
















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Quantenna Communications, Inc.
Unaudited Forward-Looking Statements Regarding Business Outlook
Business Outlook
 
Three Months Ended December 31, 2017
 
 
 
 
 
 
 
High
 
Low
Estimated GAAP diluted earnings (loss) per share
 
$
(0.11
)
 
$
(0.09
)
Estimated stock compensation expense
 
0.07

 
0.07

Estimated Non-GAAP diluted earnings (loss) per share
 
$
(0.04
)
 
$
(0.02
)


Quantenna Communications, Inc.
Condensed Consolidated Balance Sheets
(in thousands, unaudited)
 
October 1,
2017
 
January 1, 2017
Assets
 
 
 
Current assets
 
 
 
Cash and cash equivalents
$
38,844

 
$
117,045

Marketable securities
88,022

 
—

Accounts receivable
22,820

 
14,480

Inventory
23,700

 
15,820

Prepaid expenses and other current assets
2,444

 
2,470

Total current assets
175,830

 
149,815

Property and equipment, net
11,215

 
4,742

Intangible assets, net
3,259

 
—

Other long-term assets
1,037

 
232

Total assets
$
191,341

 
$
154,789

Liabilities and Stockholders’ Equity
 
 
 
Current liabilities
 
 
 
Accounts payable
$
12,918

 
$
7,776

Accrued liabilities and other current liabilities
27,941

 
11,801

Long-term debt, current portion
2,487

 
2,257

Total current liabilities
43,346

 
21,834

Long-term debt
1,900

 
3,680

Other long-term liabilities
3,413

 
527

Total liabilities
48,659

 
26,041

 
 
 
 
Stockholders’ equity
 
 
 
Common stock
3

 
3

Additional paid-in capital
302,240

 
290,319

Accumulated other comprehensive loss
(20
)
 
—

Accumulated deficit
(159,541
)
 
(161,574
)
Total stockholders’ equity
142,682

 
128,748

Total liabilities and stockholders’ equity
$
191,341

 
$
154,789



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Quantenna Communications, Inc.
Condensed Consolidated Cash Flows
(in thousands, unaudited)
 
Nine Months Ended
 
October 1, 2017
 
September 25, 2016
 
 
 
 
Cash flows from operating activities
 
 
 
Net income (loss)
$
2,087

 
$
(1,927
)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
 
 
 
Depreciation and amortization
1,566

 
880

Stock-based compensation expense
7,447

 
2,224

Accretion of discount on investments
93

 
—

Non-cash interest expense, net
254

 
140

Change in fair value of convertible preferred stock warrants liability
—

 
109

Changes in assets and liabilities:
 
 
 
Accounts receivable
(8,340
)
 
(1,589
)
Inventory
(7,880
)
 
(2,861
)
Prepaid expenses and other current assets
(22
)
 
(283
)
Deferred rent and other assets
(790
)
 
16

Accounts payable
5,119

 
(1,136
)
Accrued liabilities and other current liabilities
14,660

 
6,136

Net cash provided by operating activities
14,194

 
1,709

Cash flows from investing activities
 
 
 
Purchase of property and equipment
(6,961
)
 
(1,621
)
Purchase of marketable securities
(104,044
)
 
—

Proceeds from sales of marketable securities
3,670

 
—

Maturities of marketable securities
12,239

 
—

Restricted cash
—

 
(1,559
)
Net cash used in investing activities
(95,096
)
 
(3,180
)
Cash flows from financing activities
 
 
 
Proceeds from issuance of common stock
4,553

 
785

Payments of offering costs
(96
)
 
(881
)
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

Repayments of long-term debt
(1,756
)
 
(3,265
)
Net cash provided by financing activities
2,701

 
443

Net decrease in cash and cash equivalents
(78,201
)
 
(1,028
)
Cash and cash equivalents
 
 
 
Beginning of period
117,045

 
18,850

End of period
$
38,844

 
$
17,822

 
 
 
 

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

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