Quantenna Announces Second Quarter 2017 Financial Results

FREMONT, Calif., Aug. 07, 2017 (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 second quarter ended July 2, 2017.

“We are excited to report strong results, reflecting a material uptick in shipments of our core Wave 2 offerings and an accelerated ramp of our Wave 3 10G customer adoption. Quantenna continues to win and deploy new customer designs with its Wave 2 solutions against world-class competitors and we expect our success to continue with our Wave 3 10G products,” stated Dr. Sam Heidari, Chairman and Chief Executive Officer.

Financial Summary

Three Months Ended Six Months Ended
July 2,
June 26,
% Change July 2,
June 26,
% Change
Revenue$47,085 $33,035 42.5% $84,976 $57,472 47.9%
Gross Profit23,771 16,364 45.3% 42,355 28,267 49.8%
Gross Margin50.5% 49.5% 100 bps 49.8% 49.2% 60 bps
Net income (loss):
GAAP$169 $(234) $(716) $(1,949)
Non-GAAP2,743 652 3,962 (759)
Net income (loss) per share - diluted:
GAAP$0.00 $(0.22) $(0.02) $(1.83)
Non-GAAP0.07 0.02 0.10 (0.71)
(in thousands except per share data, unaudited)

Commentary on the second 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.

Second Quarter Company Highlights

  • Record revenue of $47.1 million, representing year over year growth of 43% over the second quarter of 2016 and 24% sequential growth over the first quarter of 2017.

  • GAAP operating income grew to $0.3 million, and non-GAAP operating income grew to $2.9 million, or 6.2% of revenue. Non-GAAP operating income was a quarterly record and represented a three-fold increase over the second quarter of 2016.

  • Cash from operations totaled $7.4 million, or $0.19 per fully diluted share, while cash, cash equivalents and marketable securities grew $10.0 million sequentially to $124.4 million, or $3.23 per fully diluted share.

  • Announced a high end GPON gateway product with ZTE featuring Quantenna’s award-winning 4x4 802.11ac Wave 2 QSR1000 chipset. This solution addresses the typical Wi-Fi residential bottleneck that occurs when coupled with high speed optical networks.

  • Surpassed 50 service providers in deployment with our solutions as we extend our technology leadership into new market applications and geographies.

Business Outlook

Third Quarter 2017
Guidance Range
Revenue$49M to $51M
Gross Margin
GAAP46.9% +/- 100bps
Non-GAAP47.0% +/- 100bps
Operating Expense Growth
GAAPFlat to down 4%
Non-GAAPFlat to down 5%
Net income (loss) per share-diluted
GAAP$0.00 - $0.02
Non-GAAP$0.07 - $0.09
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: 58438758. 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 is a global leader and innovator of leading-edge performance Wi-Fi solutions. Quantenna introduced the world's first 10G Wi-Fi technology for a new generation of access points in home, enterprise and public spaces and continues to innovate. Quantenna's Wi-Fi solutions offer superior performance, and establish benchmarks for speed, range, efficiency and reliability. With MAUI, Quantenna's cloud-based Wi-Fi analytics platform that complement its chipset solutions, service providers can deliver real-time, automated Wi-Fi monitoring, optimization, and self-healing to their customers around the clock to help achieve the best Wi-Fi experience. Quantenna is Wi-Fi perfected. 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 financial results for the second quarter ended July 2, 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; quarterly fluctuations in revenues and operating results; ability to accurately predict future revenue and expenses; challenges developing new and leading edge products on a timely basis that achieve market acceptance; 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; political uncertainty; potential changes in tax and other laws affecting Quantenna’s business; risks associated with acquisitions, divestitures and strategic partnerships; 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, adjustments to the preliminary financial results reported in this press release and related earnings call announcement and materials for the second 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 Communications, Inc., 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.

Quantenna Communications, Inc.
Condensed Consolidated Statements of Operations
(in thousands except per share data, unaudited)
Three Months Ended Six Months Ended
July 2,
June 26,
July 2,
June 26,
Revenue$47,085 $33,035 $84,976 $57,472
Cost of revenue23,314 16,671 42,621 29,205
Gross profit23,771 16,364 42,355 28,267
Operating expenses:
Research and development16,055 11,524 28,688 21,751
Sales and marketing3,276 1,769 6,191 3,399
General and administrative4,106 2,993 7,496 4,555
Total operating expenses23,437 16,286 42,375 29,705
Income (loss) from operations334 78 (20) (1,438)
Interest expense(141) (111) (339) (225)
Other income (expense), net186 (180) 387 (248)
Income (loss) before income taxes379 (213) 28 (1,911)
Provision for income taxes(210) (21) (744) (38)
Net income (loss)$169 $(234) $(716) $(1,949)
Net income (loss) per share - basic$0.00 $(0.22) $(0.02) $(1.83)
Net income (loss) per share - diluted$0.00 $(0.22) $(0.02) $(1.83)
Shares used in computing net income (loss) per share:
Basic33,881 1,075 (1)33,494 1,063 (1)
Diluted38,475 1,075 33,494 1,063
(1) The number of shares reflects the number prior to conversion of preferred stock upon the Company's IPO on November 2, 2016

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 July 2, 2017 Three months ended June 26, 2016
Revenue $ 47,085 $ 47,085 $ 33,035 $ 33,035
Gross profit 23,771 42 23,813 16,364 3 16,367
Gross margin 50.5% 0.1% 50.6% 49.5% 0.0% 49.5%
Research and development 16,055 1,414 14,641 11,524 122 11,402
Sales and marketing 3,276 410 2,866 1,769 30 1,739
General and administrative 4,106 708 3,398 2,993 731 2,262
Income from operations 334 2,574 2,908 78 886 964
Net income (loss) $169 $ 2,574 $2,743 $(234) $ 886 $652
Basic shares outstanding 33,881 33,881 1,075 1,075
Basic earnings per share $0.00 $0.08 $(0.22) $0.61
Diluted shares outstanding 38,475 38,475 1,075 29,162
Diluted earnings per share $0.00 $0.07 $(0.22) $0.02

Non-GAAP Income
Statement Items
Six months ended July 2, 2017 Six months ended June 26, 2016
Revenue $ 84,976 $ 84,976 $ 57,472 $ 57,472
Gross profit 42,355 85 42,440 28,267 6 28,273
Gross margin 49.8% 0.1% 49.9% 49.2% 0.0% 49.2%
Research and development 28,688 2,619 26,069 21,751 223 21,528
Sales and marketing 6,191 763 5,428 3,399 60 3,339
General and administrative 7,496 1,211 6,285 4,555 901 3,654
Income (loss) from operations (20) 4,678 4,658 (1,438) 1,190 (248)
Net income (loss) $(716) $ 4,678 $3,962 $(1,949) $ 1,190 $(759)
Basic shares outstanding 33,494 33,494 1,063 1,063
Basic earnings per share $(0.02) $0.12 $(1.83) $(0.71)
Diluted shares outstanding 33,494 38,414 1,063 1,063
Diluted earnings per share $(0.02) $0.10 $(1.83) $(0.71)

Quantenna Communications, Inc.
Unaudited Forward-Looking Statements Regarding Business Outlook
Business Outlook Three Months Ended
October 1, 2017
High Low
Estimated GAAP diluted earnings (loss) per share $0.00 $0.02
Estimated stock compensation expense 0.07 0.07
Estimated Non-GAAP diluted earnings per share $0.07 $0.09

Quantenna Communications, Inc.
Condensed Consolidated Balance Sheets
(in thousands, unaudited)
July 2,
January 1,
Current assets
Cash and cash equivalents$58,231 $117,045
Marketable securities66,158
Accounts receivable17,696 14,480
Inventory20,985 15,820
Prepaid expenses and other current assets4,332 2,470
Total current assets167,402 149,815
Property and equipment, net6,380 4,742
Other long-term assets769 232
Total assets$ 174,551 $ 154,789
Liabilities and Stockholders’ Equity
Current liabilities
Accounts payable$10,527 $7,776
Accrued liabilities and other current liabilities 22,021 11,801
Long-term debt, current portion2,563 2,257
Total current liabilities35,111 21,834
Long-term debt2,445 3,680
Other long-term liabilities425 527
Total liabilities37,981 26,041
Stockholders’ equity
Common stock3 3
Additional paid-in capital298,943 290,319
Accumulated other comprehensive loss(32)
Accumulated deficit(162,344) (161,574)
Total stockholders’ equity136,570 128,748
Total liabilities and stockholders’ equity$174,551 $154,789

Quantenna Communications, Inc.
Condensed Consolidated Cash Flows
(in thousands, unaudited)
Six Months Ended
July 2, 2017 June 26, 2016
Cash flows from operating activities
Net loss$(716) $(1,949)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization1,024 537
Stock-based compensation expense4,678 1,190
Non-cash interest expense, net197 30
Change in fair value of convertible preferred stock warrants liability 45
Changes in assets and liabilities
Accounts receivable(3,216) (5,096)
Inventory(5,165) (42)
Prepaid expenses and other current assets(1,898) (42)
Other assets(537) (55)
Accounts payable2,652 (3,589)
Accrued liabilities and other current liabilities9,913 5,009
Net cash provided by (used) in operating activities6,932 (3,962)
Cash flows from investing activities
Purchase of property and equipment(2,446) (626)
Purchase of marketable securities(71,169)
Proceeds from sales of marketable securities4,994
Restricted cash (1,500)
Net cash used in investing activities(68,621) (2,126)
Cash flows from financing activities
Proceeds from issuance of common stock4,076 88
Payments of offering costs(96)
Proceeds from revolving line of credit, net of fees paid 2,950
Proceeds from issuance of long-term debt, net of fees paid 3,854
Repayments of long-term debt(1,105) (2,711)
Net cash provided by financing activities2,875 4,181
Net decrease in cash and cash equivalents(58,814) (1,907)
Cash and cash equivalents
Beginning of period117,045 18,850
End of period$58,231 $16,943

Quantenna Communications, Inc. Vernon Essi, Jr. 510-897-2684 vessi@quantenna.com

Source:Quantenna Communications