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 Profit31,283  21,279  47.0% 109,402  88,151  24.1%
Gross Margin50.0% 51.6% (160) bps 49.6% 50.0% (40) bps
            
Net income:           
GAAP$1,419  $32,325    $3,083  $34,412   
Non-GAAP7,619  455    20,371  9,989   
            
Net income per share - diluted:           
GAAP$0.04  $0.84    $0.08  $0.89   
Non-GAAP0.19  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.

Business Outlook

 First Quarter 2019
Guidance Range
Revenue$56M to $59M
Gross Margin 
GAAP50.4% +/- 50bps
Non-GAAP50.5% +/- 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 revenue31,284  19,996  111,058  88,208 
Gross profit31,283  21,279  109,402  88,151 
Operating expenses:       
Research and development19,054  16,048  71,522  59,747 
Sales and marketing3,996  4,487  16,303  14,040 
General and administrative5,165  4,069  18,767  15,299 
Total operating expenses28,215  24,604  106,592  89,086 
Income (loss) from operations3,068  (3,325) 2,810  (935)
Interest expense  (272)   (713)
Other income, net432  509  1,239  1,118 
Income (loss) before income taxes3,500  (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:       
Basic37,527  35,316  36,744  34,259 
Diluted40,027  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 securities97,268  94,195 
Accounts receivable28,326  26,786 
Inventory20,218  12,662 
Prepaid expenses and other current assets5,325  2,744 
Total current assets190,018  160,819 
Deferred tax assets, net35,563  35,422 
Property and equipment, net13,691  12,511 
Intangible and other assets, net6,384  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 liabilities25,946  21,065 
Long-term debt, current portion  3,943 
Total current liabilities35,798  28,762 
Other long-term liabilities3,371  3,339 
Total liabilities39,169  32,101 
    
Stockholders’ equity   
Common stock4  3 
Additional paid-in capital331,551  308,023 
Accumulated other comprehensive loss(935) (207)
Accumulated deficit(124,133) (127,216)
Total stockholders’ equity206,487  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 compensation17,289  10,683 
Depreciation and amortization4,861  2,669 
Deferred income taxes53  (35,333)
Other1,067  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 assets313  (467)
Accounts payable5,791  (5,752)
Accrued liabilities and other current liabilities4,040  9,265 
Net cash provided by operating activities24,820  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 securities66,173  26,440 
Net cash used in investing activities(10,965) (103,636)
Cash flows from financing activities   
Proceeds from issuance of common stock8,418  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 activities888  4,281 
Effect of exchange rate changes on cash and cash equivalents(294) 113 
Net increase (decrease) in cash and cash equivalents14,449  (92,613)
Cash and cash equivalents   
Beginning of year24,432  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, 2018Three 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 profit31,283 53  31,336 21,279 42   21,321 
Gross margin50.0%0.1% 50.1%51.6%0.1%  51.7%
Research and development19,054 2,506  16,548 16,048 1,630   14,418 
Sales and marketing3,996 578  3,418 4,487 584 199  3,704 
General and administrative5,165 1,229  3,936 4,069 980   3,089 
Income (loss) from operations3,068 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 outstanding37,527   37,527 35,316    35,316 
Basic earnings per share$0.04   $0.20 $0.92    $0.01 
Diluted shares outstanding40,027   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, 2018Twelve 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 profit109,402 199  109,601 88,151 165   88,316 
Gross margin49.6%0.1% 49.7%50.0%0.1%  50.1%
Research and development71,522 9,676  61,846 59,747 5,616   54,131 
Sales and marketing16,303 2,696  13,607 14,040 1,763 199  12,078 
General and administrative18,767 4,718  14,049 15,299 3,139   12,160 
Income (loss) from operations2,810 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 outstanding36,744   36,744 34,259    34,259 
Basic earnings per share$0.08   $0.55 $1.00    $0.29 
Diluted shares outstanding39,663   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 OutlookThree 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