Quantenna Announces Fourth Quarter and Fiscal 2016

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Posted On: 02/13/2017 4:15:26 PM

Posted By: News Desk 2018

Quantenna Announces Fourth Quarter and Fiscal 2016 Financial Results

FREMONT, Calif., Feb. 13, 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 fourth quarter and fiscal year 2016 ended January 1, 2017.

“We are excited to report strong results during our first quarter as a public company. Quantenna continued its focus on delivering the best Wi-Fi solutions to existing and new customers. We believe we are well-positioned to capitalize on our deep Wi-Fi expertise and strategic customer relationships to further expand our opportunities and continue to grow our revenue in 2017 and beyond,” stated Dr. Sam Heidari, Chairman and Chief Executive Officer.

Financial Summary

	Three Months Ended								Years Ended
	December 27,			January 1,					December 27,			January 1,
		2015			2017		% Change			2015			2017		% Change

Revenue	$	25,412		$	37,492		47.5	%	$	83,773		$	129,069		54.1	%
Gross Margin		51.1	%		51.5	%	40 bps			49.2	%		49.9	%	70 bps

Net income (loss)
GAAP		427			32					(7,045	)		(1,895	)
Non-GAAP		672			898					(5,843	)		1,195

Net income (loss) per share - diluted
GAAP	$	0.02		$	0.00				$	(9.16	)	$	(0.30	)
Non-GAAP	$	0.02		$	0.03				$	(7.59	)	$	0.04

(in thousands except per share data, unaudited)

Commentary on the fourth quarter and fiscal year 2016 financial results by Company management is available at 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.

Fourth Quarter Company Highlights

Quantenna commenced shipping production quantities of its QSR10G Wave 3 products, which was formally announced in September 2015. The QSR10G is designed to be the world’s fastest Wi-Fi solution currently available in the market and leverages Quantenna’s proprietary technology architectures and advanced software and system-level algorithms.
Quantenna announced the industry's first 802.11ax Wi-Fi chipset, the QSR10G-AX. This product is built on Quantenna's QSR10G Wave 3 802.11ac Wi-Fi platform and adds features supported in draft 1.0 of the IEEE specification 802.11ax standard.
Quantenna successfully priced its initial public offering of 6,700,000 shares of common stock at a price to the public of $16.00 per share, raising approximately $100 million in proceeds, net of underwriting discounts, commissions and excluding the overallotment.
Quantenna received the prestigious "Most Respected Private Semiconductor Company" award at the 2016 Global Semiconductor Alliance (GSA) Awards Dinner Celebration on December 8th. The semiconductor industry's annual event honored outstanding semiconductor companies worldwide that have demonstrated excellence through their vision, strategy, execution and future opportunity.

Business Outlook

		First Quarter 2017
		Guidance Range

Revenue		$34.5M to $36.5M
Gross Margin		48% to 50%
Operating Expense Decline (sequential)		5% to 10%
Net income (loss) per share - diluted
GAAP		($0.05) - ($0.03)
Non-GAAP		$0.00 - $0.02

Webcast and Conference Call

Quantenna management will host a conference call discussing the quarterly and fiscal year 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: 61663823. An audio webcast and replay will be available on 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 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 . Follow us on Facebook , LinkedIn and Twitter .

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 fourth quarter and fiscal year 2016 ended January 1, 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: adjustments to the preliminary financial results reported for the fourth quarter and fiscal year 2016 in connection with completion of the final closing process and procedures and preparation of our annual report of Form 10-K, risks that Quantenna may not be able to maintain its historical growth; 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 and divestitures; 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, 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; 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								Years Ended
		December 27,					January 1,			December 27,					January 1,
			2015					2017			2015					2017


Revenue		$	25,412				$	37,492		$	83,773				$	129,069
Cost of revenue			12,425					18,188			42,554					64,640
	Gross profit		12,987					19,304			41,219					64,429
Operating expenses
Research and development			9,545					13,691			35,575					46,604
Sales and marketing			1,625					2,520			6,644					8,091
General and administrative			1,302					2,757			5,212					10,559
	Total operating expenses		12,472					18,968			47,431					65,254
	Income (loss) from operations		515					336			(6,212	)				(825	)
Interest expense			(137	)				(252	)		(697	)				(665	)
Other income (expense), net			87					262			(21	)				(38	)
	Income (loss) before income taxes		465					346			(6,930	)				(1,528	)
Provision for income taxes			(38	)				(314	)		(115	)				(367	)
	Net income (loss)	$	427				$	32		$	(7,045	)			$	(1,895	)
Net income (loss) per share - basic		$	0.49				$	0.00		$	(9.16	)			$	(0.30	)
Net income (loss) per share - diluted		$	0.02				$	0.00		$	(9.16	)			$	(0.30	)

Shares used in computing net income (loss) per share:
Basic			872		⁽¹	⁾		21,246			770		⁽¹	⁾		6,385
Diluted			27,067					35,387			770					6,385

⁽¹⁾ The number of shares reflects the number prior to conversion of preferred stock

Quantenna Communications, Inc.
Condensed Consolidated Balance Sheets
(in thousands, unaudited)
			December 27,			January 1,
				2015			2017
Assets
Current assets
	Cash and cash equivalents		$	18,850		$	117,045
	Accounts receivable			15,717			14,480
	Inventory			7,407			15,820
	Prepaid expenses and other current assets			1,428			2,470
		Total current assets		43,402			149,815
Property and equipment, net				3,083			4,742
Other assets				182			232
		Total assets	$	46,667		$	154,789
Liabilities, Redeemable Convertible Preferred Stock, and
Stockholders’ Equity (Deficit)
Current liabilities
	Accounts payable		$	5,917		$	7,776
	Accrued liabilities and other current liabilities			5,617			11,801
	Long-term debt, current portion			3,581			2,257
		Total current liabilities		15,115			21,834
Long-term debt and other long term liabilities				2,265			4,207
Convertible preferred stock warrant liability				255			-
		Total liabilities		17,635			26,041

Convertible preferred stock				184,704			-

Stockholders’ equity (deficit)
	Common stock			-			3
	Additional paid-in capital			4,007			290,319
	Accumulated deficit			(159,679	)		(161,574	)
		Total stockholders’ equity (deficit)		(155,672	)		128,748
		Total liabilities, redeemable convertible preferred stock and stockholders’ equity (deficit)	$	46,667		$	154,789

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

				Years Ended
				December 27,			January 1,
					2015			2017

Cash flows from operating activities
Net loss				$	(7,045	)	$	(1,895	)
Adjustments to reconcile net loss to net cash provided by
(used in) operating activities
	Depreciation and amortization				987			1,278
	Stock-based compensation expense				1,202			3,090
	Non-cash interest expense				271			322
	Change in fair value of convertible preferred stock warrants liability				61			87
	Changes in assets and liabilities
		Accounts receivable			(5,877	)		1,237
		Inventory			3,387			(8,413	)
		Prepaid expenses and other current assets			541			(901	)
		Other assets			60			(50	)
		Accounts payable			(4,401	)		1,804
		Accrued liabilities and other current liabilities			934			5,757
		Deferred revenue			(2,197	)		-
			Net cash provided by (used in) operating activities		(12,077	)		2,316
Cash flows from investing activities
Purchase of property and equipment					(1,761	)		(2,724	)
Restricted cash					59			(59	)
			Net cash used in investing activities		(1,702	)		(2,783	)
Cash flows from financing activities
Proceeds from issuance of convertible preferred stock, net of issuance costs					14,256			-
Proceeds from issuance of common stock					164			1,191
Proceeds from initial public offering, net of issuance costs					-			97,483
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					3,000			3,854
Repayment of long-term debt					(3,111	)		(3,816	)
			Net cash provided by financing activities		14,309			98,662
			Net increase in cash and cash equivalents		530			98,195
Cash and cash equivalents
Beginning of year					18,320			18,850
End of year				$	18,850		$	117,045

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 27, 2015									Three months ended January 1, 2017
Non-GAAP Income Statement Items	Three months ended December 27, 2015									Three months ended January 1, 2017
				Stock-based									Stock-based
	GAAP			Compensation			Non-GAAP			GAAP			Compensation			Non-GAAP
	Measure			Expense			Measure			Measure			Expense			Measure
Revenue	$	25,412					$	25,412		$	37,492					$	37,492
Gross profit		12,987			3			12,990			19,304			18			19,322
Gross margin		51.1	%		0	%		51.1	%		51.5	%		0	%		51.5	%
Research and development		9,545			77			9,468			13,691			457			13,234
Sales and marketing		1,625			26			1,599			2,520			128			2,392
General and administrative		1,302			139			1,163			2,757			263			2,494
Income from operations		515			245			760			336			866			1,202
Net income	$	427		$	245		$	672		$	32		$	866		$	898
Basic shares outstanding		872						872			21,246						21,246
Basic earnings per share	$	0.49					$	0.77		$	0.00					$	0.04
Diluted shares outstanding		27,067						27,067			35,387						35,387
Diluted earnings per share	$	0.02					$	0.02		$	0.00					$	0.03

Quantenna Communications, Inc.
Unaudited reconciliation of GAAP to Non-GAAP Financial Measures
	(In thousands, except per share data)

Non-GAAP Income Statement Items	Year ended December 27, 2015									Year ended January 1, 2017
Non-GAAP Income Statement Items	Year ended December 27, 2015									Year ended January 1, 2017
				Stock-based									Stock-based
	GAAP			Compensation			Non-GAAP			GAAP			Compensation			Non-GAAP
	Measure			Expense			Measure			Measure			Expense			Measure
Revenue	$	83,773					$	83,773		$	129,069					$	129,069
Gross profit		41,219			9			41,228			64,429			33			64,462
Gross margin		49.2	%		0	%		49.2	%		49.9	%		0	%		49.9	%
Research and development		35,575			302			35,273			46,604			911			45,693
Sales and marketing		6,644			445			6,199			8,091			248			7,843
General and administrative		5,212			446			4,766			10,559			1,898			8,661
Income from operations		(6,212	)		1,202			(5,010	)		(825	)		3,090			2,265
Net income	$	(7,045	)	$	1,202		$	(5,843	)	$	(1,895	)	$	3,090		$	1,195
Basic shares outstanding		770						770			6,385						6,385
Basic earnings per share	$	(9.16	)				$	(7.59	)	$	(0.30	)				$	0.19
Diluted shares outstanding		770						770			6,385						31,113
Diluted earnings per share	$	(9.16	)				$	(7.59	)	$	(0.30	)				$	0.04

Quantenna Communications, Inc.
Unaudited Forward-Looking Statements Regarding Business Outlook

Business Outlook	Three months ended April 2, 2017
Business Outlook	Three months ended April 2, 2017

	High			Low
Estimated GAAP diluted earnings (loss) per share	$	(0.03	)	$	(0.05	)
Estimated stock compensation expense		0.05			0.05
Estimated impact from dilutive shares deemed anti-dilutive due to GAAP loss		0.00			0.00
Estimated Non-GAAP diluted earnings per share	$	0.02		$	0.00

Quantenna Communications, Inc. Vernon Essi, Jr. 510-897-2684

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